MORGAN STANLEY

Investment Banking

Investment Banking Volumes

Source: Refinitiv data as of July 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 $1,619 million in the current quarter increased 51% from the prior year quarter, reflecting increases across businesses.

•Advisory revenues increased on higher completed M&A transactions.

•Equity underwriting revenues increased on higher private placement offerings, initial public offerings and convertible issuances, partially offset by lower revenues from follow-on offerings.

•Fixed Income underwriting revenues increased, primarily in non-investment grade issuances.

Revenues of $3,066 million in the current year period increased 32% compared with the prior year period, primarily reflecting an increase in underwriting revenues.

•Advisory revenues decreased primarily due to lower fee realizations.

•Equity underwriting revenues increased on higher volumes across products, particularly in initial public offerings.

•Fixed Income underwriting revenues increased across products, particularly in non-investment grade issuances.

While Investment Banking results improved from recent quarters, we continue to operate in a market environment with lower completed M&A activity relative to longer-term averages.

See “Investment Banking Volumes” herein.

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Management’s Discussion and Analysis

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 $3,018 million in the current quarter increased 18% compared with the prior year quarter, primarily reflecting an increase in Execution services and Financing, particularly in Asia.

•Financing revenues increased primarily due to higher average client balances and activity, partially offset by lower spreads driven by changes in the client balance mix and higher funding costs.

•Execution services revenues increased on higher gains on inventory held to facilitate client activity and increased client activity in derivatives and cash equities.

Net revenues of $5,860 million in the current year period increased 11% compared with the prior year period, primarily reflecting an increase in Execution services.

•Financing revenues increased primarily due to higher average client balances and activity, partially offset by lower gains on inventory held to facilitate client activity in Asia compared with elevated results in the prior year period.

•Execution services revenues increased on higher gains on inventory held to facilitate client activity and increased client activity in derivatives and cash equities.

Fixed Income

Net revenues of $1,999 million in the current quarter increased 16% from the prior year quarter, primarily reflecting an increase in Credit and Global macro products.

•Global macro products revenues increased primarily due to improved results in foreign exchange products, partially offset by a decline in rates products.

•Credit products revenues increased across products, most notably in securitized products.

•Commodities products and other fixed income revenues decreased primarily due to decreased client activity, partially offset by gains on inventory held to facilitate client activity.

Net revenues of $4,484 million in the current year period increased 4% compared with the prior year period, primarily reflecting an increase in Credit products.

•Global macro products revenues decreased primarily due to a decline in rates products, partially offset by improved results in foreign exchange products.

•Credit products revenues increased primarily due to higher gains on securitized products.

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

Other Net Revenues

Other net revenues were $346 million in the current quarter, compared with $315 million in the prior year quarter, primarily due to higher net interest income and fees and lower mark-to-market losses on corporate loans, inclusive of hedges.

Other net revenues were $588 million in the current year period compared with $560 million in the prior year period, primarily due to higher net interest income and fees, partially offset by higher mark-to-market losses on corporate loans, inclusive of hedges.

The Provision for credit losses on loans and lending commitments of $54 million in the current quarter was primarily related to provisions for certain specific commercial real estate loans, mainly in the office sector, and modest growth in the corporate loan portfolio. The Provision for credit losses on loans and lending commitments was $97 million in the prior year quarter, primarily related to credit deterioration in commercial real estate lending, mainly in the office sector, and modest growth in certain loan portfolios.

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Management’s Discussion and Analysis

The Provision for credit losses on loans and lending commitments of $56 million in the current year period was primarily related to provisions for certain specific commercial real estate loans, mainly in the office sector, and modest growth in certain corporate loan portfolios. This was partially offset by improvements in the macroeconomic outlook. The Provision for credit losses on loans and lending commitments was $286 million in the prior year period, primarily related to credit deterioration in commercial real estate lending, mainly in the office sector, modest growth in certain loan portfolios and deterioration in the macroeconomic outlook.

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

Non-interest expenses of $4,882 million in the current quarter and $9,545 million in the current year period increased 7% and 3%, respectively, compared with the prior year periods, primarily as a result of higher Non-compensation expenses.

•Compensation and benefits expenses increased primarily due to higher discretionary incentive compensation on higher revenues, partially offset by lower severance costs.

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