MORGAN STANLEY

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Management’s Discussion and Analysis

Wealth Management

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

2. 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 deposits, and time deposits.

4. Annualized weighted average represents the total annualized weighted average cost of the various deposit products. Amounts include the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of June 30, 2025 and December 31, 2024. The period average is based on daily balances and rates for the period.

Net New Assets

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, seasonality, our ability to attract and retain financial advisors and clients, capital market and corporate activities which may impact the amount of assets in certain client channels, and large idiosyncratic inflows and outflows. These 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 client assets 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 Rollforwards" herein.

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Management’s Discussion and Analysis

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.

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 $4,411 million in the current quarter and $8,807 million in the current year period increased 11% and 13%, respectively, compared with prior year periods, primarily reflecting higher fee-based assets due to higher market levels and the cumulative impact of positive fee-based flows.

See “Fee-Based Client Assets Rollforwards” herein.

Transactional Revenues

Transactional revenues of $1,264 million in the current quarter and $2,137 million in the current year period increased 62% and 18%, respectively, compared with the prior year periods, primarily driven by higher client activity, particularly in equity-related transactions, and gains on DCP investments.

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

Net Interest

Net interest revenues of $1,910 million in the current quarter increased 6% compared with the prior year quarter, primarily due to the cumulative impact of lending growth and changes in balance sheet mix, partially offset by the net effect of lower interest rates.

Net interest revenues of $3,812 million in the current year period increased 4% compared with the prior year period, primarily due to the cumulative impact of lending growth and changes in balance sheet mix, partially offset by the net effect of lower interest rates and lower average sweep deposits.

The level and pace of interest rate changes and other macroeconomic factors have impacted client preferences, including cash allocation to higher-yielding products and client demand for loans. These factors, along with other developments, such as pricing changes to certain deposit types due to various competitive dynamics, have impacted our net interest income. To the extent they persist, or other factors arise, such as central bank actions and changes in the path of interest rates, net interest income may be impacted in future periods.

The Provision for credit losses on loans and lending commitments of $28 million in the current quarter was primarily related to certain specific loans in our tailored lending portfolio and portfolio growth in residential real estate loans. The Provision for credit losses on loans and lending commitments of $22 million in the prior year quarter was primarily related to certain specific securities-based loans.

The Provision for credit losses on loans and lending commitments of $72 million in the current year period was primarily related to certain specific loans in our tailored lending portfolio and residential real estate loans related to California wildfires. In the prior year, the Provision for credit losses on loans and lending commitments of $14 million was primarily related to certain specific securities-based and commercial real estate loans, mainly in the office sector. This was partially offset by improvements in the macroeconomic outlook.

Non-interest expenses of $5,536 million in the current quarter and $10,868 million in the current year period increased 12% and 8%, respectively, compared with the prior year periods, primarily as a result of higher Compensation and benefits expenses.

•Compensation and benefits expenses increased, primarily as a result of an increase in the formulaic payout to Wealth Management representatives driven by higher compensable revenues and higher expenses related to DCP.

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Management’s Discussion and Analysis

•Non-compensation expenses increased, primarily reflecting higher marketing and business development costs and increased technology spend.

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

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.

Average Fee Rates 1

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

For a description of fee-based client assets in the previous tables, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Wealth Management Fee-Based Client Assets” in the 2024 Form 10-K.