MORGAN STANLEY

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Management’s Discussion and Analysis

Institutional Securities

Investment Banking

Investment Banking Volumes

Source: Refinitiv data as of April 1, 2024. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions.

1. Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction.

2. Based on full credit for single book managers and equal credit for joint book managers.

3. Includes Rule 144A issuances and registered public offerings of common stock, convertible securities and rights offerings.

4. Includes Rule 144A and publicly registered issuances, non-convertible preferred stock, mortgage-backed and asset-backed securities, and taxable municipal debt. Excludes leveraged loans and self-led issuances.

Investment Banking Revenues

Revenues of $1,447 million in the current quarter increased 16% from the prior year quarter, reflecting an increase in underwriting revenues, partially offset by lower Advisory revenues.

•Advisory revenues decreased primarily due to fewer completed M&A transactions.

•Equity underwriting revenues increased on higher volumes, primarily in initial public and follow-on offerings.

•Fixed income underwriting revenues increased primarily due to higher bond issuances, securitized products revenues and investment-grade loan issuances.

While Investment Banking results improved from recent quarters on higher underwriting revenues, we continue to operate in a market environment with lower completed M&A activity.

See “Investment Banking Volumes” herein.

Equity, Fixed Income and Other Net Revenues

Equity and Fixed Income Net Revenues

1. Includes Commissions and fees and Asset management revenues.

2. Includes funding costs, which are allocated to the businesses based on funding usage.

3. Includes Investments and Other revenues.

Equity

Net revenues of $2,842 million in the current quarter increased 4% compared with the prior year quarter, reflecting an increase in Execution services, partially offset by a decrease in Financing.

•Financing revenues decreased primarily driven by lower gains on inventory held to facilitate client activity in Asia compared to elevated results in the prior year quarter, partially offset by the impact of higher average client balances.

•Execution services revenues increased primarily due to higher gains on inventory held to facilitate client activity in derivatives and cash equities and mark-to-market gains on business-related investments compared with losses in the prior year quarter.

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Management’s Discussion and Analysis

Fixed Income

Net revenues of $2,485 million in the current quarter decreased 4% from the prior year quarter, primarily reflecting a decrease in client activity, partially offset by an increase in certain commodities products.

•Global macro products revenues decreased primarily due to decreased client activity in foreign exchange and rates products.

•Credit products revenues decreased primarily due to lower client activity, partially offset by higher gains on inventory held to facilitate client activity.

•Commodities products and other fixed income revenues increased primarily due to higher gains on inventory held to facilitate client activity.

Other Net Revenues

Other net revenues of $242 million in the current quarter were relatively unchanged from the prior year quarter.

The Provision for credit losses on loans and lending commitments of $2 million in the current quarter was primarily related to modest growth in certain loan portfolios and provisions for certain specific commercial real estate and corporate loans, partially offset by improvements in the macroeconomic outlook. The Provision for credit losses on loans and lending commitments was $189 million in the prior year quarter, primarily related to a deterioration in both the macroeconomic outlook and the commercial real estate portfolio.

For further information on the Provision for credit losses, see “Credit Risk” herein.

Non-interest expenses of $4,663 million in the current quarter decreased 1% compared with the prior year quarter, primarily due to lower Non-compensation expenses.

•Compensation and benefits expenses were relatively unchanged from the prior year quarter, reflecting lower stock-based compensation expense in the prior year quarter and the impact of lower headcount, offset by higher discretionary incentive compensation.

•Non-compensation expenses decreased primarily due to lower legal and professional services expenses, partially offset by higher execution-related expenses and an increased technology spend.