MORGAN STANLEY

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Management’s Discussion and Analysis

Institutional Securities

Investment Banking

Investment Banking Volumes

Source: LSEG Data & Risk Analytics (formerly known as Refinitiv) as of October 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 $1,463 million in the current quarter increased 56% from the prior year quarter, reflecting increases across businesses, particularly in Fixed Income underwriting.

•Advisory revenues increased primarily due to higher completed M&A activity, particularly in EMEA.

•Equity underwriting revenues increased primarily on higher initial public offerings, follow-on offerings and secondary block share trades.

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

Revenues of $4,529 million in the current year period increased 39% compared with the prior year period, reflecting increases across businesses, particularly in Fixed Income underwriting.

•Advisory revenues increased primarily due to higher completed M&A activity, partially offset by lower fee realizations.

•Equity underwriting revenues increased primarily on higher initial public offerings, follow-on offerings and secondary block share trades.

•Fixed Income underwriting revenues increased primarily in non-investment and 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 $3,045 million in the current quarter and $8,905 million in the current year period increased 21% and 14%, respectively, compared with the prior year periods, reflecting an increase in both Execution services and Financing, particularly in the Americas and Asia.

•Financing revenues increased primarily due to higher client activity and lower funding and liquidity costs.

•Execution services revenues increased primarily due to higher gains on inventory held to facilitate client activity, higher client activity in derivatives and cash equities and mark-to-market gains on business-related investments.

Fixed Income

Net revenues of $2,003 million in the current quarter increased 3% from the prior year quarter, primarily reflecting an increase in Global macro products, partially offset by a decrease in Commodities.

•Global macro products revenues increased primarily due to improved results in rates products in a changing rate

environment driven by central bank activities and gains on inventory held to facilitate client activity in foreign exchange products.

•Credit products revenues were relatively unchanged from the prior year quarter.

•Commodities products and other fixed income revenues decreased primarily due to lower gains on inventory held to facilitate client activity and decreased client activity compared to elevated results in the prior year quarter, which benefited from higher volatility in energy markets.

Net revenues of $6,487 million in the current year period increased 4% compared with the prior year period, reflecting an increase in Global macro and Credit products, partially offset by a decrease in Commodities.

•Global macro products revenues increased primarily due to gains on inventory held to facilitate client activity in foreign exchange and rates products.

•Credit products revenues increased primarily due to higher gains on inventory held to facilitate client activity and increased client activity in securitized products.

•Commodities products and other fixed income revenues decreased primarily due to decreased client activity compared to elevated results in the prior year quarter, which benefited from higher volatility in energy markets.

Other Net Revenues

Other net revenues were $304 million in the current quarter, compared with $277 million in the prior year quarter, primarily due to higher mark-to-market gains compared with losses in the prior year quarter on DCP investments and higher contributions from our Japanese securities joint venture, partially offset by higher mark-to-market losses on corporate loans, inclusive of hedges.

Other net revenues were $892 million in the current year period compared with $837 million in the prior year period, primarily due to higher net interest income and fees on corporate loans, higher mark-to-market gains on DCP investments and higher contributions from our Japanese securities joint venture, 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 $68 million in the current quarter was primarily related to growth across loan portfolios and provisions for certain specific commercial real estate and corporate loans. This was partially offset by improvements in the macroeconomic outlook. The Provision for credit losses on loans and lending commitments of $93 million in the prior year quarter was primarily related to credit deterioration 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 of $124 million in the current year period was

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Management’s Discussion and Analysis

primarily related to growth across loan portfolios and provisions for certain specific commercial real estate loans. This was partially offset by improvements in the macroeconomic outlook. The Provision for credit losses on loans and lending commitments was $379 million in the prior year period, primarily related to credit deterioration in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios.

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

Non-interest expenses of $4,836 million in the current quarter increased 10% compared with the prior year quarter as a result of higher Non-compensation expenses and Compensation and benefits expenses.

•Compensation and benefits expenses increased primarily due to higher discretionary incentive compensation on higher revenues and higher expenses related to DCP.

•Non-compensation expenses increased primarily reflecting higher execution-related expenses and increased technology spend.

Non-interest expenses of $14,381 million in the current year period increased 5% compared with the prior year period as a result of higher Non-compensation expenses and Compensation and benefits expenses.

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

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