MORGAN STANLEY

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Management’s Discussion and Analysis

Executive Summary

Overview of Financial Results

Consolidated Results—Three Months Ended March 31, 2025

•The Firm reported net revenues of $17.7 billion and net income of $4.3 billion reflecting strong results across our business segments.

•The Firm delivered ROE of 17.4% and ROTCE of 23.0% (see “Selected Non-GAAP Financial Information” herein).

•The Firm’s expense efficiency ratio was 68%. Expenses for the quarter included $144 million of severance costs related to a March employee action across our business segments. (See “Non-Interest Expenses” herein for more information).

•The Firm accreted $1.9 billionof Common Equity Tier 1 capital. At March 31, 2025, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.3%.

•Institutional Securities reported net revenues of $9.0 billion reflecting strong performance in Equity and in Investment Banking on higher Fixed Income underwriting revenues.

•Wealth Management delivered a pre-tax margin of 26.6%. Net revenues of $7.3 billion reflect strong Asset management revenues. The business added net new assets of $94 billion and fee-based asset flows were $30 billion.

•Investment Management results reflect net revenues of $1.6 billion, primarily driven by asset management fees on higher average AUM of $1.7 trillion.

Net Income Applicable to Morgan Stanley

Earnings per Diluted Common Share

We reported net revenues of $17.7 billion in the quarter ended March 31, 2025 (“current quarter,” or “1Q 2025”), which increased by 17% compared with $15.1 billion in the quarter ended March 31, 2024 (“prior year quarter,” or “1Q 2024”). Net income applicable to Morgan Stanley was $4.3 billion in the current quarter, which increased by 26% compared with $3.4 billion in the prior year quarter. Diluted earnings per common share was $2.60 in the current quarter, which increased by 29% compared with $2.02 in the prior year quarter.

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Management’s Discussion and Analysis

•Compensation and benefits expenses of $7,521 million in the current quarter increased 12% from the prior year quarter, primarily due to higher discretionary incentive compensation and higher formulaic payout to Wealth Management representatives, both on higher revenues, and higher severance costs, partially offset by lower expenses related to certain employee deferred cash-based compensation plans linked to investment performance (“DCP”).

During the current quarter, as a result of a March employee action, we recognized severance costs associated with a reduction in force (“RIF”) of $144 million, included in Compensation and benefits expenses. The RIF occurred across our business segments and geographic regions and impacted approximately 2% of our global workforce at that time. The RIF was related to performance management and the alignment of our workforce to our business needs, rather than a change in strategy or exit of businesses. We recorded severance costs of $78 million in the Institutional Securities business segment, $50 million in the Wealth Management business segment, and $16 million in the Investment Management business segment for the current quarter. These costs were incurred across all regions, with the majority in the Americas.

•Non-compensation expenses of $4,539 million in the current quarter increased 12% from the prior year quarter, primarily due to higher execution-related expenses.

The Provision for credit losses on loans and lending commitments of $135 million in the current quarter was primarily related to portfolio growth in secured lending facilities and corporate loans, provisions for certain specific loans, including residential real estate loans related to the California wildfires, and deterioration in the macroeconomic outlook. The macroeconomic outlook assumed in our ACL models and Provision for credit losses incorporated the weaker economic outlook and conditions as of March 31, 2025. The Provision for credit losses on loans and lending commitments in the prior year quarter was a net release of $6 million, primarily as a result of improvements in the macroeconomic outlook, partially offset by provisions for certain specific commercial real estate and corporate loans and modest growth in certain other loan portfolios.

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

Business Segment Results

Net Revenues by Segment 1

Net Income Applicable to Morgan Stanley by Segment 1

1. The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 19 to the financial statements for details of intersegment eliminations.

•Institutional Securities net revenues of $8,983 million in the current quarter increased 28% from the prior year quarter, primarily reflecting higher results in Equity and gains on the sale of corporate loans held-for-sale compared with mark-to-market losses, inclusive of hedges, in the prior year quarter within Other net revenues.

•Wealth Management net revenues of $7,327 million in the current quarter increased 6% from the prior year quarter, primarily reflecting higher Asset management revenues, partially offset by lower Transactional revenues.

•Investment Management net revenues of $1,602 million in the current quarter increased 16% from the prior year quarter, reflecting higher Performance-based income and other revenues and higher Asset management and related fees.

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Management’s Discussion and Analysis

Net Revenues by Region 1

1. For a discussion of how the geographic breakdown of net revenues is determined, see Note 22 to the financial statements in the 2024 Form 10-K.

•Americas net revenues in the current quarter increased 13% from the prior year quarter, driven by higher results across all business segments.

•EMEA net revenues in the current quarter increased 25% from the prior year quarter, primarily driven by higher Equity revenues within the Institutional Securities business segment and higher results within the Investment Management business segment.

•Asia net revenues in the current quarter increased 35% from the prior year quarter, primarily driven by higher Equity revenues within the Institutional Securities business segment.

Selected Financial Information and Other Statistical Data

1. The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.

2. ROE and ROTCE represent annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.

3. Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.

4. Pre-tax margin represents income before provision for income taxes as a percentage of net revenues.

5. For a discussion of Liquidity resources, see “Liquidity and Capital Resources—Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein.

6. Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet.

7. Book value per common share and tangible book value per common share equal common equity and tangible common equity, respectively, divided by common shares outstanding.

8. Client assets represents the sum of Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets are invested in Investment Management products and are therefore also included in Investment Management’s AUM.

9. For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein.

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Management’s Discussion and Analysis

Economic and Market Conditions

The economic environment, client and investor confidence and overall market sentiment deteriorated in 2025, as recent developments around global trade and government policies resulted in increased economic uncertainty and market volatility. Geopolitical risks, inflation, as well as the timing and pace of central bank actions related to interest rates present ongoing risks to the economic environment and growth. These factors have impacted, and could continue to impact capital markets and our businesses, as discussed further in “Business Segments” herein.

For more information on economic and market conditions, and the potential effects of geopolitical events and acts of war or aggression on our future results, refer to “Risk Factors” and “Forward-Looking Statements” in the 2024 Form 10-K.

Selected Non-GAAP Financial Information

We prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statements and other public disclosures. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy.

These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure.

We present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses on DCP investments from net revenues and compensation expenses. The impact of DCP is primarily reflected in our Wealth Management business segment results. These measures allow for better comparability of period-to-period underlying operating performance and revenue trends, especially in our Wealth Management business segment. By excluding the impact of these items, we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses. For additional information, see“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Matters” in the 2024 Form 10-K.

Tangible common equity is a non-GAAP financial measure that we believe analysts, investors and other stakeholders consider useful to allow for comparability to peers and of the period-to-period use of our equity. The calculation of tangible common equity represents common shareholders’ equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction. In addition, we believe that certain ratios that utilize tangible common equity, such as return on average tangible common equity (“ROTCE”) and tangible book value per common share, also non-GAAP financial measures, are useful for evaluating the operating performance and capital adequacy of the business period-to-period, respectively. The calculation of ROTCE represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average tangible common equity. The calculation of tangible book value per common share represents tangible common equity divided by common shares outstanding.

The principal non-GAAP financial measures presented in this document are set forth in the following tables.

Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures

1. Net revenues and compensation expense are adjusted for DCP for both Firm and Wealth Management business segment. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Matters” in the 2024 Form 10-K for more information.

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Management’s Discussion and Analysis

Non-GAAP Financial Measures by Business Segment

1. Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see “Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments’ Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent Company equity.

2. The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment, annualized as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment.

Return on Tangible Common Equity Goal

We have an ROTCE goal of 20%. Our ROTCE goal is a forward-looking statement that is based on a normal market environment and may be materially affected by many factors.

See “Risk Factors” and “Forward-Looking Statements” in the 2024 Form 10-K for further information on market and economic conditions and their potential effects on our future operating results.

ROTCE represents a non-GAAP financial measure. For further information on non-GAAP measures, see “Selected Non-GAAP Financial Information” herein.