MORGAN STANLEY

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Management’s Discussion and Analysis

Wealth Management

1. Transactional includes Investment banking, Trading, and Commissions and fees revenues. Other includes Investments and Other revenues.

Wealth Management Metrics

1. Client assets represent those for which Wealth Management is providing services including financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage and investment advisory services; financial and wealth planning services; workplace services, including stock plan administration, and retirement plan services. See “Advisor-Led Channel” and “Self-Directed Channel” herein for additional information.

2. Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities.

3. Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on our U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. As of December 31, 2023, there were no off-balance sheet amounts excluded from deposits. As of December 31, 2022, approximately $6 billion off-balance sheet amounts were excluded from deposits.

4. Annualized weighted average represents the total annualized weighted average cost of the various deposit products, excluding the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of December 31, 2023 and December 31, 2022. The period average is based on daily balances and rates for the year.

Net New Assets (NNA)

NNA represent client asset inflows, inclusive of interest, dividends and asset acquisitions, less client asset outflows, and exclude the impact of business combinations/divestitures and the impact of fees and commissions. The level of NNA in a given period is influenced by a variety of factors, including macroeconomic factors that impact client investment and spending behaviors, our ability to attract and retain financial advisors and clients, and timing of large idiosyncratic flows. Macroeconomic factors have had an impact on our NNA in

recent periods. Should these factors continue, the growth rate of our NNA may be impacted.

Advisor-Led Channel

1. Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned.

2. Fee‐based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.

3. Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets herein.

Self-Directed Channel

1. Self-directed client assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets.

2. Self-directed households represent the total number of households that include at least one active account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels are included in each of the respective channel counts.

3. DARTs represent the total self-directed trades in a period divided by the number of trading days during that period.

Workplace Channel 1

1. The workplace channel includes equity compensation solutions for companies, their executives and employees.

2. Stock plan unvested assets represent the market value of public company securities at the end of the period. The stock plan vested asset retention rate within the workplace channel, which represents the percentage of stock plan assets retained in either the self-directed or advisor-led channels following vesting, is 29%, 34% and 24% for 2023, 2022 and 2021, respectively. The rate is derived using the stock plan inflows for the previous year, less related outflows for the previous year and reported year, and dividing the result by the previous year inflows.

3. Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.

Asset Management

Asset management revenues of $14,019 million in 2023 increased 1% compared with the prior year, reflecting the cumulative impact of positive fee-based flows, partially offset by a reduction driven by changes in client and product mix and lower average fee-based client asset levels due to declines in the markets.

See “Fee-Based Client Assets Rollforwards” herein.

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Management’s Discussion and Analysis

Transactional Revenues

Transactional revenues of $3,556 million in 2023 increased 44% compared with the prior year, primarily due to $282 million of gains on DCP investments compared with $858 million of losses in the prior year, partially offset by lower client activity.

For further information on the impact of DCP, see “Selected Non-GAAP Financial Information” herein.

Net Interest

Net interest revenues of $8,118 million in 2023 increased 9% compared with the prior year, primarily due to the net effect of higher interest rates, partially offset by changes in deposit mix.

The level and pace of interest rate changes and other macroeconomic factors continued to impact client preferences for cash allocation to higher-yielding products and the pace of reallocation of client balances, resulting in changes in the deposit mix and associated interest expense, as well as client demand for loans. If these trends persist, net interest income could be impacted in future periods.

The Provision for credit losses on loans and lending commitments of $131 million in 2023 was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio. The Provision for credit losses on loans and lending commitments was $69 million in 2022, primarily driven by portfolio growth in Residential real estate loans and deteriorating conditions in the commercial real estate sector.

Non-interest expenses of $19,607 million in 2023 increased 10% compared with the prior year, as a result of higher Compensation and benefits expense and higher Non-compensation expense.

•Compensation and benefits expenses increased, primarily due to higher expenses related to DCP and higher salaries driven by hiring mix.

For further information on the impact of expenses related to DCP, see “Selected Non-GAAP Financial Information” herein.

•Non-compensation expenses increased, primarily driven by an FDIC special assessment of $165 million, increased spend on technology and costs related to exits of real estate.

Fee-Based Client Assets Rollforwards

1. Inflows include new accounts, account transfers, deposits, dividends and interest.

2. Outflows include closed or terminated accounts, account transfers, withdrawals and client fees.

3. Market impact includes realized and unrealized gains and losses on portfolio investments.

4. Includes non-custody account values based on asset values reported on a quarter lag by third-party custodians.

5. Includes $75 billion of fee-based assets acquired in an asset acquisition in the first quarter of 2022, reflected in Separately managed.

6. Includes $43 billion of fee-based assets acquired in an asset acquisition in the third quarter of 2021, reflected in Separately managed.

Average Fee Rates 1

1. Based on Asset management revenues related to advisory services associated with fee-based assets.

Asset management revenues within the Wealth Management segment are primarily generated from the following types of accounts:

•Separately managed—accounts by which third party and affiliated asset managers are engaged to manage clients’ assets with investment decisions made by the asset

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Management’s Discussion and Analysis

manager. Only one third-party asset manager strategy can be held per account.

•Unified managed—accounts that provide the client with the ability to combine separately managed accounts, mutual funds and exchange-traded funds, all in one aggregate account. Investment decisions and discretionary authority may be exercised by the client, financial advisor or portfolio manager. Also includes accounts that give the client the ability to systematically allocate assets across a wide range of mutual funds, for which the investment decisions are made by the client.

•Advisor—accounts where the investment decisions must be approved by the client, and the financial advisor must obtain approval each time a change is made to the account or its investments.

•Portfolio manager—accounts where a financial advisor has discretion (contractually approved by the client) to make ongoing investment decisions without the client’s approval for each individual change.

•Cash management—accounts where the financial advisor provides discretionary cash management services to institutional clients, whereby securities or proceeds are invested and reinvested in accordance with the client’s investment criteria. Generally, the portfolio will be invested in short-term fixed income and cash equivalent investments.