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As Of Filer Filing For·On·As Docs:Size 5/05/20 Morgan Stanley 10-Q 3/31/20 142:34M |
Document/Exhibit Description Pages Size 1: 10-Q Quarterly Report HTML 4.76M 2: EX-15 Letter re: Unaudited Interim Financial Info HTML 57K 3: EX-31.1 Certification -- §302 - SOA'02 HTML 48K 4: EX-31.2 Certification -- §302 - SOA'02 HTML 48K 5: EX-32.1 Certification -- §906 - SOA'02 HTML 43K 6: EX-32.2 Certification -- §906 - SOA'02 HTML 43K 62: R1 Cover Page HTML 119K 139: R2 Consolidated Income Statements HTML 136K 92: R3 Consolidated Comprehensive Income Statements HTML 76K 44: R4 Consolidated Balance Sheets HTML 139K 61: R5 Consolidated Balance Sheets (Parenthetical) HTML 75K 138: R6 Consolidated Statements of Changes in Total Equity HTML 81K 91: R7 Consolidated Cash Flow Statements HTML 138K 45: R8 Introduction and Basis of Presentation HTML 52K 60: R9 Significant Accounting Policies HTML 72K 66: R10 Cash and Cash Equivalents HTML 52K 17: R11 Fair Values HTML 729K 97: R12 Fair Value Option HTML 95K 112: R13 Derivative Instruments and Hedging Activities HTML 462K 65: R14 Investment Securities HTML 321K 16: R15 Collateralized Transactions HTML 175K 96: R16 Loans, Lending Commitments and Related Allowance HTML 348K for Credit Losses 111: R17 Other Assets - 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Segregated HTML 42K Securities (Details) 122: R76 Collateralized Transactions - Customer Margin HTML 42K Lending (Details) 109: R77 Loans, Lending Commitments and Related Allowance HTML 95K for Credit Losses - Loans by Type (Details) 24: R78 Loans, Lending Commitments and Related Allowance HTML 210K for Credit Losses - Loans Held for Investment before Allowance by Credit Quality and Origination Year (Details) 69: R79 Loans, Lending Commitments and Related Allowance HTML 68K for Credit Losses - Past Due Status of Loans Held for Investment before Allowance (Details) 19: R80 Loans, Lending Commitments and Related Allowance HTML 80K for Credit Losses - Loans Held for Investment before Allowance (Details) 73: R81 Loans, Lending Commitments and Related Allowance HTML 73K for Credit Losses - Impaired Loans and Lending Commitments before Allowance (Details) 120: R82 Loans, Lending Commitments and Related Allowance HTML 55K for Credit Losses - Impaired Loans before Allowance and Total Allowance by Region (Details) 107: R83 Loans, Lending Commitments and Related Allowance HTML 47K for Credit Losses - 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HTML 75K Narrative (Details) 34: R95 Variable Interest Entities and Securitization HTML 56K Activities - Assets and Liabilities by Type of Activity (Details) 85: R96 Variable Interest Entities and Securitization HTML 72K Activities - Assets and Liabilities by Balance Sheet Caption (Details) 135: R97 Variable Interest Entities and Securitization HTML 100K Activities - Non-Consolidated VIEs (Details) 50: R98 Variable Interest Entities and Securitization HTML 62K Activities - Mortgage and Asset Backed Securitization Assets (Details) 29: R99 Variable Interest Entities and Securitization HTML 85K Activities - Transferred Assets with Continuing Involvement (Details) 132: R100 Variable Interest Entities and Securitization HTML 71K Activities - Fair Value of Transferred Assets with Continuing Involvement (Details) 89: R101 Variable Interest Entities and Securitization HTML 52K Activities - Proceeds from New Securitization Transactions and Sales of Loans (Details) 32: R102 Variable Interest Entities and Securitization HTML 59K Activities - Assets Sold with Retained Exposure (Details) 53: R103 Regulatory Requirements - Narrative (Details) HTML 45K 131: R104 Regulatory Requirements - The Firm's Regulatory HTML 88K Capital and Capital Ratios (Details) 88: R105 Regulatory Requirements - U.S. Bank Subsidiaries' HTML 113K Regulatory Capital and Capital Ratios (Details) 30: R106 Regulatory Requirements - U.S. Broker-Dealer HTML 50K Regulatory Capital Requirements (Details) 51: R107 Total Equity - Common Stock Repurchases (Details) HTML 44K 133: R108 Total Equity - Narrative (Details) HTML 48K 83: R109 Total Equity - Common Stock Dividends Per Share HTML 42K (Details) 104: R110 Total Equity - Common Shares Outstanding for Basic HTML 51K and Diluted EPS (Details) 124: R111 Total Equity - Preferred Stock Outstanding HTML 89K (Details) 68: R112 Total Equity - Preferred Stock Dividends (Details) HTML 69K 23: R113 Total Equity - Accumulated Other Comprehensive HTML 63K Income (Loss) (Details) 105: R114 Total Equity - Components of Period Changes in OCI HTML 114K (Details) 125: R115 Total Equity - 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HTML 42K Revenue Recognized from Prior Services (Details) 39: R125 Segment, Geographic and Revenue Information - HTML 43K Receivables from Contracts with Customers (Details) 82: R126 Segment, Geographic and Revenue Information - HTML 50K Assets by Business Segment (Details) 14: XML IDEA XML File -- Filing Summary XML 278K 126: XML XBRL Instance -- msq1202010q_htm XML 12.35M 35: EXCEL IDEA Workbook of Financial Reports XLSX 213K 8: EX-101.CAL XBRL Calculations -- ms-20200331_cal XML 447K 9: EX-101.DEF XBRL Definitions -- ms-20200331_def XML 1.75M 10: EX-101.LAB XBRL Labels -- ms-20200331_lab XML 3.49M 11: EX-101.PRE XBRL Presentations -- ms-20200331_pre XML 2.29M 7: EX-101.SCH XBRL Schema -- ms-20200331 XSD 407K 90: JSON XBRL Instance as JSON Data -- MetaLinks 689± 1.11M 22: ZIP XBRL Zipped Folder -- 0000895421-20-000323-xbrl Zip 959K
Document |
Securities registered pursuant to Section 12(b) of the Act: | ||
Title of each class | Trading Symbol(s) | Name of exchange on which registered |
i Common
Stock, $0.01 par value | i MS | i New York Stock Exchange |
Depositary Shares, each representing 1/1,000th interest in
a share of Floating Rate | i MS/PA | i New York Stock Exchange |
i Non-Cumulative
Preferred Stock, Series A, $0.01 par value | ||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | i MS/PE | i New
York Stock Exchange |
i Non-Cumulative Preferred Stock, Series E, $0.01 par value | ||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | i MS/PF | i New
York Stock Exchange |
i Non-Cumulative Preferred Stock, Series F, $0.01 par value | ||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | i MS/PI | i New
York Stock Exchange |
i Non-Cumulative Preferred Stock, Series I, $0.01 par value | ||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | i MS/PK | i New
York Stock Exchange |
i Non-Cumulative Preferred Stock, Series K, $0.01 par value | ||
Depository Shares, each representing 1/1000th interest in a share of 4.875% | i MS/PL | i New
York Stock Exchange |
i Non-Cumulative Preferred Stock, Series L, $0.01 par value | ||
i Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior
Notes Due 2026 | i MS/26C | i New York Stock
Exchange |
of Morgan Stanley Finance LLC (and Registrant’s guarantee with respect thereto) | ||
i Morgan Stanley Cushing® MLP High Income Index ETNs due March 21, 2031 | i MLPY | i NYSE
Arca, Inc. |
i Large
accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | i ☐ | Emerging growth company | i ☐ |
Part | Item | Page | |||
II | 1A | ||||
I | |||||
I | 2 | ||||
I | 3 | ||||
I | 1 | ||||
II | |||||
II | 1 | ||||
II | 2 | ||||
I | 4 | ||||
II | 6 | ||||
S-1 |
• | Amended and Restated Certificate of Incorporation; |
• | Amended and Restated
Bylaws; |
• | Charters for our Audit Committee, Compensation, Management Development and Succession Committee, Nominating and Governance Committee, Operations and Technology Committee, and Risk Committee; |
• | Corporate Governance Policies; |
• | Policy
Regarding Corporate Political Activities; |
• | Policy Regarding Shareholder Rights Plan; |
• | Equity Ownership Commitment; |
• | Code of Ethics and Business Conduct; |
• | Code
of Conduct; |
• | Integrity Hotline Information; |
• | Environmental and Social Policies; and |
• | Sustainability Report. |
1 | March 2020 Form 10-Q |
March
2020 Form 10-Q | 2 |
Management’s Discussion and Analysis |
1. | For
further information on basic and diluted EPS, see Note 16 to the financial statements. |
1. | The
percentages on the bars in the chart represent the contribution of compensation and benefits expenses and non-compensation expenses to the total. |
• | Compensation and benefits expenses of $4,283 million in the current quarter decreased 8% from $4,651 million in the prior year quarter. The decrease was primarily due to decreases in the fair value of investments to which certain deferred compensation plans are referenced and compensation associated with carried interest, partially offset by increases in discretionary incentive
compensation, and the formulaic payout to Wealth Management representatives driven by the mix of revenues. |
• | Non-compensation expenses of $3,058 million in the current quarter increased 14% from $2,680 million in the prior year quarter. The increase was primarily due to higher volume-related expenses and an increase in the provision for credit losses for lending commitments. |
3 | March 2020 Form 10-Q |
Management’s Discussion and Analysis |
Three Months Ended March 31, | ||||||
$
in millions | 2020 | 2019 | ||||
Net income applicable to Morgan Stanley | $ | 1,698 | $ | 2,429 | ||
Preferred stock dividends | 108 | 93 | ||||
Earnings
applicable to Morgan Stanley common shareholders | $ | 1,590 | $ | 2,336 | ||
Expense efficiency ratio1 | 77.4 | % | 71.3 | % | ||
ROE2 | 8.5 | % | 13.1 | % | ||
Adjusted
ROE3 | 8.3 | % | 12.5 | % | ||
ROTCE2,3 | 9.7 | % | 14.9 | % | ||
Adjusted ROTCE3 | 9.5 | % | 14.2 | % | ||
Pretax
margin4 | 22.6 | % | 28.7 | % | ||
Pre-tax margin by segment4 | ||||||
Institutional Securities | 19 | % | 31 | % | ||
Wealth
Management | 26 | % | 27 | % | ||
Investment Management | 21 | % | 22 | % |
in
millions, except per share and employee data | ||||||
Liquidity resources5 | $ | 255,134 | $ | 215,868 | ||
Loans6 | $ | 148,697 | $ | 130,637 | ||
Total
assets | $ | 947,795 | $ | 895,429 | ||
Deposits | $ | 235,239 | $ | 190,356 | ||
Borrowings | $ | 194,856 | $ | 192,627 | ||
Common
shares outstanding | 1,576 | 1,594 | ||||
Common shareholders' equity | $ | 77,340 | $ | 73,029 | ||
Tangible common shareholders’ equity3 | $ | 68,194 | $ | 63,780 | ||
Book
value per common share7 | $ | 49.09 | $ | 45.82 | ||
Tangible book value per common share3,7 | $ | 43.28 | $ | 40.01 | ||
Worldwide
employees | 60,670 | 60,431 |
Capital
ratios8 | ||||
Common Equity Tier 1 capital | 15.2 | % | 16.4 | % |
Tier 1 capital | 17.3 | % | 18.6 | % |
Total
capital | 19.6 | % | 21.0 | % |
Tier 1 leverage | 8.1 | % | 8.3 | % |
SLR | 6.2 | % | 6.4 | % |
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 measure. See “Selected Non-GAAP Financial Information” herein. |
4. | Pre-tax
margin represents income from continuing operations before income taxes as a percentage of net revenues. |
5. | For a discussion of Liquidity resources, see “Liquidity and Capital Resources—Liquidity Risk Management Framework—Liquidity Resources” herein. |
6. | Amounts include loans held for investment (net of allowance) and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheets (see Note
9 to the financial statements). |
7. | Book value per common share and tangible book value per common share equal common shareholders’ equity and tangible common shareholders’ equity, respectively, divided by common shares outstanding. |
8. | At March 31, 2020 and December 31, 2019, our risk-based capital ratios
are based on the Advanced Approach and the Standardized Approach rules, respectively. For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein. |
1. | The percentages on the bars in the charts represent the contribution of each business segment to the total of the applicable financial category and may not total to 100% due to intersegment eliminations. See Note 19 to the financial statements for details of intersegment eliminations. |
• | Institutional
Securities net revenues of $4,905 million in the current quarter decreased 6% from $5,196 million in the prior year quarter primarily reflecting losses on loans and lending commitments held for sale and an increase in the provision for credit losses on loans and lending commitments held for investment, as well as losses related to investments associated with certain employee deferred cash-based compensation plans, partially offset by increases in Fixed Income and Equity sales and trading revenues driven by increased volumes and volatility. |
• | Wealth
Management net revenues of $4,037 million in the current quarter decreased 8% from $4,389 million in the prior year quarter, primarily reflecting losses related to investments associated with certain employee deferred cash-based compensation plans, partially offset by higher Asset management revenues and higher commissions driven by market volatility. |
March 2020 Form 10-Q | 4 |
Management’s Discussion and Analysis |
• | Investment Management net revenues of $692 million in the current quarter decreased 14% from $804 million in the prior year quarter, primarily
reflecting lower Investments revenues, partially offset by higher Asset management revenues. |
1. | The percentages on the bars in the charts represent the contribution of each region to the total. |
2. | For
a discussion of how the geographic breakdown of net revenues is determined, see Note 19 to the financial statements. |
5 | March 2020 Form
10-Q |
Management’s Discussion and Analysis |
Three Months Ended March 31, | ||||||
$ in millions, except per share data | 2020 | 2019 | ||||
Net
income applicable to Morgan Stanley | $ | 1,698 | $ | 2,429 | ||
Impact of adjustments | (31 | ) | (101 | ) | ||
Adjusted net income applicable to Morgan Stanley—non-GAAP1 | $ | 1,667 | $ | 2,328 | ||
Earnings
per diluted common share | $ | 1.01 | $ | 1.39 | ||
Impact of adjustments | (0.02 | ) | (0.06 | ) | ||
Adjusted earnings per diluted common share—non-GAAP1 | $ | 0.99 | $ | 1.33 | ||
Effective
income tax rate | 17.1 | % | 16.5 | % | ||
Impact of adjustments | 1.4 | % | 3.4 | % | ||
Adjusted effective income tax rate— non-GAAP1 | 18.5 | % | 19.9 | % |
Average
Monthly Balance | ||||||
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Tangible equity | ||||||
Morgan Stanley shareholders' equity | $ | 83,244 | $ | 80,115 | ||
Less:
Goodwill and net intangible assets | (9,200 | ) | (8,806 | ) | ||
Tangible Morgan Stanley shareholders' equity—Non-GAAP | $ | 74,044 | $ | 71,309 | ||
Common shareholders' equity | $ | 74,724 | $ | 71,595 | ||
Less:
Goodwill and net intangible assets | (9,200 | ) | (8,806 | ) | ||
Tangible common shareholders' equity—Non-GAAP | $ | 65,524 | $ | 62,789 |
Three
Months Ended March 31, | ||||||
$ in billions | 2020 | 2019 | ||||
Average common equity | ||||||
Unadjusted—GAAP | $ | 74.7 | $ | 71.6 | ||
Adjusted1—Non-GAAP | 74.7 | 71.5 | ||||
ROE2 | ||||||
Unadjusted—GAAP | 8.5 | % | 13.1 | % | ||
Adjusted—Non-GAAP1,
3 | 8.3 | % | 12.5 | % | ||
Average tangible common equity—Non-GAAP | ||||||
Unadjusted | $ | 65.5 | $ | 62.8 | ||
Adjusted1 | 65.5 | 62.7 | ||||
ROTCE2—Non-GAAP | ||||||
Unadjusted | 9.7 | % | 14.9 | % | ||
Adjusted1,
3 | 9.5 | % | 14.2 | % |
March 2020 Form 10-Q | 6 |
Management’s Discussion and Analysis |
Three Months Ended March 31, | ||||||
$
in billions | 2020 | 2019 | ||||
Average common equity4, 5 | ||||||
Institutional Securities | $ | 42.8 | $ | 40.4 | ||
Wealth
Management | 18.2 | 18.2 | ||||
Investment Management | 2.6 | 2.5 | ||||
Average tangible common equity4, 5 | ||||||
Institutional
Securities | $ | 42.3 | $ | 39.9 | ||
Wealth Management | 10.4 | 10.2 | ||||
Investment Management | 1.7 | 1.5 | ||||
ROE6 | ||||||
Institutional
Securities | 6.3 | % | 12.9 | % | ||
Wealth Management | 18.5 | % | 19.8 | % | ||
Investment Management | 11.7 | % | 21.9 | % | ||
ROTCE6 | ||||||
Institutional
Securities | 6.4 | % | 13.0 | % | ||
Wealth Management | 32.3 | % | 35.6 | % | ||
Investment Management | 18.1 | % | 35.3 | % |
1. | Adjusted
amounts exclude net discrete tax provisions (benefits) that are intermittent and include those that are recurring. Provisions (benefits) related to conversion of employee share-based awards are expected to occur every year and, as such, are considered recurring discrete tax items. For further information on the net discrete tax provisions (benefits), see “Supplemental Financial Information—Income Tax Matters” herein. |
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. When excluding intermittent net discrete tax provisions (benefits), both
the numerator and average denominator are adjusted. |
3. | The calculations used in determining our “ROE and ROTCE Targets” referred to in the following section are the Adjusted ROE and Adjusted ROTCE amounts shown in this table. |
4. | 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). |
5. | The sums of the segments' Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent equity. |
6. | The calculation of ROE and ROTCE by segment uses annualized net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively,
allocated to each segment. |
7 | March
2020 Form 10-Q |
Management’s Discussion and Analysis |
Three
Months Ended March 31, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Revenues | ||||||||
Investment banking | $ | 1,144 | $ | 1,151 | (1 | )% | ||
Trading | 3,416 | 3,130 | 9 | % | ||||
Investments | (25 | ) | 81 | (131 | )% | |||
Commissions
and fees | 874 | 621 | 41 | % | ||||
Asset management | 113 | 107 | 6 | % | ||||
Other | (1,079 | ) | 222 | N/M | ||||
Total
non-interest revenues | 4,443 | 5,312 | (16 | )% | ||||
Interest income | 2,423 | 3,056 | (21 | )% | ||||
Interest
expense | 1,961 | 3,172 | (38 | )% | ||||
Net interest | 462 | (116 | ) | N/M | ||||
Net
revenues | 4,905 | 5,196 | (6 | )% | ||||
Compensation and benefits | 1,814 | 1,819 | — | % | ||||
Non-compensation
expenses | 2,141 | 1,782 | 20 | % | ||||
Total non-interest expenses | 3,955 | 3,601 | 10 | % | ||||
Income
before provision for income taxes | 950 | 1,595 | (40 | )% | ||||
Provision for income taxes | 151 | 190 | (21 | )% | ||||
Net
income | 799 | 1,405 | (43 | )% | ||||
Net income applicable to noncontrolling interests | 42 | 34 | 24 | % | ||||
Net
income applicable to Morgan Stanley | $ | 757 | $ | 1,371 | (45 | )% |
• | Uncertainty, driven by market volatility and the overall environment, resulted in lower activity in Advisory and Equity underwriting. |
• | Market volumes and volatility were significantly higher than in the prior year quarter resulting in increased client
activity across the Sales and Trading businesses and widened bid-offer spreads. Valuations were negatively impacted, and client balances declined significantly in the Equity Financing business. |
• | Credit deteriorated rapidly, the results of which are reflected in losses on held-for-sale loans and lending commitments recorded in Other revenues, partially offset by positive hedge results in Other Sales and Trading, aggregating to $610 million for the current quarter; provisions for loan losses recorded in Other revenues, and lending commitments shown in Non-compensation expenses, aggregating to $388 million for the current quarter; Trading losses in certain Credit |
Three Months Ended March 31, | ||||||||
$
in millions | 2020 | 2019 | % Change | |||||
Advisory | $ | 362 | $ | 406 | (11 | )% | ||
Underwriting: | ||||||||
Equity | 336 | 339 | (1 | )% | ||||
Fixed
income | 446 | 406 | 10 | % | ||||
Total Underwriting | 782 | 745 | 5 | % | ||||
Total
Investment banking | $ | 1,144 | $ | 1,151 | (1 | )% |
Three
Months Ended March 31, | ||||||
$ in billions | 2020 | 2019 | ||||
Completed mergers and acquisitions1 | $ | 109 | $ | 195 | ||
Equity and equity-related offerings2,
3 | 13 | 14 | ||||
Fixed income offerings2, 4 | 82 | 58 |
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. |
• | Advisory
revenues decreased in the current quarter primarily as a result of lower volumes of completed M&A activity, particularly large transactions. |
• | Equity underwriting revenues were relatively unchanged compared with subdued results in the prior year quarter as lower revenues in secondary block share trades were offset by higher revenues in initial public offerings and follow-on offerings. |
March
2020 Form 10-Q | 8 |
Management’s Discussion and Analysis |
• | Fixed
income underwriting revenues increased in the current quarter primarily due to higher overall volumes compared to the prior year quarter, with higher revenues in investment grade bond and non-investment grade loan issuances, partially offset by lower revenues from investment grade loan issuances. |
Three Months Ended March 31, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Trading | $ | 3,416 | $ | 3,130 | 9 | % | ||
Commissions
and fees | 874 | 621 | 41 | % | ||||
Asset management | 113 | 107 | 6 | % | ||||
Net
interest | 462 | (116 | ) | N/M | ||||
Total | $ | 4,865 | $ | 3,742 | 30 | % |
Three Months Ended March 31, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Equity | $ | 2,422 | $ | 2,015 | 20 | % | ||
Fixed
Income | 2,203 | 1,710 | 29 | % | ||||
Other | 240 | 17 | N/M | |||||
Total | $ | 4,865 | $ | 3,742 | 30 | % |
Three Months Ended March 31, 2020 | ||||||||||||
Net | ||||||||||||
$ in millions | Trading | Fees1 | Interest2 | Total | ||||||||
Financing | $ | 1,034 | $ | 101 | $ | (37 | ) | $ | 1,098 | |||
Execution
services | 579 | 783 | (38 | ) | 1,324 | |||||||
Total Equity | $ | 1,613 | $ | 884 | $ | (75 | ) | $ | 2,422 | |||
Total
Fixed Income | $ | 1,773 | $ | 102 | $ | 328 | $ | 2,203 |
Three
Months Ended March 31, 2019 | ||||||||||||
Net | ||||||||||||
$ in millions | Trading | Fees1 | Interest2 | Total | ||||||||
Financing | $ | 1,115 | $ | 98 | $ | (258 | ) | $ | 955 | |||
Execution
services | 551 | 553 | (44 | ) | 1,060 | |||||||
Total Equity | $ | 1,666 | $ | 651 | $ | (302 | ) | $ | 2,015 | |||
Total
Fixed Income | $ | 1,727 | $ | 78 | $ | (95 | ) | $ | 1,710 |
1. | Includes
Commissions and fees and Asset management revenues. |
2. | Includes funding costs, which are allocated to the businesses based on funding usage. |
• | Financing
increased from the prior year quarter, primarily due to higher average client balances, partially offset by the impact of reduced dividend expectations on the valuation of certain hedges. Net interest increased reflecting a reduction in funding costs. |
• | Execution services increased from the prior year quarter, reflecting an increase in market volumes in cash equities resulting in higher Commissions and fees, and higher client trading activity in derivatives products, which was partially offset by the impact of losses on certain counterparties’ failure to meet margin requirements and the impact of reduced dividend expectations on derivative valuations. |
• | Global macro products Trading revenues increased primarily due to higher client activity in both foreign exchange and rates products, and the widening of bid-offer spreads from higher market volatility. Higher average balances and lower funding costs contributed to an increase in Net interest revenues. |
• | Credit
products Trading revenues decreased primarily due to the widening of credit spreads which resulted in losses in securitized products and municipal securities, partially offset by increased revenues from client activity in corporate credit products from higher volumes and widening bid-offer spreads. Net interest revenues increased, primarily driven by higher spreads on Agency products and higher average balances in secured lending facilities. |
• | Trading revenues from Commodities products and Other decreased as a result of lower client structuring activity within derivatives counterparty credit risk management, partially offset by improved inventory management in commodities due to higher market volatility in energy and metals. Net interest revenues
increased, reflecting lower funding costs. |
• | Other sales and trading revenues of $240 million in the current quarter increased from the prior year quarter reflecting gains on hedges associated with loans and lending commitments compared with losses in the prior year quarter, partially offset by losses related to investments associated with certain employee deferred cash-based compensation plans. |
9 | March
2020 Form 10-Q |
Management’s Discussion and Analysis |
• | Net
investment losses of $25 million in the current quarter compared to gains in the prior year quarter, were primarily driven by losses in the current quarter on an energy-related investment and lower revenues from fund-related distributions. |
• | Other net losses of $1,079 million in the current quarter were primarily as a result of mark-to-market losses on loans and lending commitments held for sale due to the widening of credit spreads, compared with gains in the prior year quarter, as well as an increase in the provision for credit losses on loans held for investment. |
• | Compensation and benefits expenses remained relatively unchanged in the current quarter as the benefit from a decrease in the fair value of investments to which certain deferred compensation plans are referenced was offset by an increase in discretionary incentive compensation reflecting baseline annual compensation estimates, exclusive of the benefit noted. |
• | Non-compensation
expenses increased in the current quarter primarily due to higher volume-related expenses as well as an increase in the provision for credit losses for lending commitments held for investment. |
March 2020 Form 10-Q | 10 |
Management’s Discussion and Analysis |
Three Months Ended March 31, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Revenues | ||||||||
Investment
banking | $ | 158 | $ | 109 | 45 | % | ||
Trading | (347 | ) | 302 | N/M | ||||
Investments | — | 1 | (100 | )% | ||||
Commissions
and fees | 588 | 406 | 45 | % | ||||
Asset management | 2,680 | 2,361 | 14 | % | ||||
Other | 62 | 80 | (23 | )% | ||||
Total
non-interest revenues | 3,141 | 3,259 | (4 | )% | ||||
Interest income | 1,193 | 1,413 | (16 | )% | ||||
Interest
expense | 297 | 283 | 5 | % | ||||
Net interest | 896 | 1,130 | (21 | )% | ||||
Net
revenues | 4,037 | 4,389 | (8 | )% | ||||
Compensation and benefits | 2,212 | 2,462 | (10 | )% | ||||
Non-compensation
expenses | 770 | 739 | 4 | % | ||||
Total non-interest expenses | 2,982 | 3,201 | (7 | )% | ||||
Income
before provision for income taxes | $ | 1,055 | $ | 1,188 | (11 | )% | ||
Provision for income taxes | 191 | 264 | (28 | )% | ||||
Net
income applicable to Morgan Stanley | $ | 864 | $ | 924 | (6 | )% |
• | The
decline in global asset prices contributed to losses on investments associated with certain employee deferred cash-based compensation plans of $426 million in the current quarter. |
• | Already elevated market volumes and volatility compared to the prior year quarter increased further, resulting in increased commissions from client activity. |
$ in billions, except employee data | ||||||
Client assets | $ | 2,397 | $ | 2,700 | ||
Fee-based client assets1 | $ | 1,134 | $ | 1,267 | ||
Fee-based
client assets as a percentage of total client assets | 47 | % | 47 | % | ||
Client liabilities2 | $ | 92 | $ | 90 | ||
Investment securities
portfolio | $ | 75.5 | $ | 67.2 | ||
Loans and lending commitments | $ | 95.9 | $ | 93.2 | ||
Wealth
Management representatives | 15,432 | 15,468 |
Three
Months Ended March 31, | ||||||
2020 | 2019 | |||||
Per representative: | ||||||
Annualized revenues ($ in thousands)3 | $ | 1,045 | $ | 1,118 | ||
Client
assets ($ in millions)4 | $ | 155 | $ | 158 | ||
Fee-based asset flows ($ in billions)5 | $ | 18.4 | $ | 14.8 |
1. | Fee-based
client assets represent the amount of assets in client accounts where the fee for services is calculated based on those assets. |
2. | Client liabilities include securities-based and tailored lending, residential real estate loans and margin lending. |
3. | Revenues per representative equal Wealth Management’s annualized net revenues divided by the average number of representatives. |
4. | Client
assets per representative equal total period-end client assets divided by period-end number of representatives. |
5. | For a description of the Inflows and Outflows included within Fee-based asset flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Wealth Management—Fee-Based Client Assets” in the 2019 Form 10-K. Excludes institutional cash management-related activity. |
Three Months Ended March 31, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Investment banking | $ | 158 | $ | 109 | 45 | % | ||
Trading | (347 | ) | 302 | N/M | ||||
Commissions
and fees | 588 | 406 | 45 | % | ||||
Total | $ | 399 | $ | 817 | (51 | )% | ||
Transactional
revenues as a % of Net revenues | 10 | % | 19 | % |
11 | March 2020 Form 10-Q |
Management’s Discussion and Analysis |
• | Investment
banking revenues increased in the current quarter primarily due to higher revenues from structured products and closed-end fund issuances. |
• | Trading revenues decreased in the current quarter principally due to losses related to investments associated with certain employee deferred cash-based compensation plans, compared with gains in the prior year quarter. |
• | Commissions and fees increased
in the current quarter primarily due to increased client activity in equities. |
• | Compensation and benefits expenses decreased in the current quarter, primarily due to decreases in the fair value of investments to which certain deferred compensation plans are referenced, partially offset by an increase in the formulaic |
• | Non-compensation
expenses increased in the current quarter primarily due to incremental expenses related to Solium Capital, Inc., which was acquired in the second quarter of 2019. |
$
in billions | Inflows | Outflows | Market Impact | ||||||||||||
Separately managed1 | $ | 322 | $ | 12 | $ | (7 | ) | $ | 2 | $ | 329 | ||||
Unified
managed | 313 | 16 | (13 | ) | (53 | ) | 263 | ||||||||
Advisor | 155 | 10 | (9 | ) | (25 | ) | 131 | ||||||||
Portfolio
manager | 435 | 27 | (18 | ) | (65 | ) | 379 | ||||||||
Subtotal | $ | 1,225 | $ | 65 | $ | (47 | ) | $ | (141 | ) | $ | 1,102 | |||
Cash
management | 42 | 4 | (14 | ) | — | 32 | |||||||||
Total fee-based client assets | $ | 1,267 | $ | 69 | $ | (61 | ) | $ | (141 | ) | $ | 1,134 |
$
in billions | Inflows | Outflows | Market Impact | ||||||||||||
Separately managed1 | $ | 279 | $ | 14 | $ | (5 | ) | $ | (12 | ) | $ | 276 | |||
Unified
managed | 257 | 13 | (11 | ) | 24 | 283 | |||||||||
Advisor | 137 | 8 | (9 | ) | 11 | 147 | |||||||||
Portfolio
manager | 353 | 19 | (14 | ) | 33 | 391 | |||||||||
Subtotal | $ | 1,026 | $ | 54 | $ | (39 | ) | $ | 56 | $ | 1,097 | ||||
Cash
management | 20 | 4 | (5 | ) | — | 19 | |||||||||
Total fee-based client assets | $ | 1,046 | $ | 58 | $ | (44 | ) | $ | 56 | $ | 1,116 |
Three Months Ended March 31, | ||||
Fee rate in bps | 2020 | 2019 | ||
Separately managed | 14 | 14 | ||
Unified
managed | 99 | 101 | ||
Advisor | 85 | 88 | ||
Portfolio manager | 94 | 96 | ||
Subtotal | 72 | 74 | ||
Cash
management | 5 | 6 | ||
Total fee-based client assets | 71 | 73 |
1. | Includes non-custody account
values reflecting prior quarter-end balances due to a lag in the reporting of asset values by third-party custodians. |
March 2020 Form 10-Q | 12 |
Management’s Discussion and Analysis |
Three
Months Ended March 31, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Revenues | ||||||||
Trading | $ | (37 | ) | $ | (3 | ) | N/M | |
Investments | 63 | 191 | (67 | )% | ||||
Asset
management | 665 | 617 | 8 | % | ||||
Other | 7 | 3 | 133 | % | ||||
Total
non-interest revenues | 698 | 808 | (14 | )% | ||||
Interest income | 8 | 4 | 100 | % | ||||
Interest
expense | 14 | 8 | 75 | % | ||||
Net interest | (6 | ) | (4 | ) | (50 | )% | ||
Net
revenues | 692 | 804 | (14 | )% | ||||
Compensation and benefits | 257 | 370 | (31 | )% | ||||
Non-compensation
expenses | 292 | 260 | 12 | % | ||||
Total non-interest expenses | 549 | 630 | (13 | )% | ||||
Income
before provision for income taxes | 143 | 174 | (18 | )% | ||||
Provision for income taxes | 25 | 33 | (24 | )% | ||||
Net
income | 118 | 141 | (16 | )% | ||||
Net income applicable to noncontrolling interests | 40 | 5 | N/M | |||||
Net
income applicable to Morgan Stanley | $ | 78 | $ | 136 | (43 | )% |
• | The
decline in global asset prices led to losses of $326 million in the current quarter related to the reversal of accrued carried interest, and losses on investments in certain of our funds, net of economic hedges, and net losses in Trading revenues. |
• | Compensation and benefits expenses decreased in the current quarter primarily due to lower compensation associated with carried interest and a decrease in the fair value of investments to which certain deferred compensation plans are referenced. |
• | Non-compensation
expenses in the current quarter increased from the prior year quarter primarily as a result of higher fee sharing paid to intermediaries driven by higher average AUM. |
13 | March 2020 Form 10-Q |
Management’s Discussion and Analysis |
$
in billions | Inflows | Outflows | Market Impact | Other | ||||||||||||||
Equity | $ | 138 | $ | 14 | $ | (12 | ) | $ | (18 | ) | $ | (1 | ) | $ | 121 | |||
Fixed
income | 79 | 10 | (9 | ) | (4 | ) | (1 | ) | 75 | |||||||||
Alternative/Other | 139 | 8 | (4 | ) | (7 | ) | 5 | 141 | ||||||||||
Long-term
AUM subtotal | 356 | 32 | (25 | ) | (29 | ) | 3 | 337 | ||||||||||
Liquidity | 196 | 446 | (395 | ) | 1 | (1 | ) | 247 | ||||||||||
Total
AUM | $ | 552 | $ | 478 | $ | (420 | ) | $ | (28 | ) | $ | 2 | $ | 584 | ||||
Shares
of minority stake assets | 6 | 6 |
$
in billions | Inflows | Outflows | Market Impact | Other | ||||||||||||||
Equity | $ | 103 | $ | 9 | $ | (8 | ) | $ | 16 | $ | — | $ | 120 | |||||
Fixed
income | 68 | 6 | (7 | ) | 1 | — | 68 | |||||||||||
Alternative/Other | 128 | 5 | (4 | ) | 5 | (1 | ) | 133 | ||||||||||
Long-term
AUM subtotal | 299 | 20 | (19 | ) | 22 | (1 | ) | 321 | ||||||||||
Liquidity | 164 | 343 | (348 | ) | 1 | (1 | ) | 159 | ||||||||||
Total
AUM | $ | 463 | $ | 363 | $ | (367 | ) | $ | 23 | $ | (2 | ) | $ | 480 | ||||
Shares
of minority stake assets | 7 | 6 |
Three Months Ended March 31, | ||||||
$ in billions | 2020 | 2019 | ||||
Equity | $ | 133 | $ | 113 | ||
Fixed
income | 79 | 68 | ||||
Alternative/Other | 139 | 131 | ||||
Long-term AUM subtotal | 351 | 312 | ||||
Liquidity | 206 | 163 | ||||
Total
AUM | $ | 557 | $ | 475 | ||
Shares of minority stake assets | 6 | 6 |
Three
Months Ended March 31, | |||
Fee rate in bps | 2020 | 2019 | |
Equity | 77 | 76 | |
Fixed income | 31 | 32 | |
Alternative/Other | 60 | 68 | |
Long-term
AUM | 60 | 63 | |
Liquidity | 17 | 17 | |
Total AUM | 44 | 47 |
March 2020 Form 10-Q | 14 |
Management’s Discussion and Analysis |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
U.S. GAAP | 17.1 | % | 16.5 | % | ||
Adjusted effective income tax rate—non-GAAP1 | 18.5 | % | 19.9 | % | ||
Net
discrete tax provisions/(benefits) | ||||||
Recurring2 | $ | (99 | ) | $ | (107 | ) |
Intermittent3 | $ | (31 | ) | $ | (101 | ) |
1. | The
adjusted effective income tax rate is a non-GAAP measure that excludes net discrete tax provisions (benefits) that are intermittent and includes those that are recurring. For further information on non-GAAP measures, see “Selected Non-GAAP Financial Information” herein. |
2. | Provisions (benefits) related to conversion of employee share-based awards are expected to occur every year and, as such, are considered recurring discrete tax items. |
3. | Includes
all tax provisions (benefits) that have been determined to be discrete, other than Recurring items as defined above. |
$
in billions | ||||||
Assets | $ | 265.4 | $ | 219.6 | ||
Investment securities portfolio: | ||||||
Investment
securities—AFS | 49.0 | 42.4 | ||||
Investment securities—HTM | 28.7 | 26.1 | ||||
Total investment securities | $ | 77.7 | $ | 68.5 | ||
Deposits2 | $ | 234.1 | $ | 189.3 | ||
Wealth
Management Loans | ||||||
Securities-based lending and other3 | $ | 51.4 | $ | 49.9 | ||
Residential real estate | 31.1 | 30.2 | ||||
Total | $ | 82.5 | $ | 80.1 | ||
Institutional
Securities Loans | ||||||
Corporate4: | ||||||
Corporate relationship and event-driven lending | $ | 15.4 | $ | 5.6 | ||
Secured lending facilities | 28.4 | 26.8 | ||||
Securities-based
lending and other | 5.1 | 5.4 | ||||
Commercial and residential real estate | 10.3 | 12.0 | ||||
Total | $ | 59.2 | $ | 49.8 |
1. | Amounts
exclude transactions between the bank subsidiaries, as well as deposits from the Parent Company and affiliates. |
2. | For further information on deposits, see “Liquidity and Capital Resources—Funding Management—Unsecured Financing” herein. |
3. | Other loans primarily include tailored lending. |
4. | For
a further discussion of corporate loans in the Institutional Securities business segment, see “Credit Risk—Institutional Securities Corporate Loans” herein. |
15 | March
2020 Form 10-Q |
Management’s Discussion and Analysis |
• | Reference
Rate Reform. This accounting update provides optional accounting relief to entities with contracts, hedge accounting relationships or other transactions that reference LIBOR or other interest rate benchmarks for which the referenced rate is expected to be discontinued or replaced. This optional relief generally allows for contract modifications solely related to the replacement of the reference rate to be accounted for as a continuation of the existing contract instead of as an extinguishment of the contract, and would therefore not trigger certain accounting impacts that would otherwise
be required. The relief also allows entities to change certain critical terms of existing hedge accounting relationships that are affected by reference rate reform, and these changes would not require de-designating the hedge accounting relationship. The optional relief can be applied beginning January 1, 2020, and ending December 31, 2022. We plan to apply the accounting relief as relevant contract and hedge accounting relationship modifications are made during the course of the reference rate reform transition period. |
$
in millions | IS | WM | IM | Total | ||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 101,615 | $ | 29,803 | $ | 91 | $ | 131,509 | ||||
Trading
assets at fair value | 266,781 | 389 | 3,746 | 270,916 | ||||||||
Investment securities | 40,662 | 75,495 | — | 116,157 | ||||||||
Securities
purchased under agreements to resell | 88,008 | 16,792 | — | 104,800 | ||||||||
Securities borrowed | 71,826 | 474 | — | 72,300 | ||||||||
Customer
and other receivables | 58,523 | 15,216 | 685 | 74,424 | ||||||||
Loans1 | 66,171 | 82,516 | 10 | 148,697 | ||||||||
Other
assets2 | 13,903 | 13,139 | 1,950 | 28,992 | ||||||||
Total assets | $ | 707,489 | $ | 233,824 | $ | 6,482 | $ | 947,795 |
$ in millions | IS | WM | IM | Total | ||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 67,657 | $ | 14,247 | $ | 267 | $ | 82,171 | ||||
Trading
assets at fair value | 293,477 | 47 | 3,586 | 297,110 | ||||||||
Investment securities | 38,524 | 67,201 | — | 105,725 | ||||||||
Securities
purchased under agreements to resell | 80,744 | 7,480 | — | 88,224 | ||||||||
Securities borrowed | 106,199 | 350 | — | 106,549 | ||||||||
Customer
and other receivables | 39,743 | 15,190 | 713 | 55,646 | ||||||||
Loans1 | 50,557 | 80,075 | 5 | 130,637 | ||||||||
Other
assets2 | 14,300 | 13,092 | 1,975 | 29,367 | ||||||||
Total assets | $ | 691,201 | $ | 197,682 | $ | 6,546 | $ | 895,429 |
1. | Amounts include loans held for investment, net of allowance, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheets (see Note 9 to the financial statements). |
2. | Other assets primarily
includes Goodwill and Intangible assets, premises, equipment and software, ROU assets related to leases, other investments, and deferred tax assets. |
March 2020 Form 10-Q | 16 |
Management’s Discussion and Analysis |
$ in millions | ||||||
Cash deposits with central banks | $ | 60,719 | $ | 35,025 | ||
Unencumbered HQLA Securities2: | ||||||
U.S.
government obligations | 95,619 | 88,754 | ||||
U.S. agency and agency mortgage-backed securities | 58,342 | 50,732 | ||||
Non-U.S. sovereign obligations3 | 30,255 | 29,909 | ||||
Other
investment grade securities | 700 | 1,591 | ||||
Total HQLA2 | $ | 245,635 | $ | 206,011 | ||
Cash deposits with banks (non-HQLA) | 9,499 | 9,857 | ||||
Total
Liquidity Resources | $ | 255,134 | $ | 215,868 |
1. | In the first quarter of 2020, we changed our internal measure of liquidity from the Global Liquidity Reserve to Liquidity Resources, which is more closely aligned with the regulatory definition of HQLA. Prior periods have been recast to conform to the current presentation. |
2. | HQLA
is presented prior to applying weightings and includes all HQLA held in subsidiaries. |
3. | Primarily composed of unencumbered U.K., French, Japanese, and German government obligations. |
$
in millions | Average Daily Balance Three Months Ended March 31, 2020 | ||||||||
Bank legal entities | |||||||||
Domestic | $ | 112,126 | $ | 75,894 | $ | 83,117 | |||
Foreign | 5,265 | 4,049 | 4,419 | ||||||
Total
Bank legal entities | 117,391 | 79,943 | 87,536 | ||||||
Non-Bank legal entities | |||||||||
Domestic: | |||||||||
Parent
Company | 53,548 | 53,128 | 49,284 | ||||||
Non-Parent Company | 33,665 | 28,905 | 36,295 | ||||||
Total
Domestic | 87,213 | 82,033 | 85,579 | ||||||
Foreign | 50,530 | 53,892 | 54,333 | ||||||
Total
Non-Bank legal entities | 137,743 | 135,925 | 139,912 | ||||||
Total Liquidity Resources | $ | 255,134 | $ | 215,868 | $ | 227,448 |
1. | In
the first quarter of 2020, we changed our internal measure of liquidity from the Global Liquidity Reserve to Liquidity Resources, which is more closely aligned with the regulatory definition of HQLA. Prior periods have been recast to conform to the current presentation. |
17 | March
2020 Form 10-Q |
Management’s Discussion and Analysis |
Average Daily Balance Three Months Ended | ||||||
$ in millions | ||||||
Eligible HQLA1 | ||||||
Cash deposits with central banks | $ | 32,778 | $ | 29,597 | ||
Securities2 | 140,336 | 148,221 | ||||
Total
Eligible HQLA1 | $ | 173,114 | $ | 177,818 | ||
LCR | 127 | % | 134 | % |
1. | Under
the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries. |
2. | Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds. |
$ in millions | ||||||
Securities purchased under agreements to resell and Securities borrowed | $ | 177,100 | $ | 194,773 | ||
Securities
sold under agreements to repurchase and Securities loaned | $ | 57,447 | $ | 62,706 | ||
Securities received as collateral1 | $ | 4,711 | $ | 13,022 |
Average
Daily Balance Three Months Ended | ||||||
$ in millions | ||||||
Securities purchased under agreements to resell and Securities borrowed | $ | 177,971 | $ | 210,257 | ||
Securities
sold under agreements to repurchase and Securities loaned | $ | 61,143 | $ | 64,870 |
1. | Included within Trading assets—Corporate equities in the balance sheets. |
March 2020 Form 10-Q | 18 |
Management’s Discussion and Analysis |
$
in millions | ||||||
Savings and demand deposits: | ||||||
Brokerage sweep deposits1 | $ | 151,618 | $ | 121,077 | ||
Savings
and other | 36,886 | 28,388 | ||||
Total Savings and demand deposits | 188,504 | 149,465 | ||||
Time deposits | 46,735 | 40,891 | ||||
Total | $ | 235,239 | $ | 190,356 |
1. | Amounts
represent balances swept from client brokerage accounts. |
$ in millions | Parent Company | Total | |||||||
Original
maturities of one year or less | $ | 8 | $ | 2,203 | $ | 2,211 | |||
Original maturities greater than one year | |||||||||
2020 | $ | 8,264 | $ | 2,692 | $ | 10,956 | |||
2021 | 19,575 | 4,099 | 23,674 | ||||||
2022 | 16,116 | 3,045 | 19,161 | ||||||
2023 | 15,155 | 2,938 | 18,093 | ||||||
2024 | 15,678 | 4,809 | 20,487 | ||||||
Thereafter
| 79,688 | 20,586 | 100,274 | ||||||
Total | $ | 154,476 | $ | 38,169 | $ | 192,645 | |||
Total
Borrowings | $ | 154,484 | $ | 40,372 | $ | 194,856 | |||
Maturities over next 12 months2 | $ | 17,153 |
1. | Original
maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date. |
2. | Includes only borrowings with original maturities greater than one year. |
Parent Company | |||
Short-Term Debt | Long-Term Debt | Rating Outlook | |
DBRS,
Inc. | R-1 (middle) | A (high) | Stable |
Fitch Ratings, Inc. | F1 | A | Negative |
Moody’s Investors Service, Inc. | P-2 | A3 | Ratings Under Review |
Rating and Investment Information, Inc. | a-1 | A | Stable |
S&P
Global Ratings | A-2 | BBB+ | Stable |
MSBNA | |||
Short-Term Debt | Long-Term Debt | Rating Outlook | |
Fitch
Ratings, Inc. | F1 | A+ | Negative |
Moody’s Investors Service, Inc. | P-1 | A1 | Ratings Under Review |
S&P Global Ratings | A-1 | A+ | Stable |
MSPBNA | |||
Short-Term Debt | Long-Term Debt | Rating Outlook | |
Moody’s
Investors Service, Inc. | P-1 | A1 | Ratings Under Review |
S&P Global Ratings | A-1 | A+ | Stable |
19 | March
2020 Form 10-Q |
Management’s Discussion and Analysis |
Three Months Ended March 31, | ||||||
in millions, except for per share data | 2020 | 2019 | ||||
Number of shares | 29 | 28 | ||||
Average price per share | $ | 46.01 | $ | 42.19 | ||
Total | $ | 1,347 | $ | 1,180 |
Announcement date | |||
Amount per share | $0.35 | ||
Date to be paid | |||
Shareholders of record as of |
Announcement date | |
Date
paid | |
Shareholders of record as of |
March 2020 Form 10-Q | 20 |
Management’s Discussion and Analysis |
• | A greater than 2.5% capital conservation buffer; |
• | The G-SIB capital surcharge,
currently at 3%; and |
• | Up to a 2.5% CCyB, currently set by U.S. banking agencies at zero. |
21 | March
2020 Form 10-Q |
Management’s Discussion and Analysis |
$ in millions | Required Ratio1 | Standardized | Advanced | |||||
Risk-based capital | ||||||||
Common Equity Tier 1 capital | $ | 65,195 | $ | 65,195 | ||||
Tier
1 capital | 73,896 | 73,896 | ||||||
Total capital | 84,121 | 83,847 | ||||||
Total RWA | 415,002 | 427,782 | ||||||
Common
Equity Tier 1 capital ratio | 10.0 | % | 15.7 | % | 15.2 | % | ||
Tier 1 capital ratio | 11.5 | % | 17.8 | % | 17.3 | % | ||
Total
capital ratio | 13.5 | % | 20.3 | % | 19.6 | % | ||
$ in millions | Required Ratio1 | |||||||
Leverage-based capital | ||||||||
Adjusted average assets2 | $ | 910,499 | ||||||
Tier 1 leverage ratio | 4.0 | % | 8.1 | % | ||||
Supplementary
leverage exposure3 | $ | 1,185,734 | ||||||
SLR | 5.0 | % | 6.2 | % |
$ in millions | Required Ratio1 | Standardized | Advanced | |||||
Risk-based capital | ||||||||
Common Equity Tier 1 capital | $ | 64,751 | $ | 64,751 | ||||
Tier
1 capital | 73,443 | 73,443 | ||||||
Total capital | 82,708 | 82,423 | ||||||
Total RWA | 394,177 | 382,496 | ||||||
Common
Equity Tier 1 capital ratio | 10.0 | % | 16.4 | % | 16.9 | % | ||
Tier 1 capital ratio | 11.5 | % | 18.6 | % | 19.2 | % | ||
Total
capital ratio | 13.5 | % | 21.0 | % | 21.5 | % | ||
$ in millions | Required Ratio1 | |||||||
Leverage-based capital | ||||||||
Adjusted average assets2 | $ | 889,195 | ||||||
Tier 1 leverage ratio | 4.0 | % | 8.3 | % | ||||
Supplementary
leverage exposure3 | $ | 1,155,177 | ||||||
SLR | 5.0 | % | 6.4 | % |
1. | Required
ratios are inclusive of any buffers applicable as of the date presented. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. |
2. | Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in
our own capital instruments, certain deferred tax assets and other capital deductions. |
3. | Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures. |
$ in millions | Change | ||||||||
Common Equity Tier 1 capital | |||||||||
Common
stock and surplus | $ | 3,727 | $ | 5,228 | $ | (1,501 | ) | ||
Retained earnings | 71,718 | 70,589 | 1,129 | ||||||
AOCI | 2,095 | (2,788 | ) | 4,883 | |||||
Regulatory
adjustments and deductions: | |||||||||
Net goodwill | (7,058 | ) | (7,081 | ) | 23 | ||||
Net intangible assets | (1,924 | ) | (2,012 | ) | 88 | ||||
Other
adjustments and deductions1 | (3,363 | ) | 815 | (4,178 | ) | ||||
Total Common Equity Tier 1 capital | $ | 65,195 | $ | 64,751 | $ | 444 | |||
Additional
Tier 1 capital | |||||||||
Preferred stock | $ | 8,520 | $ | 8,520 | $ | — | |||
Noncontrolling
interests | 536 | 607 | (71 | ) | |||||
Additional Tier 1 capital | $ | 9,056 | $ | 9,127 | $ | (71 | ) | ||
Deduction
for investments in covered funds | (355 | ) | (435 | ) | 80 | ||||
Total Tier 1 capital | $ | 73,896 | $ | 73,443 | $ | 453 | |||
Standardized
Tier 2 capital | |||||||||
Subordinated debt | $ | 9,090 | $ | 8,538 | $ | 552 | |||
Noncontrolling
interests | 126 | 143 | (17 | ) | |||||
Eligible allowance for credit losses | 1,013 | 590 | 423 | ||||||
Other
adjustments and deductions | (4 | ) | (6 | ) | 2 | ||||
Total Standardized Tier 2 capital | $ | 10,225 | $ | 9,265 | $ | 960 | |||
Total
Standardized capital | $ | 84,121 | $ | 82,708 | $ | 1,413 | |||
Advanced Tier 2 capital | |||||||||
Subordinated
debt | $ | 9,090 | $ | 8,538 | $ | 552 | |||
Noncontrolling interests | 126 | 143 | (17 | ) | |||||
Eligible
credit reserves | 739 | 305 | 434 | ||||||
Other adjustments and deductions | (4 | ) | (6 | ) | 2 | ||||
Total
Advanced Tier 2 capital | $ | 9,951 | $ | 8,980 | $ | 971 | |||
Total Advanced capital | $ | 83,847 | $ | 82,423 | $ | 1,424 |
1. | Other
adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets. |
March 2020 Form 10-Q | 22 |
Management’s Discussion and Analysis |
Three Months Ended March 31, 2020 | ||||||
$
in millions | Standardized | Advanced | ||||
Credit risk RWA | ||||||
Balance at December 31, 2019 | $ | 342,684 | $ | 228,927 | ||
Change
related to the following items: | ||||||
Derivatives | 12,902 | 31,104 | ||||
Securities financing transactions | (13,755 | ) | 837 | |||
Securitizations | (768 | ) | (600 | ) | ||
Investment
securities | 1,626 | 2,559 | ||||
Commitments, guarantees and loans | 11,162 | 3,652 | ||||
Cash | 919 | 591 | ||||
Equity
investments | 953 | 1,003 | ||||
Other credit risk1 | 4,652 | 4,925 | ||||
Total change in credit risk RWA | $ | 17,691 | $ | 44,071 | ||
Balance
at March 31, 2020 | $ | 360,375 | $ | 272,998 | ||
Market risk RWA | ||||||
Balance at December 31, 2019 | $ | 51,493 | $ | 51,597 | ||
Change
related to the following items: | ||||||
Regulatory VaR | 1,971 | 1,971 | ||||
Regulatory stressed VaR | 287 | 287 | ||||
Incremental
risk charge | 1,737 | 1,737 | ||||
Comprehensive risk measure | 216 | 112 | ||||
Specific risk: | ||||||
Non-securitization | 2,034 | 2,034 | ||||
Securitization | (3,111 | ) | (3,111 | ) | ||
Total
change in market risk RWA | $ | 3,134 | $ | 3,030 | ||
Balance at March 31, 2020 | $ | 54,627 | $ | 54,627 | ||
Operational
risk RWA | ||||||
Balance at December 31, 2019 | N/A | $ | 101,972 | |||
Change in operational risk RWA | N/A | (1,815 | ) | |||
Balance
at March 31, 2020 | N/A | $ | 100,157 | |||
Total RWA | $ | 415,002 | $ | 427,782 |
1. | Amounts reflect assets not in a defined category, non-material portfolios of exposures and unsettled transactions, as applicable. |
Actual Amount/Ratio | ||||||||||
$ in millions | Regulatory
Minimum | Required Ratio1 | ||||||||
External TLAC2 | $ | 201,486 | $ | 196,888 | ||||||
External
TLAC as a % of RWA | 18.0 | % | 21.5 | % | 47.1 | % | 49.9 | % | ||
External TLAC as a % of leverage exposure | 7.5 | % | 9.5 | % | 17.0 | % | 17.0 | % | ||
Eligible
LTD3 | $ | 118,778 | $ | 113,624 | ||||||
Eligible LTD as a % of RWA | 9.0 | % | 9.0 | % | 27.8 | % | 28.8 | % | ||
Eligible
LTD as a % of leverage exposure | 4.5 | % | 4.5 | % | 10.0 | % | 9.8 | % |
1. | Required ratios are inclusive of applicable buffers.The final rule imposes TLAC buffer requirements
on top of both the risk-based and leverage exposure-based external TLAC minimum requirements. The risk-based TLAC buffer is equal to the sum of 2.5%, the covered BHC's Method 1 G-SIB surcharge and the CCyB, if any, as a percentage of total RWA. The leverage exposure-based TLAC buffer is equal to 2% of the covered BHC's total leverage exposure. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. |
2. | External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as
eligible LTD. |
3. | Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date. |
23 | March 2020 Form 10-Q |
Management’s
Discussion and Analysis |
Three
Months Ended March 31, | ||||||
$ in billions | 2020 | 2019 | ||||
Institutional Securities | $ | 42.8 | $ | 40.4 | ||
Wealth Management | 18.2 | 18.2 | ||||
Investment
Management | 2.6 | 2.5 | ||||
Parent | 11.1 | 10.5 | ||||
Total | $ | 74.7 | $ | 71.6 |
1. | The
attribution of average common equity to the business segments is a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. |
March 2020 Form 10-Q | 24 |
Management’s
Discussion and Analysis |
25 | March 2020 Form 10-Q |
Management’s
Discussion and Analysis |
March 2020 Form 10-Q | 26 |
Management’s
Discussion and Analysis |
27 | March
2020 Form 10-Q |
Three
Months Ended | ||||||||||||
$ in millions | Period End | Average | High2 | Low2 | ||||||||
Interest rate and credit spread | $ | 62 | $ | 32 | $ | 62 | $ | 24 | ||||
Equity
price | 22 | 15 | 23 | 12 | ||||||||
Foreign exchange rate | 11 | 8 | 14 | 5 | ||||||||
Commodity
price | 12 | 13 | 19 | 10 | ||||||||
Less: Diversification benefit1 | (65 | ) | (33 | ) | N/A | N/A | ||||||
Primary
Risk Categories | $ | 42 | $ | 35 | $ | 52 | $ | 28 | ||||
Credit Portfolio | 25 | 15 | 25 | 12 | ||||||||
Less:
Diversification benefit1 | (12 | ) | (10 | ) | N/A | N/A | ||||||
Total Management VaR | $ | 55 | $ | 40 | $ | 58 | $ | 32 |
Three
Months Ended | ||||||||||||
$ in millions | Period End | Average | High2 | Low2 | ||||||||
Interest rate and credit spread | $ | 26 | $ | 28 | $ | 31 | $ | 24 | ||||
Equity
price | 11 | 14 | 18 | 11 | ||||||||
Foreign exchange rate | 10 | 9 | 13 | 6 | ||||||||
Commodity
price | 10 | 17 | 22 | 10 | ||||||||
Less: Diversification benefit1 | (27 | ) | (33 | ) | N/A | N/A | ||||||
Primary
Risk Categories | $ | 30 | $ | 35 | $ | 40 | $ | 30 | ||||
Credit Portfolio | 15 | 15 | 17 | 13 | ||||||||
Less:
Diversification benefit1 | (10 | ) | (11 | ) | N/A | N/A | ||||||
Total Management VaR | $ | 35 | $ | 39 | $ | 43 | $ | 33 |
1. | Diversification
benefit equals the difference between the total Management VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component. |
2. | The high and low VaR values for the total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and therefore, the diversification benefit is not an applicable measure. |
March
2020 Form 10-Q | 28 |
Risk Disclosures |
$ in millions | ||||||
Derivatives | $ | 6 | $ | 6 | ||
Funding liabilities2 | 39 | 42 |
1. | Amounts
represent the potential gain for each 1 bps widening of our credit spread. |
2. | Relates to Borrowings carried at fair value. |
$ in millions | ||||||
Basis point change | ||||||
+100 | $ | 850 | $ | 151 | ||
-100 | (495 | ) | (642 | ) |
29 | March
2020 Form 10-Q |
Risk Disclosures |
Loss
from 10% Decline | ||||||
$ in millions | ||||||
Investments related to Investment Management activities | $ | 327 | $ | 367 | ||
Other
investments: | ||||||
MUMSS | 173 | 169 | ||||
Other Firm investments | 197 | 195 |
March 2020 Form 10-Q | 30 |
Risk Disclosures |
$ in millions | IS | WM | IM1 | Total | ||||||||
Loans
held for investment, before allowance | $ | 49,358 | $ | 82,589 | $ | 5 | $ | 131,952 | ||||
Allowance for credit losses | (530 | ) | (87 | ) | — | (617 | ) | |||||
Loans
held for investment, net of allowance | $ | 48,828 | $ | 82,502 | $ | 5 | $ | 131,335 | ||||
Loans held for sale | 17,343 | 14 | 5 | 17,362 | ||||||||
Loans
held at fair value | 9,573 | — | 489 | 10,062 | ||||||||
Total loans | $ | 75,744 | $ | 82,516 | $ | 499 | $ | 158,759 | ||||
Lending
commitments2 | 92,911 | 13,366 | — | 106,277 | ||||||||
Total loans and lending commitments2 | $ | 168,655 | $ | 95,882 | $ | 499 | $ | 265,036 | ||||
Total
loans, before allowance | $ | 76,274 | $ | 82,603 | $ | 499 | $ | 159,376 |
$ in millions | IS | WM | IM1 | Total | ||||||||
Loans held for investment, before allowance | $ | 38,290 | $ | 80,114 | $ | 5 | $ | 118,409 | ||||
Allowance
for credit losses | (297 | ) | (52 | ) | — | (349 | ) | |||||
Loans held for investment, net of allowance | $ | 37,993 | $ | 80,062 | $ | 5 | $ | 118,060 | ||||
Loans
held for sale | 12,564 | 13 | — | 12,577 | ||||||||
Loans held at fair value | 11,075 | — | 251 | 11,326 | ||||||||
Total
loans | $ | 61,632 | $ | 80,075 | $ | 256 | $ | 141,963 | ||||
Lending commitments2 | 106,886 | 13,161 | 21 | 120,068 | ||||||||
Total
loans and lending commitments2 | $ | 168,518 | $ | 93,236 | $ | 277 | $ | 262,031 | ||||
Total
loans, before allowance | $ | 61,929 | $ | 80,127 | $ | 256 | $ | 142,312 |
1. | Investment
Management business segment loans are related to certain of our activities as an investment advisor and manager. At March 31, 2020 and December 31, 2019, loans held at fair value are predominantly the result of the consolidation of CLO vehicles, managed by Investment Management, composed primarily of senior secured corporate loans. |
2. | Lending commitments represent the notional amount of legally binding obligations to provide funding to clients for lending transactions. Since commitments associated with these business activities may expire unused or
may not be utilized to full capacity, they do not necessarily reflect the actual future cash funding requirements. |
$
in millions | |||
$ | 590 | ||
Effect of CECL adoption | (41 | ) | |
Gross charge-offs | (32 | ) | |
Provision | 407 | ||
Other | (3 | ) | |
$ | 921 | ||
Allowance for credit losses—Loans | $ | 617 | |
Allowance for credit losses—Lending commitments | 304 |
1. | At
December 31, 2019, the total allowance for credit losses for Loans and Lending commitments was $349 million and $241 million, respectively. |
IS | WM | IS | WM | |||||
Current | 99.5 | % | 99.9 | % | 99.0 | % | 99.9 | % |
Nonaccrual1 | 0.5 | % | 0.1 | % | 1.0 | % | 0.1 | % |
1. | These
loans are on nonaccrual status because the loans were past due for a period of 90 days or more or payment of principal or interest was in doubt. |
31 | March 2020 Form 10-Q |
Risk
Disclosures |
Contractual Years to Maturity | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Loans | |||||||||||||||
AA | $ | 59 | $ | 47 | $ | 14 | $ | 5 | $ | 125 | |||||
A | 931 | 1,456 | 554 | 589 | 3,530 | ||||||||||
BBB | 3,619 | 5,872 | 6,867 | 574 | 16,932 | ||||||||||
BB | 12,401 | 11,430 | 10,186 | 1,251 | 35,268 | ||||||||||
Other
NIG | 5,865 | 5,503 | 4,313 | 2,242 | 17,923 | ||||||||||
Unrated2 | 101 | 92 | 286 | 1,487 | 1,966 | ||||||||||
Total
loans | 22,976 | 24,400 | 22,220 | 6,148 | 75,744 | ||||||||||
Lending commitments | |||||||||||||||
AAA | — | 50 | — | — | 50 | ||||||||||
AA | 2,831 | 818 | 2,562 | 30 | 6,241 | ||||||||||
A | 3,994 | 7,477 | 9,150 | 279 | 20,900 | ||||||||||
BBB | 8,407 | 12,732 | 15,460 | 731 | 37,330 | ||||||||||
BB | 3,635 | 3,986 | 7,219 | 1,067 | 15,907 | ||||||||||
Other
NIG | 2,064 | 2,754 | 6,604 | 1,056 | 12,478 | ||||||||||
Unrated2 | 3 | — | — | 2 | 5 | ||||||||||
Total
lending commitments | 20,934 | 27,817 | 40,995 | 3,165 | 92,911 | ||||||||||
Total exposure | $ | 43,910 | $ | 52,217 | $ | 63,215 | $ | 9,313 | $ | 168,655 |
Contractual Years to Maturity | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Loans | |||||||||||||||
AA | $ | 7 | $ | 50 | $ | — | $ | 5 | $ | 62 | |||||
A | 955 | 923 | 516 | 277 | 2,671 | ||||||||||
BBB | 2,297 | 5,589 | 3,592 | 949 | 12,427 | ||||||||||
BB | 9,031 | 11,189 | 9,452 | 1,449 | 31,121 | ||||||||||
Other
NIG | 4,020 | 5,635 | 2,595 | 1,143 | 13,393 | ||||||||||
Unrated2 | 117 | 82 | 131 | 1,628 | 1,958 | ||||||||||
Total
loans | 16,427 | 23,468 | 16,286 | 5,451 | 61,632 | ||||||||||
Lending commitments | |||||||||||||||
AAA | — | 50 | — | — | 50 | ||||||||||
AA | 2,838 | 908 | 2,509 | — | 6,255 | ||||||||||
A | 6,461 | 7,287 | 9,371 | 298 | 23,417 | ||||||||||
BBB | 7,548 | 13,780 | 20,560 | 753 | 42,641 | ||||||||||
BB | 2,464 | 5,610 | 8,333 | 1,526 | 17,933 | ||||||||||
Other
NIG | 2,193 | 4,741 | 7,062 | 2,471 | 16,467 | ||||||||||
Unrated2 | — | 9 | 107 | 7 | 123 | ||||||||||
Total
lending commitments | 21,504 | 32,385 | 47,942 | 5,055 | 106,886 | ||||||||||
Total exposure | $ | 37,931 | $ | 55,853 | $ | 64,228 | $ | 10,506 | $ | 168,518 |
1. | Counterparty credit ratings are internally determined by CRM. |
2. | Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see “Market Risk” herein. |
$ in millions | ||||||
Industry | ||||||
Financials | $ | 40,142 | $ | 40,992 | ||
Real estate | 27,190 | 28,348 | ||||
Industrials | 16,100 | 13,136 | ||||
Healthcare | 13,582 | 14,113 | ||||
Communications
services | 10,839 | 12,165 | ||||
Utilities | 10,231 | 9,905 | ||||
Information technology | 10,019 | 9,201 | ||||
Consumer
discretionary | 9,993 | 9,589 | ||||
Energy | 9,856 | 9,461 | ||||
Consumer staples | 9,415 | 9,724 | ||||
Materials | 5,469 | 5,577 | ||||
Insurance | 3,961 | 3,755 | ||||
Other | 1,858 | 2,552 | ||||
Total | $ | 168,655 | $ | 168,518 |
March
2020 Form 10-Q | 32 |
Risk Disclosures |
$ in millions | ||||||
Corporate relationship and event-driven lending | $ | 27,058 | $ | 11,638 | ||
Secured lending facilities | 30,493 | 29,654 | ||||
Commercial
& residential real estate | 11,604 | 13,198 | ||||
Securities-based lending and other | 7,119 | 7,439 | ||||
Total Institutional Securities loans | $ | 76,274 | $ | 61,929 |
1. | Amounts
include loans held for investment, before the allowance for credit losses, loans held for sale and loans at fair value. |
Contractual
Years to Maturity | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Loans | $ | 3,284 | $ | 1,205 | $ | 1,527 | $ | 1,132 | $ | 7,148 | |||||
Lending
commitments | 7,312 | 2,317 | 1,921 | 1,507 | 13,057 | ||||||||||
Total loans and lending commitments | $ | 10,596 | $ | 3,522 | $ | 3,448 | $ | 2,639 | $ | 20,205 |
Contractual Years to Maturity | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Loans | $ | 1,194 | $ | 1,024 | $ | 839 | $ | 390 | $ | 3,447 | |||||
Lending
commitments | 7,921 | 5,012 | 2,285 | 3,090 | 18,308 | ||||||||||
Total loans and lending commitments | $ | 9,115 | $ | 6,036 | $ | 3,124 | $ | 3,480 | $ | 21,755 |
1. | Amounts
include loans and lending commitments held for investment, before the allowance for credit losses, and held for sale. |
$ in millions | Loans | Lending
Commitments | Loans | Lending Commitments | ||||||||
Corporate relationship and event-driven lending | $ | 15,457 | $ | 55,365 | $ | 5,426 | $ | 61,716 | ||||
Secured
lending facilities | 25,805 | 5,987 | 24,502 | 6,105 | ||||||||
Commercial & residential real estate1 | 7,430 | 730 | 7,859 | 425 | ||||||||
Securities-based
lending and other2 | 666 | 461 | 503 | 832 | ||||||||
Total, before allowance for credit losses | $ | 49,358 | $ | 62,543 | $ | 38,290 | $ | 69,078 | ||||
Allowance
for credit losses | (530 | ) | (298 | ) | (297 | ) | (236 | ) |
1. | Amounts principally comprise Commercial real estate loans and lending commitments. |
2. | Amounts
principally comprise Other loans and lending commitments. |
$ in millions | Corporate relationship and event-driven lending | Secured lending facilities | Commercial
& residential real estate | Securities-based lending and other | Total | ||||||||||
$ | 115 | $ | 101 | $ | 75 | $ | 6 | $ | 297 | ||||||
Effect
of CECL adoption | (2 | ) | (42 | ) | 34 | 3 | (7 | ) | |||||||
Gross charge-offs | (32 | ) | — | — | — | (32 | ) | ||||||||
Provision | 177 | 29 | 66 | 1 | 273 | ||||||||||
Other | — | — | (1 | ) | — | (1 | ) | ||||||||
$ | 258 | $ | 88 | $ | 174 | $ | 10 | $ | 530 |
$ in millions | Corporate relationship and event-driven lending | Secured lending facilities | Commercial & residential real estate | Securities-based
lending and other | Total | ||||||||||
$ | 201 | $ | 27 | $ | 7 | $ | 1 | $ | 236 | ||||||
Effect
of CECL adoption | (41 | ) | (11 | ) | 1 | — | (51 | ) | |||||||
Provision | 91 | 16 | 5 | 3 | 115 | ||||||||||
Other | (2 | ) | — | — | — | (2 | ) | ||||||||
$ | 249 | $ | 32 | $ | 13 | $ | 4 | $ | 298 |
33 | March
2020 Form 10-Q |
Risk Disclosures |
Corporate relationship and event-driven lending | 1.7 | % | 2.1 | % |
Secured lending facilities | 0.3 | % | 0.4 | % |
Commercial
& residential real estate | 2.3 | % | 1.0 | % |
Securities-based lending and other | 1.5 | % | 1.2 | % |
Total Institutional Securities loans | 1.1 | % | 0.8 | % |
Contractual Years to Maturity | |||||||||||||||
$
in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Securities-based lending and other loans | $ | 43,158 | $ | 4,709 | $ | 2,141 | $ | 1,441 | $ | 51,449 | |||||
Residential
real estate loans | 14 | 7 | — | 31,046 | 31,067 | ||||||||||
Total loans | $ | 43,172 | $ | 4,716 | $ | 2,141 | $ | 32,487 | $ | 82,516 | |||||
Lending
commitments | 10,397 | 2,382 | 326 | 261 | 13,366 | ||||||||||
Total loans and lending commitments | $ | 53,569 | $ | 7,098 | $ | 2,467 | $ | 32,748 | $ | 95,882 |
Contractual Years to Maturity | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Securities-based lending and other loans | $ | 41,863 | $ | 3,972 | $ | 2,783 | $ | 1,284 | $ | 49,902 | |||||
Residential
real estate loans | 13 | 11 | — | 30,149 | 30,173 | ||||||||||
Total loans | $ | 41,876 | $ | 3,983 | $ | 2,783 | $ | 31,433 | $ | 80,075 | |||||
Lending
commitments | 10,219 | 2,564 | 71 | 307 | 13,161 | ||||||||||
Total loans and lending commitments | $ | 52,095 | $ | 6,547 | $ | 2,854 | $ | 31,740 | $ | 93,236 |
$ in millions | |||
$ | 57 | ||
Effect of CECL adoption | 17 | ||
Provision | 19 | ||
$ | 93 | ||
Allowance for credit losses—Loans | $ | 87 | |
Allowance for credit losses—Lending commitments | 6 |
1. | At
December 31, 2019, the total Allowance for credit losses for Loans and Lending commitments was $52 million and $5 million, respectively. |
$ in millions | IS | WM | Total | ||||||
Customer receivables representing margin loans | $ | 16,635 | $ | 9,546 | $ | 26,181 |
$ in millions | IS | WM | Total | ||||||
Customer receivables representing margin loans | $ | 22,216 | $ | 9,700 | $ | 31,916 |
$ in millions | ||||||
Currently employed by the Firm | $ | 2,867 | N/A | |||
No longer employed by the Firm | 150 | N/A | ||||
Balance | $ | 3,017 | $ | 2,980 | ||
Allowance
for credit losses1 | (180 | ) | (61 | ) | ||
Balance, net | $ | 2,837 | $ | 2,919 | ||
Remaining repayment term, weighted average in years | 5.0 | 4.8 |
1. | The
change in Allowance for credit losses includes a $124 million increase due to the adoption of CECL on January 1, 2020. |
March 2020 Form 10-Q | 34 |
Risk
Disclosures |
Counterparty
Credit Rating1 | ||||||||||||||||||
$ in millions | AAA | AA | A | BBB | NIG | Total | ||||||||||||
<1
year | $ | 2,046 | $ | 26,829 | $ | 55,668 | $ | 38,756 | $ | 19,369 | $ | 142,668 | ||||||
1-3
years | 536 | 6,458 | 22,788 | 18,243 | 13,104 | 61,129 | ||||||||||||
3-5
years | 521 | 5,952 | 14,442 | 10,521 | 4,718 | 36,154 | ||||||||||||
Over
5 years | 4,257 | 32,785 | 93,165 | 68,387 | 17,506 | 216,100 | ||||||||||||
Total,
gross | $ | 7,360 | $ | 72,024 | $ | 186,063 | $ | 135,907 | $ | 54,697 | $ | 456,051 | ||||||
Counterparty
netting | (3,472 | ) | (55,991 | ) | (150,333 | ) | (104,343 | ) | (30,638 | ) | (344,777 | ) | ||||||
Cash
and securities collateral | (3,336 | ) | (12,216 | ) | (29,345 | ) | (23,461 | ) | (16,979 | ) | (85,337 | ) | ||||||
Total,
net | $ | 552 | $ | 3,817 | $ | 6,385 | $ | 8,103 | $ | 7,080 | $ | 25,937 |
Counterparty
Credit Rating1 | ||||||||||||||||||
$ in millions | AAA | AA | A | BBB | NIG | Total | ||||||||||||
<1
year | $ | 371 | $ | 9,195 | $ | 31,789 | $ | 22,757 | $ | 6,328 | $ | 70,440 | ||||||
1-3
years | 378 | 5,150 | 17,707 | 11,495 | 9,016 | 43,746 | ||||||||||||
3-5
years | 502 | 4,448 | 9,903 | 6,881 | 3,421 | 25,155 | ||||||||||||
Over
5 years | 3,689 | 24,675 | 70,765 | 40,542 | 14,587 | 154,258 | ||||||||||||
Total,
gross | $ | 4,940 | $ | 43,468 | $ | 130,164 | $ | 81,675 | $ | 33,352 | $ | 293,599 | ||||||
Counterparty
netting | (2,172 | ) | (33,521 | ) | (103,452 | ) | (62,345 | ) | (19,514 | ) | (221,004 | ) | ||||||
Cash
and securities collateral | (2,641 | ) | (8,134 | ) | (22,319 | ) | (14,570 | ) | (10,475 | ) | (58,139 | ) | ||||||
Total,
net | $ | 127 | $ | 1,813 | $ | 4,393 | $ | 4,760 | $ | 3,363 | $ | 14,456 |
$
in millions | ||||||
Industry | ||||||
Financials | $ | 8,343 | $ | 3,448 | ||
Utilities | 5,226 | 4,275 | ||||
Industrials | 2,877 | 914 | ||||
Healthcare | 1,558 | 991 | ||||
Regional
governments | 1,089 | 791 | ||||
Not-for-profit organizations | 936 | 657 | ||||
Sovereign governments | 900 | 403 | ||||
Energy | 891 | 524 | ||||
Materials | 826 | 325 | ||||
Consumer
staples | 725 | 129 | ||||
Information technology | 686 | 659 | ||||
Communications services | 684 | 381 | ||||
Consumer
discretionary | 463 | 370 | ||||
Insurance | 391 | 214 | ||||
Real estate | 215 | 315 | ||||
Other | 127 | 60 | ||||
Total | $ | 25,937 | $ | 14,456 |
1. | Counterparty
credit ratings are determined internally by CRM. |
35 | March
2020 Form 10-Q |
Risk Disclosures |
United
Kingdom | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | (238 | ) | $ | 1,327 | $ | 1,089 | ||
Net
counterparty exposure2 | 88 | 13,314 | 13,402 | ||||||
Loans | — | 2,822 | 2,822 | ||||||
Lending
commitments | — | 6,547 | 6,547 | ||||||
Exposure before hedges | (150 | ) | 24,010 | 23,860 | |||||
Hedges3 | (311 | ) | (1,266 | ) | (1,577 | ) | |||
Net
exposure | $ | (461 | ) | $ | 22,744 | $ | 22,283 |
Germany | |||||||||
$
in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 1,080 | $ | 281 | $ | 1,361 | |||
Net
counterparty exposure2 | 127 | 5,539 | 5,666 | ||||||
Loans | — | 1,649 | 1,649 | ||||||
Lending
commitments | — | 3,492 | 3,492 | ||||||
Exposure before hedges | 1,207 | 10,961 | 12,168 | ||||||
Hedges3 | (285 | ) | (874 | ) | (1,159 | ) | |||
Net
exposure | $ | 922 | $ | 10,087 | $ | 11,009 |
Japan | |||||||||
$
in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 1,501 | $ | 431 | $ | 1,932 | |||
Net
counterparty exposure2 | 78 | 4,559 | 4,637 | ||||||
Loans | — | 714 | 714 | ||||||
Lending
commitments | — | 3 | 3 | ||||||
Exposure before hedges | 1,579 | 5,707 | 7,286 | ||||||
Hedges3 | (92 | ) | (130 | ) | (222 | ) | |||
Net
exposure | $ | 1,487 | $ | 5,577 | $ | 7,064 |
France | |||||||||
$
in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | (427 | ) | $ | (476 | ) | $ | (903 | ) |
Net
counterparty exposure2 | 14 | 3,734 | 3,748 | ||||||
Loans | — | 935 | 935 | ||||||
Lending
commitments | — | 2,919 | 2,919 | ||||||
Exposure before hedges | (413 | ) | 7,112 | 6,699 | |||||
Hedges3 | (6 | ) | (712 | ) | (718 | ) | |||
Net
exposure | $ | (419 | ) | $ | 6,400 | $ | 5,981 |
Canada | |||||||||
$
in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 587 | $ | 369 | $ | 956 | |||
Net
counterparty exposure2 | 57 | 3,221 | 3,278 | ||||||
Loans | — | 629 | 629 | ||||||
Lending
commitments | — | 985 | 985 | ||||||
Exposure before hedges | 644 | 5,204 | 5,848 | ||||||
Hedges3 | — | (97 | ) | (97 | ) | ||||
Net
exposure | $ | 644 | $ | 5,107 | $ | 5,751 |
Spain | |||||||||
$
in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 360 | $ | (139 | ) | $ | 221 | ||
Net
counterparty exposure2 | 3 | 383 | 386 | ||||||
Loans | — | 3,623 | 3,623 | ||||||
Lending
commitments | — | 713 | 713 | ||||||
Exposure before hedges | 363 | 4,580 | 4,943 | ||||||
Hedges3 | — | (132 | ) | (132 | ) | ||||
Net
exposure | $ | 363 | $ | 4,448 | $ | 4,811 |
China | |||||||||
$
in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | (432 | ) | $ | 1,487 | $ | 1,055 | ||
Net
counterparty exposure2 | 135 | 460 | 595 | ||||||
Loans | — | 1,965 | 1,965 | ||||||
Lending
commitments | — | 770 | 770 | ||||||
Exposure before hedges | (297 | ) | 4,682 | 4,385 | |||||
Hedges3 | (82 | ) | (82 | ) | (164 | ) | |||
Net
exposure | $ | (379 | ) | $ | 4,600 | $ | 4,221 |
Australia | |||||||||
$
in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 1,464 | $ | 359 | $ | 1,823 | |||
Net
counterparty exposure2 | 16 | 1,346 | 1,362 | ||||||
Loans | — | 355 | 355 | ||||||
Lending
commitments | — | 647 | 647 | ||||||
Exposure before hedges | 1,480 | 2,707 | 4,187 | ||||||
Hedges3 | — | (107 | ) | (107 | ) | ||||
Net
exposure | $ | 1,480 | $ | 2,600 | $ | 4,080 |
Brazil | |||||||||
$
in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 2,384 | $ | 79 | $ | 2,463 | |||
Net
counterparty exposure2 | — | 924 | 924 | ||||||
Loans | — | 237 | 237 | ||||||
Lending
commitments | — | 64 | 64 | ||||||
Exposure before hedges | 2,384 | 1,304 | 3,688 | ||||||
Hedges3 | (12 | ) | (16 | ) | (28 | ) | |||
Net
exposure | $ | 2,372 | $ | 1,288 | $ | 3,660 |
March 2020 Form 10-Q | 36 |
Risk Disclosures |
India | |||||||||
$
in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 1,571 | $ | 680 | $ | 2,251 | |||
Net
counterparty exposure2 | — | 612 | 612 | ||||||
Loans | — | 235 | 235 | ||||||
Exposure
before hedges | 1,571 | 1,527 | 3,098 | ||||||
Net exposure | $ | 1,571 | $ | 1,527 | $ | 3,098 |
1. | Net
inventory represents exposure to both long and short single-name and index positions (i.e., bonds and equities at fair value and CDS based on a notional amount assuming zero recovery adjusted for the fair value of any receivable or payable). |
2. | Net counterparty exposure (e.g., repurchase transactions, securities lending and OTC derivatives) is net of the benefit of collateral received and also is net by counterparty when legally enforceable master netting agreements are in place. For more information, see “Additional Information—Top 10 Non-U.S. Country Exposures”
herein. |
3. | Amounts represent net CDS hedges (purchased and sold) on net counterparty exposure and lending executed by trading desks responsible for hedging counterparty and lending credit risk exposures. Amounts are based on the CDS notional amount assuming zero recovery adjusted for any fair value receivable or payable. For further description of the contractual terms for purchased credit protection and whether they may limit the effectiveness of our hedges, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Derivatives” in the 2019 Form 10-K. |
$ in millions | ||||
Counterparty credit exposure | Collateral2 | |||
United
Kingdom | U.K., U.S. and Spain | $ | 14,985 | |
Germany | Italy and Germany | 13,356 | ||
Other | Japan, U.S. and Canada | 27,025 |
1. | The
benefit of collateral received is reflected in the Top 10 Non-U.S. Country Exposures at March 31, 2020. |
2. | Collateral primarily consists of cash and government obligations. |
37 | March 2020 Form 10-Q |
New York, New York |
March 2020 Form 10-Q | 38 |
Consolidated Income Statements (Unaudited) |
Three
Months Ended March 31, | ||||||
in millions, except per share data | 2020 | 2019 | ||||
Revenues | ||||||
Investment banking | $ | i 1,271 | $ | i 1,242 | ||
Trading | i 3,056 | i 3,441 | ||||
Investments | i 38 | i 273 | ||||
Commissions
and fees | i 1,360 | i 966 | ||||
Asset
management | i 3,417 | i 3,049 | ||||
Other | ( i 1,011 | ) | i 301 | |||
Total
non-interest revenues | i 8,131 | i 9,272 | ||||
Interest
income | i 3,503 | i 4,290 | ||||
Interest
expense | i 2,147 | i 3,276 | ||||
Net
interest | i 1,356 | i 1,014 | ||||
Net
revenues | i 9,487 | i 10,286 | ||||
Non-interest
expenses | ||||||
Compensation and benefits | i 4,283 | i 4,651 | ||||
Brokerage,
clearing and exchange fees | i 740 | i 593 | ||||
Information
processing and communications | i 563 | i 532 | ||||
Professional
services | i 449 | i 514 | ||||
Occupancy
and equipment | i 365 | i 347 | ||||
Marketing
and business development | i 132 | i 141 | ||||
Other | i 809 | i 553 | ||||
Total
non-interest expenses | i 7,341 | i 7,331 | ||||
Income
before provision for income taxes | i 2,146 | i 2,955 | ||||
Provision
for income taxes | i 366 | i 487 | ||||
Net
income | $ | i 1,780 | $ | i 2,468 | ||
Net
income applicable to noncontrolling interests | i 82 | i 39 | ||||
Net
income applicable to Morgan Stanley | $ | i 1,698 | $ | i 2,429 | ||
Preferred
stock dividends | i 108 | i 93 | ||||
Earnings
applicable to Morgan Stanley common shareholders | $ | i 1,590 | $ | i 2,336 | ||
Earnings
per common share | ||||||
Basic | $ | i 1.02 | $ | i 1.41 | ||
Diluted | $ | i 1.01 | $ | i 1.39 | ||
Average
common shares outstanding | ||||||
Basic | i 1,555 | i 1,658 | ||||
Diluted | i 1,573 | i 1,677 |
See
Notes to Consolidated Financial Statements | 39 | March 2020 Form 10-Q |
Consolidated Comprehensive Income Statements (Unaudited) |
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Net income | $ | i 1,780 | $ | i 2,468 | ||
Other
comprehensive income (loss), net of tax: | ||||||
Foreign currency translation adjustments | ( i 132 | ) | ( i 22 | ) | ||
Change
in net unrealized gains (losses) on available-for-sale securities | i 1,325 | i 429 | ||||
Pension,
postretirement and other | i 25 | i 1 | ||||
Change
in net debt valuation adjustment | i 3,803 | ( i 620 | ) | |||
Total
other comprehensive income (loss) | $ | i 5,021 | $ | ( i 212 | ) | |
Comprehensive
income | $ | i 6,801 | $ | i 2,256 | ||
Net
income applicable to noncontrolling interests | i 82 | i 39 | ||||
Other
comprehensive income (loss) applicable to noncontrolling interests | i 138 | ( i 31 | ) | |||
Comprehensive
income applicable to Morgan Stanley | $ | i 6,581 | $ | i 2,248 |
March
2020 Form 10-Q | 40 | See Notes to Consolidated Financial Statements |
Consolidated Balance Sheets |
$
in millions, except share data | (Unaudited) At March 31, 2020 | |||||
Assets | ||||||
Cash and cash equivalents | $ | i 131,509 | $ | i 82,171 | ||
Trading
assets at fair value ($103,637 and $128,386 were pledged to various parties) | i 270,916 | i 297,110 | ||||
Investment
securities (includes $68,871 and $62,223 at fair value) | i 116,157 | i 105,725 | ||||
Securities
purchased under agreements to resell (includes $5 and $4 at fair value) | i 104,800 | i 88,224 | ||||
Securities
borrowed | i 72,300 | i 106,549 | ||||
Customer
and other receivables | i 74,424 | i 55,646 | ||||
Loans: | ||||||
Held
for investment (net of allowance of $617 and $349) | i 131,335 | i 118,060 | ||||
Held
for sale | i 17,362 | i 12,577 | ||||
Goodwill | i 7,125 | i 7,143 | ||||
Intangible
assets (net of accumulated amortization of $3,281 and $3,204) | i 2,021 | i 2,107 | ||||
Other
assets | i 19,846 | i 20,117 | ||||
Total
assets | $ | i 947,795 | $ | i 895,429 | ||
Liabilities | ||||||
Deposits
(includes $4,052 and $2,099 at fair value) | $ | i 235,239 | $ | i 190,356 | ||
Trading
liabilities at fair value | i 142,076 | i 133,356 | ||||
Securities
sold under agreements to repurchase (includes $775 and $733 at fair value) | i 45,816 | i 54,200 | ||||
Securities
loaned | i 11,631 | i 8,506 | ||||
Other
secured financings (includes $6,897 and $7,809 at fair value) | i 13,058 | i 14,698 | ||||
Customer
and other payables | i 198,074 | i 197,834 | ||||
Other
liabilities and accrued expenses | i 19,817 | i 21,155 | ||||
Borrowings
(includes $57,162 and $64,461 at fair value) | i 194,856 | i 192,627 | ||||
Total
liabilities | i 860,567 | i 812,732 | ||||
Commitments
and contingent liabilities (see Note 13) | i | i | ||||
Equity | ||||||
Morgan
Stanley shareholders’ equity: | ||||||
Preferred stock | i 8,520 | i 8,520 | ||||
Common
stock, $0.01 par value: | ||||||
Shares authorized: 3,500,000,000; Shares issued: 2,038,893,979; Shares outstanding: 1,575,500,507 and 1,593,973,680 | i 20 | i 20 | ||||
Additional
paid-in capital | i 23,428 | i 23,935 | ||||
Retained
earnings | i 71,518 | i 70,589 | ||||
Employee
stock trusts | i 3,088 | i 2,918 | ||||
Accumulated
other comprehensive income (loss) | i 2,095 | ( i 2,788 | ) | |||
Common
stock held in treasury at cost, $0.01 par value (463,393,472 and 444,920,299 shares) | ( i 19,721 | ) | ( i 18,727 | ) | ||
Common
stock issued to employee stock trusts | ( i 3,088 | ) | ( i 2,918 | ) | ||
Total
Morgan Stanley shareholders’ equity | i 85,860 | i 81,549 | ||||
Noncontrolling
interests | i 1,368 | i 1,148 | ||||
Total
equity | i 87,228 | i 82,697 | ||||
Total
liabilities and equity | $ | i 947,795 | $ | i 895,429 |
See
Notes to Consolidated Financial Statements | 41 | March 2020 Form 10-Q |
Consolidated Statements of Changes in Total Equity (Unaudited) |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Preferred Stock | ||||||
Beginning and ending balance | $ | i 8,520 | $ | i 8,520 | ||
Common
Stock | ||||||
Beginning and ending balance | i 20 | i 20 | ||||
Additional
Paid-in Capital | ||||||
Beginning balance | i 23,935 | i 23,794 | ||||
Share-based
award activity | ( i 507 | ) | ( i 618 | ) | ||
Other
net increases | i — | i 2 | ||||
Ending
balance | i 23,428 | i 23,178 | ||||
Retained
Earnings | ||||||
Beginning balance | i 70,589 | i 64,175 | ||||
Cumulative
adjustments for accounting changes1 | ( i 100 | ) | i 63 | |||
Net
income applicable to Morgan Stanley | i 1,698 | i 2,429 | ||||
Preferred
stock dividends2 | ( i 108 | ) | ( i 93 | ) | ||
Common
stock dividends2 | ( i 561 | ) | ( i 513 | ) | ||
Ending
balance | i 71,518 | i 66,061 | ||||
Employee
Stock Trusts | ||||||
Beginning balance | i 2,918 | i 2,836 | ||||
Share-based
award activity | i 170 | i 164 | ||||
Ending
balance | i 3,088 | i 3,000 | ||||
Accumulated
Other Comprehensive Income (Loss) | ||||||
Beginning balance | ( i 2,788 | ) | ( i 2,292 | ) | ||
Net
change in Accumulated other comprehensive income (loss) | i 4,883 | ( i 181 | ) | |||
Ending
balance | i 2,095 | ( i 2,473 | ) | |||
Common
Stock Held In Treasury at Cost | ||||||
Beginning balance | ( i 18,727 | ) | ( i 13,971 | ) | ||
Share-based
award activity | i 788 | i 1,034 | ||||
Repurchases
of common stock and employee tax withholdings | ( i 1,782 | ) | ( i 1,645 | ) | ||
Ending
balance | ( i 19,721 | ) | ( i 14,582 | ) | ||
Common
Stock Issued to Employee Stock Trusts | ||||||
Beginning balance | ( i 2,918 | ) | ( i 2,836 | ) | ||
Share-based
award activity | ( i 170 | ) | ( i 164 | ) | ||
Ending
balance | ( i 3,088 | ) | ( i 3,000 | ) | ||
Non-Controlling
Interests | ||||||
Beginning balance | i 1,148 | i 1,160 | ||||
Net
income applicable to non-controlling interests | i 82 | i 39 | ||||
Net
change in Accumulated other comprehensive income (loss) | i 138 | ( i 31 | ) | |||
Ending
balance | i 1,368 | i 1,168 | ||||
Total
Equity | $ | i 87,228 | $ | i 81,892 |
1. | See
Notes 2 and 16 for further information regarding cumulative adjustments for accounting changes. |
2. | See Note 16 for information regarding dividends per share for each class of stock. |
See
Notes to Consolidated Financial Statements | 42 | March 2020 Form 10-Q |
Consolidated Cash Flow Statements (Unaudited) |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Cash flows from operating activities | ||||||
Net income | $ | i 1,780 | $ | i 2,468 | ||
Adjustments
to reconcile net income to net cash provided by (used for) operating activities: | ||||||
Stock-based compensation expense | i 154 | i 293 | ||||
Depreciation
and amortization | i 824 | i 658 | ||||
Provision
for (Release of) credit losses on lending activities | i 407 | i 36 | ||||
Other
operating adjustments | i 1,044 | ( i 92 | ) | |||
Changes
in assets and liabilities: | ||||||
Trading assets, net of Trading liabilities | i 35,079 | i 23,977 | ||||
Securities
borrowed | i 34,249 | ( i 22,578 | ) | |||
Securities
loaned | i 3,125 | i 600 | ||||
Customer
and other receivables and other assets | ( i 23,619 | ) | i 1,567 | |||
Customer
and other payables and other liabilities | ( i 4,247 | ) | i 9,971 | |||
Securities
purchased under agreements to resell | ( i 16,576 | ) | i 1,952 | |||
Securities
sold under agreements to repurchase | ( i 8,384 | ) | ( i 1,811 | ) | ||
Net
cash provided by (used for) operating activities | i 23,836 | i 17,041 | ||||
Cash
flows from investing activities | ||||||
Proceeds from (payments for): | ||||||
Other assets—Premises, equipment and software, net | ( i 354 | ) | ( i 529 | ) | ||
Changes
in loans, net | ( i 13,243 | ) | ( i 1,329 | ) | ||
Investment
securities: | ||||||
Purchases | ( i 12,924 | ) | ( i 15,895 | ) | ||
Proceeds
from sales | i 3,128 | i 7,875 | ||||
Proceeds
from paydowns and maturities | i 2,378 | i 2,663 | ||||
Other
investing activities | ( i 93 | ) | ( i 12 | ) | ||
Net
cash provided by (used for) investing activities | ( i 21,108 | ) | ( i 7,227 | ) | ||
Cash
flows from financing activities | ||||||
Net proceeds from (payments for): | ||||||
Other secured financings | i 259 | ( i 1,575 | ) | |||
Deposits | i 44,694 | ( i 8,089 | ) | |||
Proceeds
from issuance of Borrowings | i 20,601 | i 8,091 | ||||
Payments
for: | ||||||
Borrowings | ( i 14,967 | ) | ( i 11,927 | ) | ||
Repurchases
of common stock and employee tax withholdings | ( i 1,782 | ) | ( i 1,645 | ) | ||
Cash
dividends | ( i 688 | ) | ( i 663 | ) | ||
Other
financing activities | ( i 163 | ) | ( i 56 | ) | ||
Net
cash provided by (used for) financing activities | i 47,954 | ( i 15,864 | ) | |||
Effect
of exchange rate changes on cash and cash equivalents | ( i 1,344 | ) | ( i 464 | ) | ||
Net
increase (decrease) in cash and cash equivalents | i 49,338 | ( i 6,514 | ) | |||
Cash
and cash equivalents, at beginning of period | i 82,171 | i 87,196 | ||||
Cash
and cash equivalents, at end of period | $ | i 131,509 | $ | i 80,682 | ||
Supplemental
Disclosure of Cash Flow Information | ||||||
Cash payments for: | ||||||
Interest | $ | i 2,123 | $ | i 2,896 | ||
Income
taxes, net of refunds | i 342 | i 245 |
See
Notes to Consolidated Financial Statements | 43 | March 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
March 2020 Form 10-Q | 44 |
Notes to Consolidated Financial Statements (Unaudited) |
45 | March 2020 Form 10-Q |
Notes
to Consolidated Financial Statements (Unaudited) |
• | Corporate loans and Commercial real estate loans and securities: Internal risk ratings developed
by CRM which are refreshed at least annually, and more frequently as necessary. These ratings generally correspond to external ratings published by S&P. The Firm also considers transaction structure, including type of collateral, collateral terms, and position of the obligation within the capital structure. In addition, for Commercial real estate, the Firm considers property type and location, net operating income, LTV ratios, among others, as well as commercial real estate price and credit spread indices and capitalization rates. |
• | Residential real estate loans: Loan origination Fair Isaac Corporation (“FICO”) credit scores as determined by independent credit agencies in the United States and loan-to-value (“LTV”) ratios. |
• | Employee
loans: Employment status, which includes those currently employed by the Firm and for which the Firm can deduct any unpaid amounts due to it through certain compensation arrangements; and those no longer employed by the Firm where such compensation arrangements are no longer applicable. |
ACL | Provision for credit losses | |
Instruments measured at amortized cost (e.g., HFI loans, HTM securities and customer and other receivables) | Contra asset | Other revenue |
Employee loans | Contra
asset | Compensation and benefits expense |
Off-balance sheet instruments (e.g., HFI lending commitments and certain guarantees) | Other liabilities and accrued expenses | Other expense |
March 2020 Form 10-Q | 46 |
Notes
to Consolidated Financial Statements (Unaudited) |
ACL | Provision for credit losses | |
AFS securities | Contra
asset | Other revenue |
$ in millions | ||||||
Cash and due from banks | $ | i 11,570 | $ | i 6,763 | ||
Interest
bearing deposits with banks | i 119,939 | i 75,408 | ||||
Total
Cash and cash equivalents | $ | i 131,509 | $ | i 82,171 | ||
Restricted
cash | $ | i 56,064 | $ | i 32,512 |
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||
Assets at fair value | |||||||||||||||
Trading
assets: | |||||||||||||||
U.S. Treasury and agency securities | $ | i 42,231 | $ | i 29,105 | $ | i 99 | $ | — | $ | i 71,435 | |||||
Other
sovereign government obligations | i 29,493 | i 5,017 | i 17 | — | i 34,527 | ||||||||||
State
and municipal securities | i — | i 2,226 | i 1 | — | i 2,227 | ||||||||||
MABS | i — | i 838 | i 483 | — | i 1,321 | ||||||||||
Loans
and lending commitments2 | i — | i 4,082 | i 5,980 | — | i 10,062 | ||||||||||
Corporate
and other debt | i — | i 23,448 | i 1,708 | — | i 25,156 | ||||||||||
Corporate
equities3 | i 66,409 | i 582 | i 146 | — | i 67,137 | ||||||||||
Derivative and other contracts: | |||||||||||||||
Interest
rate | i 14,025 | i 253,646 | i 1,367 | — | i 269,038 | ||||||||||
Credit | i — | i 12,605 | i 753 | — | i 13,358 | ||||||||||
Foreign
exchange | i 26 | i 112,711 | i 76 | — | i 112,813 | ||||||||||
Equity | i 1,041 | i 93,175 | i 1,560 | — | i 95,776 | ||||||||||
Commodity
and other | i 1,070 | i 17,813 | i 3,384 | — | i 22,267 | ||||||||||
Netting1 | ( i 12,720 | ) | ( i 376,568 | ) | ( i 1,301 | ) | ( i 69,653 | ) | ( i 460,242 | ) | |||||
Total
derivative and other contracts | i 3,442 | i 113,382 | i 5,839 | ( i 69,653 | ) | i 53,010 | |||||||||
Investments4 | i 562 | i 204 | i 725 | — | i 1,491 | ||||||||||
Physical
commodities | i — | i 960 | i — | — | i 960 | ||||||||||
Total
trading assets4 | i 142,137 | i 179,844 | i 14,998 | ( i 69,653 | ) | i 267,326 | |||||||||
Investment
securities—AFS | i 35,899 | i 32,972 | i — | — | i 68,871 | ||||||||||
Securities
purchased under agreements to resell | i — | i 5 | i — | — | i 5 | ||||||||||
Total
assets at fair value | $ | i 178,036 | $ | i 212,821 | $ | i 14,998 | $ | ( i 69,653 | ) | $ | i 336,202 |
47 | March
2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||
Liabilities at fair value | |||||||||||||||
Deposits | $ | i — | $ | i 3,935 | $ | i 117 | $ | — | $ | i 4,052 | |||||
Trading
liabilities: | |||||||||||||||
U.S. Treasury and agency securities | i 13,273 | i 201 | i 16 | — | i 13,490 | ||||||||||
Other
sovereign government obligations | i 20,273 | i 836 | i 2 | — | i 21,111 | ||||||||||
Corporate
and other debt | i — | i 9,341 | i 6 | — | i 9,347 | ||||||||||
Corporate
equities3 | i 57,134 | i 85 | i 40 | — | i 57,259 | ||||||||||
Derivative
and other contracts: | |||||||||||||||
Interest rate | i 14,655 | i 242,840 | i 494 | — | i 257,989 | ||||||||||
Credit | i — | i 12,631 | i 555 | — | i 13,186 | ||||||||||
Foreign
exchange | i 20 | i 112,552 | i 226 | — | i 112,798 | ||||||||||
Equity | i 1,090 | i 89,344 | i 2,936 | — | i 93,370 | ||||||||||
Commodity
and other | i 1,438 | i 15,280 | i 1,535 | — | i 18,253 | ||||||||||
Netting1 | ( i 12,720 | ) | ( i 376,568 | ) | ( i 1,301 | ) | ( i 64,138 | ) | ( i 454,727 | ) | |||||
Total
derivative and other contracts | i 4,483 | i 96,079 | i 4,445 | ( i 64,138 | ) | i 40,869 | |||||||||
Total
trading liabilities | i 95,163 | i 106,542 | i 4,509 | ( i 64,138 | ) | i 142,076 | |||||||||
Securities
sold under agreements to repurchase | i — | i 775 | i — | — | i 775 | ||||||||||
Other
secured financings | i — | i 6,508 | i 389 | — | i 6,897 | ||||||||||
Borrowings | i — | i 53,164 | i 3,998 | — | i 57,162 | ||||||||||
Total
liabilities at fair value | $ | i 95,163 | $ | i 170,924 | $ | i 9,013 | $ | ( i 64,138 | ) | $ | i 210,962 |
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||
Assets at fair value | |||||||||||||||
Trading
assets: | |||||||||||||||
U.S. Treasury and agency securities | $ | i 36,866 | $ | i 28,992 | $ | i 22 | $ | — | $ | i 65,880 | |||||
Other
sovereign government obligations | i 23,402 | i 4,347 | i 5 | — | i 27,754 | ||||||||||
State
and municipal securities | i — | i 2,790 | i 1 | — | i 2,791 | ||||||||||
MABS | i — | i 1,690 | i 438 | — | i 2,128 | ||||||||||
Loans
and lending commitments2 | i — | i 6,253 | i 5,073 | — | i 11,326 | ||||||||||
Corporate
and other debt | i — | i 22,124 | i 1,396 | — | i 23,520 | ||||||||||
Corporate
equities3 | i 123,942 | i 652 | i 97 | — | i 124,691 | ||||||||||
Derivative
and other contracts: | |||||||||||||||
Interest rate | i 1,265 | i 182,977 | i 1,239 | — | i 185,481 | ||||||||||
Credit | i — | i 6,658 | i 654 | — | i 7,312 | ||||||||||
Foreign
exchange | i 15 | i 64,260 | i 145 | — | i 64,420 | ||||||||||
Equity | i 1,219 | i 48,927 | i 922 | — | i 51,068 | ||||||||||
Commodity
and other | i 1,079 | i 7,255 | i 2,924 | — | i 11,258 | ||||||||||
Netting1 | ( i 2,794 | ) | ( i 235,947 | ) | ( i 993 | ) | ( i 47,804 | ) | ( i 287,538 | ) | |||||
Total
derivative and other contracts | i 784 | i 74,130 | i 4,891 | ( i 47,804 | ) | i 32,001 | |||||||||
Investments4 | i 481 | i 252 | i 858 | — | i 1,591 | ||||||||||
Physical
commodities | i — | i 1,907 | i — | — | i 1,907 | ||||||||||
Total
trading assets4 | i 185,475 | i 143,137 | i 12,781 | ( i 47,804 | ) | i 293,589 | |||||||||
Investment
securities—AFS | i 32,902 | i 29,321 | i — | — | i 62,223 | ||||||||||
Securities
purchased under agreements to resell | i — | i 4 | i — | — | i 4 | ||||||||||
Total
assets at fair value | $ | i 218,377 | $ | i 172,462 | $ | i 12,781 | $ | ( i 47,804 | ) | $ | i 355,816 |
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||
Liabilities at fair value | |||||||||||||||
Deposits | $ | i — | $ | i 1,920 | $ | i 179 | $ | — | $ | i 2,099 | |||||
Trading
liabilities: | |||||||||||||||
U.S. Treasury and agency securities | i 11,191 | i 34 | i — | — | i 11,225 | ||||||||||
Other
sovereign government obligations | i 21,837 | i 1,332 | i 1 | — | i 23,170 | ||||||||||
Corporate
and other debt | i — | i 7,410 | i — | — | i 7,410 | ||||||||||
Corporate
equities3 | i 63,002 | i 79 | i 36 | — | i 63,117 | ||||||||||
Derivative
and other contracts: | |||||||||||||||
Interest rate | i 1,144 | i 171,025 | i 462 | — | i 172,631 | ||||||||||
Credit | i — | i 7,391 | i 530 | — | i 7,921 | ||||||||||
Foreign
exchange | i 6 | i 67,473 | i 176 | — | i 67,655 | ||||||||||
Equity | i 1,200 | i 49,062 | i 2,606 | — | i 52,868 | ||||||||||
Commodity
and other | i 1,194 | i 7,118 | i 1,312 | — | i 9,624 | ||||||||||
Netting1 | ( i 2,794 | ) | ( i 235,947 | ) | ( i 993 | ) | ( i 42,531 | ) | ( i 282,265 | ) | |||||
Total
derivative and other contracts | i 750 | i 66,122 | i 4,093 | ( i 42,531 | ) | i 28,434 | |||||||||
Total
trading liabilities | i 96,780 | i 74,977 | i 4,130 | ( i 42,531 | ) | i 133,356 | |||||||||
Securities
sold under agreements to repurchase | i — | i 733 | i — | — | i 733 | ||||||||||
Other
secured financings | i — | i 7,700 | i 109 | — | i 7,809 | ||||||||||
Borrowings | i — | i 60,373 | i 4,088 | — | i 64,461 | ||||||||||
Total
liabilities at fair value | $ | i 96,780 | $ | i 145,703 | $ | i 8,506 | $ | ( i 42,531 | ) | $ | i 208,458 |
1. | For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Netting.” Positions classified within the same level that are with the same counterparty are netted within that level. For further information on derivative instruments and hedging activities, see Note 6. |
2. | For a further
breakdown by type, see the following Detail of Loans and Lending Commitments at Fair Value table. |
3. | For trading purposes, the Firm holds or sells short equity securities issued by entities in diverse industries and of varying sizes. |
4. | Amounts exclude certain investments that are measured based on NAV per share, which are not classified in the fair value hierarchy. For additional disclosure about such investments, see “Net Asset Value Measurements” herein.
|
$ in millions | ||||||
Corporate | $ | i 7,711 | $ | i 8,036 | ||
Residential
real estate | i 1,154 | i 1,192 | ||||
Commercial
real estate | i 1,197 | i 2,098 | ||||
Total | $ | i 10,062 | $ | i 11,326 |
$ in millions | ||||||
Customer and other receivables, net | $ | i 935 | $ | i 365 |
1. | These
contracts are primarily Level 1, actively traded, valued based on quoted prices from the exchange and are excluded from the previous recurring fair value tables. |
March 2020 Form 10-Q | 48 |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
U.S. Treasury and agency securities | ||||||
Beginning balance | $ | i 22 | $ | i 54 | ||
Realized
and unrealized gains (losses) | i 5 | i — | ||||
Purchases | i 85 | i — | ||||
Sales | ( i 21 | ) | ( i 50 | ) | ||
Net
transfers | i 8 | i 3 | ||||
Ending
balance | $ | i 99 | $ | i 7 | ||
Unrealized
gains (losses) | $ | i 5 | $ | i — | ||
Other
sovereign government obligations | ||||||
Beginning balance | $ | i 5 | $ | i 17 | ||
Realized
and unrealized gains (losses) | i 1 | i — | ||||
Purchases | i 10 | i 2 | ||||
Sales | i — | ( i 2 | ) | |||
Net
transfers | i 1 | ( i 12 | ) | |||
Ending
balance | $ | i 17 | $ | i 5 | ||
Unrealized
gains (losses) | $ | i 1 | $ | i — | ||
State
and municipal securities | ||||||
Beginning balance | $ | i 1 | $ | i 148 | ||
Realized
and unrealized gains (losses) | i — | i 1 | ||||
Purchases | i — | i 10 | ||||
Sales | i — | ( i 44 | ) | |||
Net
transfers | i — | ( i 103 | ) | |||
Ending
balance | $ | i 1 | $ | i 12 | ||
Unrealized
gains (losses) | $ | i — | $ | i 1 | ||
MABS | ||||||
Beginning
balance | $ | i 438 | $ | i 354 | ||
Realized
and unrealized gains (losses) | ( i 89 | ) | ( i 7 | ) | ||
Purchases | i 158 | i 19 | ||||
Sales | ( i 140 | ) | ( i 83 | ) | ||
Settlements | i — | ( i 3 | ) | |||
Net
transfers | i 116 | i 21 | ||||
Ending
balance | $ | i 483 | $ | i 301 | ||
Unrealized
gains (losses) | $ | ( i 92 | ) | $ | ( i 14 | ) |
Loans
and lending commitments | ||||||
Beginning balance | $ | i 5,073 | $ | i 6,870 | ||
Realized
and unrealized gains (losses) | ( i 102 | ) | i — | |||
Purchases
and originations | i 1,952 | i 1,255 | ||||
Sales | ( i 529 | ) | ( i 108 | ) | ||
Settlements | ( i 1,387 | ) | ( i 820 | ) | ||
Net
transfers1 | i 973 | ( i 854 | ) | |||
Ending
balance | $ | i 5,980 | $ | i 6,343 | ||
Unrealized
gains (losses) | $ | ( i 101 | ) | $ | ( i 7 | ) |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Corporate and other debt | ||||||
Beginning balance | $ | i 1,396 | $ | i 1,076 | ||
Realized
and unrealized gains (losses) | ( i 92 | ) | i 43 | |||
Purchases | i 585 | i 204 | ||||
Sales | ( i 177 | ) | ( i 127 | ) | ||
Settlements | i — | ( i 3 | ) | |||
Net
transfers | ( i 4 | ) | ( i 132 | ) | ||
Ending
balance | $ | i 1,708 | $ | i 1,061 | ||
Unrealized
gains (losses) | $ | ( i 90 | ) | $ | i 41 | |
Corporate
equities | ||||||
Beginning balance | $ | i 97 | $ | i 95 | ||
Realized
and unrealized gains (losses) | ( i 60 | ) | i 6 | |||
Purchases | i 22 | i 51 | ||||
Sales | ( i 40 | ) | ( i 9 | ) | ||
Net
transfers | i 127 | i 9 | ||||
Ending
balance | $ | i 146 | $ | i 152 | ||
Unrealized
gains (losses) | $ | ( i 54 | ) | $ | i 7 | |
Investments | ||||||
Beginning
balance | $ | i 858 | $ | i 757 | ||
Realized
and unrealized gains (losses) | ( i 63 | ) | i 10 | |||
Purchases | i 15 | i 10 | ||||
Sales | ( i 8 | ) | ( i 4 | ) | ||
Net
transfers | ( i 77 | ) | i 201 | |||
Ending
balance | $ | i 725 | $ | i 974 | ||
Unrealized
gains (losses) | $ | ( i 64 | ) | $ | i 14 | |
Net
derivatives: Interest rate | ||||||
Beginning balance | $ | i 777 | $ | i 618 | ||
Realized
and unrealized gains (losses) | i 156 | ( i 48 | ) | |||
Purchases | i 61 | i 24 | ||||
Issuances | ( i 7 | ) | ( i 19 | ) | ||
Settlements | ( i 42 | ) | ( i 12 | ) | ||
Net
transfers | ( i 72 | ) | ( i 12 | ) | ||
Ending
balance | $ | i 873 | $ | i 551 | ||
Unrealized
gains (losses) | $ | i 111 | $ | ( i 43 | ) | |
Net
derivatives: Credit | ||||||
Beginning balance | $ | i 124 | $ | i 40 | ||
Realized
and unrealized gains (losses) | i 131 | i 162 | ||||
Purchases | i 26 | i 26 | ||||
Issuances | ( i 21 | ) | ( i 442 | ) | ||
Settlements | ( i 24 | ) | ( i 33 | ) | ||
Net
transfers | ( i 38 | ) | ( i 14 | ) | ||
Ending
balance | $ | i 198 | $ | ( i 261 | ) | |
Unrealized
gains (losses) | $ | i 123 | $ | i 167 | ||
49 | March
2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Net derivatives: Foreign exchange | ||||||
Beginning balance | $ | ( i 31 | ) | $ | i 75 | |
Realized
and unrealized gains (losses) | ( i 62 | ) | ( i 113 | ) | ||
Purchases | i 3 | i 1 | ||||
Issuances | ( i 8 | ) | i — | |||
Settlements | ( i 8 | ) | i 8 | |||
Net
transfers | ( i 44 | ) | i 34 | |||
Ending
balance | $ | ( i 150 | ) | $ | i 5 | |
Unrealized
gains (losses) | $ | ( i 164 | ) | $ | i 3 | |
Net
derivatives: Equity | ||||||
Beginning balance | $ | ( i 1,684 | ) | $ | ( i 1,485 | ) |
Realized
and unrealized gains (losses) | i 635 | ( i 191 | ) | |||
Purchases | i 97 | i 34 | ||||
Issuances | ( i 144 | ) | ( i 193 | ) | ||
Settlements | ( i 167 | ) | i 139 | |||
Net
transfers | ( i 113 | ) | ( i 64 | ) | ||
Ending
balance | $ | ( i 1,376 | ) | $ | ( i 1,760 | ) |
Unrealized
gains (losses) | $ | i 566 | $ | ( i 203 | ) | |
Net
derivatives: Commodity and other | ||||||
Beginning balance | $ | i 1,612 | $ | i 2,052 | ||
Realized
and unrealized gains (losses) | i 75 | i 43 | ||||
Purchases | i 3 | i 5 | ||||
Issuances | ( i 3 | ) | ( i 1 | ) | ||
Settlements | i 157 | ( i 81 | ) | |||
Net
transfers | i 5 | i 88 | ||||
Ending
balance | $ | i 1,849 | $ | i 2,106 | ||
Unrealized
gains (losses) | $ | i 22 | $ | ( i 25 | ) | |
Deposits | ||||||
Beginning
balance | $ | i 179 | $ | i 27 | ||
Realized
and unrealized losses (gains) | ( i 6 | ) | i 6 | |||
Issuances | i 12 | i 24 | ||||
Settlements | ( i 5 | ) | ( i 1 | ) | ||
Net
transfers | ( i 63 | ) | i 43 | |||
Ending
balance | $ | i 117 | $ | i 99 | ||
Unrealized
losses (gains) | $ | ( i 6 | ) | $ | i 6 | |
Nonderivative
trading liabilities | ||||||
Beginning balance | $ | i 37 | $ | i 16 | ||
Realized
and unrealized losses (gains) | ( i 43 | ) | ( i 1 | ) | ||
Purchases | ( i 82 | ) | ( i 6 | ) | ||
Sales | i 52 | i 23 | ||||
Net
transfers | i 100 | i 11 | ||||
Ending
balance | $ | i 64 | $ | i 43 | ||
Unrealized
losses (gains) | $ | ( i 43 | ) | $ | ( i 1 | ) |
Other
secured financings | ||||||
Beginning balance | $ | i 109 | $ | i 208 | ||
Realized
and unrealized losses (gains) | ( i 12 | ) | i 4 | |||
Issuances | i 2 | i — | ||||
Settlements | ( i 115 | ) | ( i 7 | ) | ||
Net
transfers | i 405 | ( i 52 | ) | |||
Ending
balance | $ | i 389 | $ | i 153 | ||
Unrealized
losses (gains) | $ | ( i 12 | ) | $ | i 4 |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Borrowings | ||||||
Beginning balance | $ | i 4,088 | $ | i 3,806 | ||
Realized
and unrealized losses (gains) | ( i 897 | ) | i 287 | |||
Issuances | i 701 | i 264 | ||||
Settlements | ( i 234 | ) | ( i 115 | ) | ||
Net
transfers | i 340 | ( i 467 | ) | |||
Ending
balance | $ | i 3,998 | $ | i 3,775 | ||
Unrealized
losses (gains) | $ | ( i 895 | ) | $ | i 276 | |
Portion
of Unrealized losses (gains) recorded in OCI—Change in net DVA | ( i 398 | ) | i 59 |
1. | Net
transfers in the current quarter include the transfer of $ i 857 million of equity margin loans from Level 2 to Level 3 as the unobservable input became significant. |
March
2020 Form 10-Q | 50 |
Notes to Consolidated Financial Statements (Unaudited) |
Balance
/ Range (Average)1 | ||||||
$ in millions, except inputs | ||||||
Assets Measured at Fair Value on a Recurring Basis | ||||||
U.S. Treasury and agency securities | $ | i 99 | $ | i 22 | ||
Comparable
pricing: | ||||||
Bond price | 18 to 117 points (86 points) | N/M | ||||
MABS | $ | i 483 | $ | i 438 | ||
Comparable
pricing: | ||||||
Bond price | 0 to 87 points (43 points) | 0 to 96 points (47 points) | ||||
Loans and lending commitments | $ | i 5,980 | $ | i 5,073 | ||
Margin
loan model: | ||||||
Discount rate | 1% to 10% (2%) | 1% to 9% (2%) | ||||
Volatility skew | 13% to 89% (58%) | 15% to 80% (28%) | ||||
Credit
Spread | 12 to 109 bps (41 bps) | 9 to 39 bps (19 bps) | ||||
Comparable pricing: | ||||||
Loan price | 71 to 100 points (92 points) | 69 to 100 points (93 points) | ||||
Corporate
and other debt | $ | i 1,708 | $ | i 1,396 | ||
Comparable
pricing: | ||||||
Bond price | 10 to 108 points (85 points) | 11 to 108 points (84 points) | ||||
Discounted cash flow: | ||||||
Recovery rate | 51% to 62% (54% / 51%) | i 35 | % | |||
Option
model: | ||||||
At the money volatility | i 21 | % | i 21 | % | ||
Corporate
equities | $ | i 146 | $ | i 97 | ||
Comparable
pricing: | ||||||
Equity price | i 100 | % | i 100 | % | ||
Investments | $ | i 725 | $ | i 858 | ||
Discounted
cash flow: | ||||||
WACC | 11% to 16% (14%) | 8% to 17% (15%) | ||||
Exit multiple | 7 to 17 times (12 times) | 7 to 16 times (11 times) | ||||
Market
approach: | ||||||
EBITDA multiple | 7 to 22 times (9 times) | 7 to 24 times (11 times) | ||||
Comparable pricing: | ||||||
Equity price | 50% to 100% (99%) | 75%
to 100% (99%) | ||||
Net derivative and other contracts: | ||||||
Interest rate | $ | i 873 | $ | i 777 | ||
Option
model: | ||||||
IR volatility skew | 2% to 183% (68% / 70%) | 24% to 156% (63% / 59%) | ||||
IR curve correlation | 46% to 88% (71% / 73%) | 47% to 90% (72% / 72%) | ||||
Bond
volatility | 6% to 35% (25% / 25%) | 4% to 15% (13% / 14%) | ||||
Inflation volatility | 24% to 63% (44% / 41%) | 24% to 63% (44% / 41%) | ||||
IR curve | 0 | % | i 1 | % | ||
Balance
/ Range (Average)1 | ||||||
$ in millions, except inputs | ||||||
Credit | $ | i 198 | $ | i 124 | ||
Credit
default swap model: | ||||||
Cash-synthetic basis | 6 points | 6 points | ||||
Bond price | 0 to 98 points (52 points) | 0 to 104 points (45 points) | ||||
Credit
spread | 20 to 488 bps (114 bps) | 9 to 469 bps (81 bps) | ||||
Funding spread | 204 to 278 bps (267 bps) | 47 to 117 bps (84 bps) | ||||
Correlation model: | ||||||
Credit
correlation | 40% to 78% (50%) | 29% to 62% (36%) | ||||
Foreign exchange2 | $ | ( i 150 | ) | $ | ( i 31 | ) |
Option
model: | ||||||
IR - FX correlation | 21% to 58% (38% / 38%) | 32% to 56% (46% / 46%) | ||||
IR volatility skew | 2% to 183% (68% / 70%) | 24% to 156% (63% / 59%) | ||||
IR
curve | 10 | % | 10% to 11% (10% / 10%) | |||
Contingency probability | 95 | % | 85% to 95% (94% / 95%) | |||
Equity2 | $ | ( i 1,376 | ) | $ | ( i 1,684 | ) |
Option
model: | ||||||
At the money volatility | 17% to 78% (45%) | 9% to 90% (36%) | ||||
Volatility skew | -4% to 0% (-1%) | -2% to 0% (-1%) | ||||
Equity
correlation | 5% to 96% (76%) | 5% to 98% (70%) | ||||
FX correlation | -79% to 55% (-39%) | -79% to 60% (-37%) | ||||
IR correlation | -7% to 44% (19% / 18%) | -11%
to 44% (18% / 16%) | ||||
Commodity and other | $ | i 1,849 | $ | i 1,612 | ||
Option
model: | ||||||
Forward power price | $1 to $137 ($26) per MWh | $3 to $182 ($28) per MWh | ||||
Commodity volatility | 8% to 145% (18%) | 7% to 183% (18%) | ||||
Cross-commodity
correlation | 5% to 99% (93%) | 43% to 99% (93%) | ||||
Liabilities Measured at Fair Value on a Recurring Basis | ||||||
Deposits | $ | i 117 | $ | i 179 | ||
Option
Model: | ||||||
At the money volatility | 7% to 24% (7%) | 16% to 37% (20%) | ||||
Other secured financings | $ | i 389 | $ | i 109 | ||
Discounted
cash flow: | ||||||
Funding spread | 106 to 161 bps (121 bps) | 111 to 124 bps (117 bps) | ||||
Comparable pricing: | ||||||
Loan price | 30 to 101 points (86 points) | N/M | ||||
Borrowings | $ | i 3,998 | $ | i 4,088 | ||
Option
model: | ||||||
At the money volatility | 5% to 55% (31%) | 5% to 44% (21%) | ||||
Volatility skew | -2% to 0% (0%) | -2% to 0% (0%) | ||||
Equity
correlation | 39% to 98% (81%) | 38% to 94% (78%) | ||||
Equity - FX correlation | -75% to 17% (-32%) | -75% to 26% (-25%) | ||||
IR - FX Correlation | -27% to 7% (-5% / -5%) | -26%
to 10% (-7% / -7%) | ||||
51 | March 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Balance / Range (Average)1 | ||||||
$
in millions, except inputs | ||||||
Nonrecurring Fair Value Measurement | ||||||
Loans | $ | i 3,901 | $ | i 1,500 | ||
Corporate
loan model: | ||||||
Credit spread | 44 to 600 bps (367 bps) | 69 to 446 bps (225 bps) | ||||
Warehouse model: | ||||||
Credit spread | 159 to 743 bps (313 bps) | 287
to 318 bps (297 bps) |
1. | A single amount is disclosed for range and average when there is no significant difference between the minimum, maximum and average. Amounts represent weighted averages except where simple averages and the median of the inputs are more relevant. |
2. |
$ in millions | Carrying Value | Commitment | Carrying Value | Commitment | ||||||||
Private equity | $ | i 2,219 | $ | i 557 | $ | i 2,078 | $ | i 450 | ||||
Real
estate | i 1,280 | i 147 | i 1,349 | i 150 | ||||||||
Hedge1 | i 91 | i — | i 94 | i 4 | ||||||||
Total | $ | i 3,590 | $ | i 704 | $ | i 3,521 | $ | i 604 |
1. | Investments
in hedge funds may be subject to initial period lock-up or gate provisions, which restrict an investor from withdrawing from the fund during a certain initial period or restrict the redemption amount on any redemption date, respectively. |
Carrying Value at March 31, 2020 | ||||||
$ in millions | Private Equity | Real Estate | ||||
Less than 5 years | $ | i 1,409 | $ | i 431 | ||
5-10
years | i 759 | i 173 | ||||
Over
10 years | i 51 | i 676 | ||||
Total | $ | i 2,219 | $ | i 1,280 |
Fair Value | |||||||||
$ in millions | Level 2 | Level 31 | Total | ||||||
Assets | |||||||||
Loans | $ | i 5,823 | $ | i 3,901 | $ | i 9,724 | |||
Liabilities | |||||||||
Other
liabilities and accrued expenses—Lending commitments | $ | i 321 | $ | i 247 | $ | i 568 |
Fair Value | |||||||||
$ in millions | Level 2 | Level 31 | Total | ||||||
Assets | |||||||||
Loans | $ | i 1,543 | $ | i 1,500 | $ | i 3,043 | |||
Other
assets—Other investments | $ | i — | $ | i 113 | $ | i 113 | |||
Total | $ | i 1,543 | $ | i 1,613 | $ | i 3,156 | |||
Liabilities | |||||||||
Other
liabilities and accrued expenses—Lending commitments | $ | i 132 | $ | i 69 | $ | i 201 | |||
Total | $ | i 132 | $ | i 69 | $ | i 201 |
1. | For
significant Level 3 balances, refer to “Significant Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements” section herein for details of the significant unobservable inputs used for nonrecurring fair value measurement. |
March 2020 Form 10-Q | 52 |
Notes to Consolidated Financial Statements (Unaudited) |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Assets | ||||||
Loans2 | $ | ( i 713 | ) | $ | i 36 | |
Other
assets—Other investments3 | i — | ( i 5 | ) | |||
Other
assets—Premises, equipment and software4 | ( i 3 | ) | ( i 2 | ) | ||
Total | $ | ( i 716 | ) | $ | i 29 | |
Liabilities | ||||||
Other
liabilities and accrued expenses—Lending commitments2 | $ | ( i 316 | ) | $ | i 67 | |
Total | $ | ( i 316 | ) | $ | i 67 |
1. | Gains
and losses for Loans and Other assets—Other investments are classified in Other revenues. For other items, gains and losses are recorded in Other revenues if the item is held for sale; otherwise, they are recorded in Other expenses. |
2. | Nonrecurring changes in the fair value of loans and lending commitments were calculated as follows: for the held-for-investment category, based on the value of the underlying collateral; and for the held-for-sale category, based on recently executed transactions, market price quotations, valuation models that incorporate market observable inputs where possible, such as comparable loan or debt prices and CDS spread levels adjusted for any basis difference between cash and derivative instruments,
or default recovery analysis where such transactions and quotations are unobservable. |
3. | Losses related to Other assets—Other investments were determined using techniques that included discounted cash flow models, methodologies that incorporate multiples of certain comparable companies and recently executed transactions. |
4. | Losses related to Other assets—Premises, equipment and software generally include write-offs related to the disposal of certain assets.
|
Carrying Value | Fair Value | ||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Financial assets | |||||||||||||||
Cash
and cash equivalents | $ | i 131,509 | $ | i 131,509 | $ | i — | $ | i — | $ | i 131,509 | |||||
Investment
securities—HTM | i 47,286 | i 32,207 | i 17,149 | i 777 | i 50,133 | ||||||||||
Securities
purchased under agreements to resell | i 104,795 | i — | i 103,451 | i 1,426 | i 104,877 | ||||||||||
Securities
borrowed | i 72,300 | i — | i 72,303 | i — | i 72,303 | ||||||||||
Customer
and other receivables1 | i 69,923 | i — | i 67,086 | i 2,852 | i 69,938 | ||||||||||
Loans2 | i 148,697 | i — | i 32,529 | i 114,841 | i 147,370 | ||||||||||
Other
assets | i 461 | i — | i 461 | i — | i 461 | ||||||||||
Financial
liabilities | |||||||||||||||
Deposits | $ | i 231,187 | $ | i — | $ | i 231,555 | $ | i — | $ | i 231,555 | |||||
Securities
sold under agreements to repurchase | i 45,041 | i — | i 45,077 | i — | i 45,077 | ||||||||||
Securities
loaned | i 11,631 | i — | i 11,633 | i — | i 11,633 | ||||||||||
Other
secured financings | i 6,161 | i — | i 6,167 | i — | i 6,167 | ||||||||||
Customer
and other payables1 | i 195,211 | i — | i 195,211 | i — | i 195,211 | ||||||||||
Borrowings | i 137,694 | i — | i 135,148 | i 10 | i 135,158 | ||||||||||
Commitment Amount | |||||||||||||||
Lending
commitments3 | $ | i 105,466 | $ | i — | $ | i 1,668 | $ | i 1,089 | $ | i 2,757 |
Carrying Value | Fair Value | ||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Financial assets | |||||||||||||||
Cash
and cash equivalents | $ | i 82,171 | $ | i 82,171 | $ | i — | $ | i — | $ | i 82,171 | |||||
Investment
securities—HTM | i 43,502 | i 30,661 | i 12,683 | i 789 | i 44,133 | ||||||||||
Securities
purchased under agreements to resell | i 88,220 | i — | i 86,794 | i 1,442 | i 88,236 | ||||||||||
Securities
borrowed | i 106,549 | i — | i 106,551 | i — | i 106,551 | ||||||||||
Customer
and other receivables1 | i 51,134 | i — | i 48,215 | i 2,872 | i 51,087 | ||||||||||
Loans2 | i 130,637 | i — | i 22,293 | i 108,059 | i 130,352 | ||||||||||
Other
assets | i 495 | i — | i 495 | i — | i 495 | ||||||||||
Financial
liabilities | |||||||||||||||
Deposits | $ | i 188,257 | $ | i — | $ | i 188,639 | $ | i — | $ | i 188,639 | |||||
Securities
sold under agreements to repurchase | i 53,467 | i — | i 53,486 | i — | i 53,486 | ||||||||||
Securities
loaned | i 8,506 | i — | i 8,506 | i — | i 8,506 | ||||||||||
Other
secured financings | i 6,889 | i — | i 6,800 | i 92 | i 6,892 | ||||||||||
Customer
and other payables1 | i 195,035 | i — | i 195,035 | i — | i 195,035 | ||||||||||
Borrowings | i 128,166 | i — | i 133,563 | i 10 | i 133,573 | ||||||||||
Commitment Amount | |||||||||||||||
Lending
commitments3 | $ | i 119,004 | $ | i — | $ | i 748 | $ | i 338 | $ | i 1,086 |
1. | Accrued
interest and dividend receivables and payables have been excluded. Carrying value approximates fair value for these receivables and payables. As of March 31, 2020 and December 31, 2019, accrued interest receivable was $ i 2.4 billion and $ i 1.7
billion, respectively. |
2. | Amounts include loans measured at fair value on a nonrecurring basis. |
3. | Represents Lending commitments accounted for as Held for Investment and Held for Sale. For a further discussion on lending commitments, see Note 13. |
53 | March 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | ||||||
Business Unit Responsible for Risk Management | ||||||
Equity | $ | i 25,089 | $ | i 30,214 | ||
Interest
rates | i 25,195 | i 27,298 | ||||
Commodities | i 4,681 | i 4,501 | ||||
Credit | i 1,179 | i 1,246 | ||||
Foreign
exchange | i 1,018 | i 1,202 | ||||
Total | $ | i 57,162 | $ | i 64,461 |
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Trading revenues | $ | i 3,447 | $ | ( i 2,903 | ) | |
Interest
expense | i 83 | i 93 | ||||
Net
revenues1 | $ | i 3,364 | $ | ( i 2,996 | ) |
1. | Amounts
do not reflect any gains or losses from related economic hedges. |
Three
Months Ended March 31, | ||||||||||||
2020 | 2019 | |||||||||||
$ in millions | Trading Revenues | OCI | Trading Revenues | OCI | ||||||||
Borrowings | $ | ( i 5 | ) | $ | i 4,948 | $ | ( i 4 | ) | $ | ( i 816 | ) | |
Loans
and other debt1 | ( i 281 | ) | i — | i 93 | i — | |||||||
Lending
commitments | i 2 | i — | ( i 1 | ) | i — | |||||||
Deposits | i — | i 72 | i — | ( i 4 | ) |
$
in millions | ||||||
Cumulative pre-tax DVA gain (loss) recognized in AOCI | $ | i 3,022 | $ | ( i 1,998 | ) |
1. | Loans
and other debt instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses. |
$ in millions | ||||||
Loans and other debt2 | $ | i 13,654 | $ | i 13,037 | ||
Nonaccrual
loans2 | i 11,014 | i 10,849 | ||||
Borrowings3 | i 798 | ( i 1,665 | ) |
1. | Amounts
indicate contractual principal greater than or (less than) fair value. |
2. | The majority of the difference between principal and fair value amounts for loans and other debt relates to distressed debt positions purchased at amounts well below par. |
3. | Excludes borrowings where the repayment of the initial principal amount fluctuates based on changes in a reference price or index. |
$ in millions | ||||||
Nonaccrual
loans | $ | i 1,150 | $ | i 1,100 | ||
Nonaccrual
loans 90 or more days past due | $ | i 262 | $ | i 330 |
March
2020 Form 10-Q | 54 |
Notes to Consolidated Financial Statements (Unaudited) |
Assets | ||||||||||||
$
in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | i 1,295 | $ | i 7 | $ | i — | $ | i 1,302 | ||||
Foreign
exchange | i 152 | i 83 | i — | i 235 | ||||||||
Total | i 1,447 | i 90 | i — | i 1,537 | ||||||||
Not
designated as accounting hedges | ||||||||||||
Interest rate | i 252,956 | i 13,730 | i 1,050 | i 267,736 | ||||||||
Credit | i 10,204 | i 3,154 | i — | i 13,358 | ||||||||
Foreign
exchange | i 109,212 | i 3,191 | i 175 | i 112,578 | ||||||||
Equity | i 44,289 | i — | i 51,487 | i 95,776 | ||||||||
Commodity
and other | i 17,778 | i — | i 4,489 | i 22,267 | ||||||||
Total | i 434,439 | i 20,075 | i 57,201 | i 511,715 | ||||||||
Total
gross derivatives | $ | i 435,886 | $ | i 20,165 | $ | i 57,201 | $ | i 513,252 | ||||
Amounts
offset | ||||||||||||
Counterparty netting | ( i 328,104 | ) | ( i 16,673 | ) | ( i 54,079 | ) | ( i 398,856 | ) | ||||
Cash
collateral netting | ( i 59,531 | ) | ( i 1,855 | ) | i — | ( i 61,386 | ) | |||||
Total
in Trading assets | $ | i 48,251 | $ | i 1,637 | $ | i 3,122 | $ | i 53,010 | ||||
Amounts
not offset1 | ||||||||||||
Financial instruments collateral | ( i 23,868 | ) | i — | i — | ( i 23,868 | ) | ||||||
Other
cash collateral | ( i 83 | ) | i — | i — | ( i 83 | ) | ||||||
Net
amounts | $ | i 24,300 | $ | i 1,637 | $ | i 3,122 | $ | i 29,059 | ||||
Net
amounts for which master netting or collateral agreements are not in place or may not be legally enforceable | $ | i 3,984 |
Liabilities | ||||||||||||
$
in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | i — | $ | i — | $ | i — | $ | i — | ||||
Foreign
exchange | i 54 | i 2 | i — | i 56 | ||||||||
Total | i 54 | i 2 | i — | i 56 | ||||||||
Not
designated as accounting hedges | ||||||||||||
Interest rate | i 245,978 | i 10,698 | i 1,313 | i 257,989 | ||||||||
Credit | i 9,556 | i 3,630 | i — | i 13,186 | ||||||||
Foreign
exchange | i 109,225 | i 3,336 | i 181 | i 112,742 | ||||||||
Equity | i 39,606 | i — | i 53,764 | i 93,370 | ||||||||
Commodity
and other | i 13,661 | i — | i 4,592 | i 18,253 | ||||||||
Total | i 418,026 | i 17,664 | i 59,850 | i 495,540 | ||||||||
Total
gross derivatives | $ | i 418,080 | $ | i 17,666 | $ | i 59,850 | $ | i 495,596 | ||||
Amounts
offset | ||||||||||||
Counterparty netting | ( i 328,104 | ) | ( i 16,673 | ) | ( i 54,079 | ) | ( i 398,856 | ) | ||||
Cash
collateral netting | ( i 55,307 | ) | ( i 564 | ) | i — | ( i 55,871 | ) | |||||
Total
in Trading liabilities | $ | i 34,669 | $ | i 429 | $ | i 5,771 | $ | i 40,869 | ||||
Amounts
not offset1 | ||||||||||||
Financial instruments collateral | ( i 8,357 | ) | i — | ( i 3,825 | ) | ( i 12,182 | ) | |||||
Other
cash collateral | ( i 34 | ) | ( i 37 | ) | i — | ( i 71 | ) | |||||
Net
amounts | $ | i 26,278 | $ | i 392 | $ | i 1,946 | $ | i 28,616 | ||||
Net
amounts for which master netting or collateral agreements are not in place or may not be legally enforceable | i 5,601 |
Assets | ||||||||||||
$ in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated
as accounting hedges | ||||||||||||
Interest rate | $ | i 673 | $ | i — | $ | i — | $ | i 673 | ||||
Foreign
exchange | i 41 | i 1 | i — | i 42 | ||||||||
Total | i 714 | i 1 | i — | i 715 | ||||||||
Not
designated as accounting hedges | ||||||||||||
Interest rate | i 179,450 | i 4,839 | i 519 | i 184,808 | ||||||||
Credit | i 4,895 | i 2,417 | i — | i 7,312 | ||||||||
Foreign
exchange | i 62,957 | i 1,399 | i 22 | i 64,378 | ||||||||
Equity | i 27,621 | i — | i 23,447 | i 51,068 | ||||||||
Commodity
and other | i 9,306 | i — | i 1,952 | i 11,258 | ||||||||
Total | i 284,229 | i 8,655 | i 25,940 | i 318,824 | ||||||||
Total
gross derivatives | $ | i 284,943 | $ | i 8,656 | $ | i 25,940 | $ | i 319,539 | ||||
Amounts
offset | ||||||||||||
Counterparty netting | ( i 213,710 | ) | ( i 7,294 | ) | ( i 24,037 | ) | ( i 245,041 | ) | ||||
Cash
collateral netting | ( i 41,222 | ) | ( i 1,275 | ) | i — | ( i 42,497 | ) | |||||
Total
in Trading assets | $ | i 30,011 | $ | i 87 | $ | i 1,903 | $ | i 32,001 | ||||
Amounts
not offset1 | ||||||||||||
Financial instruments collateral | ( i 15,596 | ) | i — | i — | ( i 15,596 | ) | ||||||
Other
cash collateral | ( i 46 | ) | i — | i — | ( i 46 | ) | ||||||
Net
amounts | $ | i 14,369 | $ | i 87 | $ | i 1,903 | $ | i 16,359 | ||||
Net
amounts for which master netting or collateral agreements are not in place or may not be legally enforceable | $ | i 1,900 |
Liabilities | ||||||||||||
$
in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | i 1 | $ | i — | $ | i — | $ | i 1 | ||||
Foreign
exchange | i 121 | i 38 | i — | i 159 | ||||||||
Total | i 122 | i 38 | i — | i 160 | ||||||||
Not
designated as accounting hedges | ||||||||||||
Interest rate | i 168,597 | i 3,597 | i 436 | i 172,630 | ||||||||
Credit | i 4,798 | i 3,123 | i — | i 7,921 | ||||||||
Foreign
exchange | i 65,965 | i 1,492 | i 39 | i 67,496 | ||||||||
Equity | i 30,135 | i — | i 22,733 | i 52,868 | ||||||||
Commodity
and other | i 7,713 | i — | i 1,911 | i 9,624 | ||||||||
Total | i 277,208 | i 8,212 | i 25,119 | i 310,539 | ||||||||
Total
gross derivatives | $ | i 277,330 | $ | i 8,250 | $ | i 25,119 | $ | i 310,699 | ||||
Amounts
offset | ||||||||||||
Counterparty netting | ( i 213,710 | ) | ( i 7,294 | ) | ( i 24,037 | ) | ( i 245,041 | ) | ||||
Cash
collateral netting | ( i 36,392 | ) | ( i 832 | ) | i — | ( i 37,224 | ) | |||||
Total
in Trading liabilities | $ | i 27,228 | $ | i 124 | $ | i 1,082 | $ | i 28,434 | ||||
Amounts
not offset1 | ||||||||||||
Financial instruments collateral | ( i 7,747 | ) | i — | ( i 287 | ) | ( i 8,034 | ) | |||||
Other
cash collateral | ( i 14 | ) | i — | i — | ( i 14 | ) | ||||||
Net
amounts | $ | i 19,467 | $ | i 124 | $ | i 795 | $ | i 20,386 | ||||
Net
amounts for which master netting or collateral agreements are not in place or may not be legally enforceable | $ | i 3,680 |
1. | Amounts
relate to master netting agreements and collateral agreements that have been determined by the Firm to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance. |
55 | March
2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Assets | ||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated
as accounting hedges | ||||||||||||
Interest rate | $ | i 10 | $ | i 144 | $ | i — | $ | i 154 | ||||
Foreign
exchange | i 5 | i 2 | i — | i 7 | ||||||||
Total | i 15 | i 146 | i — | i 161 | ||||||||
Not
designated as accounting hedges | ||||||||||||
Interest rate | i 4,261 | i 8,028 | i 615 | i 12,904 | ||||||||
Credit | i 173 | i 111 | i — | i 284 | ||||||||
Foreign
exchange | i 3,054 | i 104 | i 10 | i 3,168 | ||||||||
Equity | i 426 | i — | i 453 | i 879 | ||||||||
Commodity
and other | i 111 | i — | i 72 | i 183 | ||||||||
Total | i 8,025 | i 8,243 | i 1,150 | i 17,418 | ||||||||
Total
gross derivatives | $ | i 8,040 | $ | i 8,389 | $ | i 1,150 | $ | i 17,579 |
Liabilities | ||||||||||||
$
in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | i — | $ | i 43 | $ | i — | $ | i 43 | ||||
Foreign
exchange | i 6 | i — | i — | i 6 | ||||||||
Total | i 6 | i 43 | i — | i 49 | ||||||||
Not
designated as accounting hedges | ||||||||||||
Interest rate | i 5,085 | i 8,023 | i 545 | i 13,653 | ||||||||
Credit | i 164 | i 124 | i — | i 288 | ||||||||
Foreign
exchange | i 2,981 | i 104 | i 9 | i 3,094 | ||||||||
Equity | i 352 | i — | i 541 | i 893 | ||||||||
Commodity
and other | i 89 | i — | i 69 | i 158 | ||||||||
Total | i 8,671 | i 8,251 | i 1,164 | i 18,086 | ||||||||
Total
gross derivatives | $ | i 8,677 | $ | i 8,294 | $ | i 1,164 | $ | i 18,135 |
Assets | ||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated
as accounting hedges | ||||||||||||
Interest rate | $ | i 14 | $ | i 94 | $ | i — | $ | i 108 | ||||
Foreign
exchange | i 2 | i — | i — | i 2 | ||||||||
Total | i 16 | i 94 | i — | i 110 | ||||||||
Not
designated as accounting hedges | ||||||||||||
Interest rate | i 4,230 | i 7,398 | i 732 | i 12,360 | ||||||||
Credit | i 136 | i 79 | i — | i 215 | ||||||||
Foreign
exchange | i 2,667 | i 91 | i 10 | i 2,768 | ||||||||
Equity | i 429 | i — | i 419 | i 848 | ||||||||
Commodity
and other | i 99 | i — | i 61 | i 160 | ||||||||
Total | i 7,561 | i 7,568 | i 1,222 | i 16,351 | ||||||||
Total
gross derivatives | $ | i 7,577 | $ | i 7,662 | $ | i 1,222 | $ | i 16,461 |
Liabilities | ||||||||||||
$
in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | i — | $ | i 71 | $ | i — | $ | i 71 | ||||
Foreign
exchange | i 9 | i 2 | i — | i 11 | ||||||||
Total | i 9 | i 73 | i — | i 82 | ||||||||
Not
designated as accounting hedges | ||||||||||||
Interest rate | i 4,185 | i 6,866 | i 666 | i 11,717 | ||||||||
Credit | i 153 | i 84 | i — | i 237 | ||||||||
Foreign
exchange | i 2,841 | i 91 | i 14 | i 2,946 | ||||||||
Equity | i 455 | i — | i 515 | i 970 | ||||||||
Commodity
and other | i 85 | i — | i 61 | i 146 | ||||||||
Total | i 7,719 | i 7,041 | i 1,256 | i 16,016 | ||||||||
Total
gross derivatives | $ | i 7,728 | $ | i 7,114 | $ | i 1,256 | $ | i 16,098 |
March
2020 Form 10-Q | 56 |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended | ||||||
March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Fair value hedges—Recognized
in Interest income | ||||||
Interest rate contracts | $ | ( i 64 | ) | $ | ( i 5 | ) |
Investment
Securities—AFS | i 65 | i 5 | ||||
Fair
value hedges—Recognized in Interest expense | ||||||
Interest rate contracts | $ | i 6,667 | $ | i 1,577 | ||
Deposits1 | ( i 261 | ) | i — | |||
Borrowings | ( i 6,432 | ) | ( i 1,621 | ) | ||
Net
investment hedges—Foreign exchange contracts | ||||||
Recognized in OCI | $ | i 410 | $ | i 64 | ||
Forward
points excluded from hedge effectiveness testing—Recognized in Interest income | i 33 | i 35 |
$ in millions | ||||||
Investment Securities—AFS | ||||||
Carrying
amount2 currently or previously hedged | $ | i 1,969 | $ | i 917 | ||
Basis
adjustments included in carrying amount3 | $ | i 77 | $ | i 14 | ||
Deposits1 | ||||||
Carrying
amount currently or previously hedged | i 18,335 | i 5,435 | ||||
Basis
adjustments included in carrying amount3 | i 254 | ( i 7 | ) | |||
Borrowings | ||||||
Carrying
amount currently or previously hedged | $ | i 109,810 | $ | i 102,456 | ||
Basis
adjustments included in carrying amount3 | $ | i 9,007 | $ | i 2,593 |
1. | The
Firm began designating interest rate swaps as fair value hedges of certain Deposits in the fourth quarter of 2019. |
2. | Carrying amount represents amortized cost basis for AFS securities. |
3. | Hedge accounting basis adjustments are primarily related to outstanding hedges. |
$ in millions | ||||||
Net derivative liabilities with credit risk-related contingent features | $ | i 33,064 | $ | i 21,620 | ||
Collateral
posted | i 28,502 | i 17,392 |
$
in millions | |||
One-notch downgrade | $ | i 325 | |
Two-notch
downgrade | i 377 | ||
Bilateral downgrade agreements included in the amounts above1 | $ | i 614 |
1. | Amount
represents arrangements between the Firm and other parties where upon the downgrade of one party, the downgraded party must deliver collateral to the other party. These bilateral downgrade arrangements are used by the Firm to manage the risk of counterparty downgrades. |
Years
to Maturity at March 31, 2020 | |||||||||||||||
$ in billions | < 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Single-name CDS | |||||||||||||||
Investment
grade | $ | i 13 | $ | i 17 | $ | i 34 | $ | i 13 | $ | i 77 | |||||
Non-investment
grade | i 9 | i 9 | i 16 | i 5 | i 39 | ||||||||||
Total | $ | i 22 | $ | i 26 | $ | i 50 | $ | i 18 | $ | i 116 | |||||
Index
and basket CDS | |||||||||||||||
Investment grade | $ | i 5 | $ | i 8 | $ | i 65 | $ | i 34 | $ | i 112 | |||||
Non-investment
grade | i 7 | i 5 | i 21 | i 17 | i 50 | ||||||||||
Total | $ | i 12 | $ | i 13 | $ | i 86 | $ | i 51 | $ | i 162 | |||||
Total
CDS sold | $ | i 34 | $ | i 39 | $ | i 136 | $ | i 69 | $ | i 278 | |||||
Other
credit contracts | i — | i — | i — | i — | i — | ||||||||||
Total
credit protection sold | $ | i 34 | $ | i 39 | $ | i 136 | $ | i 69 | $ | i 278 | |||||
CDS
protection sold with identical protection purchased | $ | i 242 |
Years
to Maturity at December 31, 2019 | |||||||||||||||
$ in billions | < 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Single-name CDS | |||||||||||||||
Investment
grade | $ | i 16 | $ | i 17 | $ | i 33 | $ | i 9 | $ | i 75 | |||||
Non-investment grade | i 9 | i 9 | i 16 | i 1 | i 35 | ||||||||||
Total | $ | i 25 | $ | i 26 | $ | i 49 | $ | i 10 | $ | i 110 | |||||
Index
and basket CDS | |||||||||||||||
Investment grade | $ | i 4 | $ | i 7 | $ | i 46 | $ | i 11 | $ | i 68 | |||||
Non-investment
grade | i 7 | i 4 | i 17 | i 10 | i 38 | ||||||||||
Total | $ | i 11 | $ | i 11 | $ | i 63 | $ | i 21 | $ | i 106 | |||||
Total
CDS sold | $ | i 36 | $ | i 37 | $ | i 112 | $ | i 31 | $ | i 216 | |||||
Other
credit contracts | i — | i — | i — | i — | i — | ||||||||||
Total
credit protection sold | $ | i 36 | $ | i 37 | $ | i 112 | $ | i 31 | $ | i 216 | |||||
CDS
protection sold with identical protection purchased | $ | i 187 |
57 | March
2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
$
in millions | ||||||
Single-name CDS | ||||||
Investment grade | $ | ( i 963 | ) | $ | i 1,057 | |
Non-investment
grade | ( i 3,350 | ) | ( i 540 | ) | ||
Total | $ | ( i 4,313 | ) | $ | i 517 | |
Index
and basket CDS | ||||||
Investment grade | $ | ( i 693 | ) | $ | i 1,052 | |
Non-investment
grade | ( i 4,849 | ) | i 134 | |||
Total | $ | ( i 5,542 | ) | $ | i 1,186 | |
Total
CDS sold | $ | ( i 9,855 | ) | $ | i 1,703 | |
Other
credit contracts | ( i 4 | ) | ( i 17 | ) | ||
Total
credit protection sold | $ | ( i 9,859 | ) | $ | i 1,686 |
1. | Investment
grade/non-investment grade determination is based on the internal credit rating of the reference obligation. Internal credit ratings serve as the Credit Risk Management Department’s assessment of credit risk and the basis for a comprehensive credit limits framework used to control credit risk. The Firm uses quantitative models and judgment to estimate the various risk parameters related to each obligor. |
Notional | ||||||
$
in billions | ||||||
Single name | $ | i 123 | $ | i 118 | ||
Index
and basket | i 153 | i 103 | ||||
Tranched
index and basket | i 18 | i 15 | ||||
Total | $ | i 294 | $ | i 236 |
Fair
Value Asset (Liability) | ||||||
$ in millions | ||||||
Single name | $ | i 4,152 | $ | ( i 723 | ) | |
Index
and basket | i 5,176 | ( i 1,139 | ) | |||
Tranched
index and basket | i 699 | ( i 450 | ) | |||
Total | $ | i 10,027 | $ | ( i 2,312 | ) |
March
2020 Form 10-Q | 58 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | Amortized Cost1 | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||
AFS
securities | ||||||||||||
U.S. government and agency securities: | ||||||||||||
U.S. Treasury securities | $ | i 34,600 | $ | i 1,298 | $ | i — | $ | i 35,898 | ||||
U.S.
agency securities2 | i 22,687 | i 717 | i 82 | i 23,322 | ||||||||
Total
U.S. government and agency securities | i 57,287 | i 2,015 | i 82 | i 59,220 | ||||||||
Corporate
and other debt: | ||||||||||||
Agency CMBS | i 4,765 | i 244 | i 8 | i 5,001 | ||||||||
Corporate
bonds | i 1,828 | i 16 | i 35 | i 1,809 | ||||||||
State
and municipal securities | i 1,453 | i 48 | i 48 | i 1,453 | ||||||||
FFELP
student loan ABS3 | i 1,535 | i — | i 147 | i 1,388 | ||||||||
Total
corporate and other debt | i 9,581 | i 308 | i 238 | i 9,651 | ||||||||
Total
AFS securities | i 66,868 | i 2,323 | i 320 | i 68,871 | ||||||||
HTM
securities | ||||||||||||
U.S. government and agency securities: | ||||||||||||
U.S. Treasury securities | i 29,951 | i 2,256 | i — | i 32,207 | ||||||||
U.S.
agency securities2 | i 16,542 | i 607 | i — | i 17,149 | ||||||||
Total
U.S. government and agency securities | i 46,493 | i 2,863 | i — | i 49,356 | ||||||||
Corporate
and other debt: | ||||||||||||
Non-agency CMBS | i 793 | i 4 | i 20 | i 777 | ||||||||
Total
HTM securities | i 47,286 | i 2,867 | i 20 | i 50,133 | ||||||||
Total
investment securities | $ | i 114,154 | $ | i 5,190 | $ | i 340 | $ | i 119,004 |
$ in millions | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||
AFS securities | ||||||||||||
U.S.
government and agency securities: | ||||||||||||
U.S. Treasury securities | $ | i 32,465 | $ | i 224 | $ | i 111 | $ | i 32,578 | ||||
U.S.
agency securities2 | i 20,725 | i 249 | i 100 | i 20,874 | ||||||||
Total
U.S. government and agency securities | i 53,190 | i 473 | i 211 | i 53,452 | ||||||||
Corporate
and other debt: | ||||||||||||
Agency CMBS | i 4,810 | i 55 | i 57 | i 4,808 | ||||||||
Corporate
bonds | i 1,891 | i 17 | i 1 | i 1,907 | ||||||||
State
and municipal securities | i 481 | i 22 | i — | i 503 | ||||||||
FFELP
student loan ABS3 | i 1,580 | i 1 | i 28 | i 1,553 | ||||||||
Total
corporate and other debt | i 8,762 | i 95 | i 86 | i 8,771 | ||||||||
Total
AFS securities | i 61,952 | i 568 | i 297 | i 62,223 | ||||||||
HTM
securities | ||||||||||||
U.S. government and agency securities: | ||||||||||||
U.S. Treasury securities | i 30,145 | i 568 | i 52 | i 30,661 | ||||||||
U.S.
agency securities2 | i 12,589 | i 151 | i 57 | i 12,683 | ||||||||
Total
U.S. government and agency securities | i 42,734 | i 719 | i 109 | i 43,344 | ||||||||
Corporate
and other debt: | ||||||||||||
Non-agency CMBS | i 768 | i 22 | i 1 | i 789 | ||||||||
Total
HTM securities | i 43,502 | i 741 | i 110 | i 44,133 | ||||||||
Total
investment securities | $ | i 105,454 | $ | i 1,309 | $ | i 407 | $ | i 106,356 |
1. | Amounts
are net of any allowance for credit losses. |
2. | U.S. agency securities consist mainly of agency-issued debt, agency mortgage pass-through pool securities and CMOs. |
3. | Underlying loans are backed by a guarantee, ultimately from the U.S. Department of Education, of at least i 95%
of the principal balance and interest outstanding. |
59 | March
2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Less than 12 Months | 12
Months or Longer | Total | ||||||||||||||||
$ in millions | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||
AFS
securities | ||||||||||||||||||
U.S. agency securities | $ | i 931 | $ | i 7 | $ | i 3,892 | $ | i 75 | $ | i 4,823 | $ | i 82 | ||||||
Corporate
and other debt: | ||||||||||||||||||
Agency CMBS | i 30 | i — | i 670 | i 8 | i 700 | i 8 | ||||||||||||
Corporate
bonds | i 747 | i 24 | i 58 | i 11 | i 805 | i 35 | ||||||||||||
State
and municipal securities | i 678 | i 48 | i — | i — | i 678 | i 48 | ||||||||||||
FFELP
student loan ABS | i 349 | i 29 | i 1,038 | i 118 | i 1,387 | i 147 | ||||||||||||
Total
corporate and other debt | i 1,804 | i 101 | i 1,766 | i 137 | i 3,570 | i 238 | ||||||||||||
Total
AFS securities | $ | i 2,735 | $ | i 108 | $ | i 5,658 | $ | i 212 | $ | i 8,393 | $ | i 320 |
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||
$ in millions | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair
Value | Gross Unrealized Losses | ||||||||||||
AFS securities | ||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||
U.S.
Treasury securities | $ | i 4,793 | $ | i 28 | $ | i 7,904 | $ | i 83 | $ | i 12,697 | $ | i 111 | ||||||
U.S.
agency securities | i 2,641 | i 20 | i 7,697 | i 80 | i 10,338 | i 100 | ||||||||||||
Total
U.S. government and agency securities | i 7,434 | i 48 | i 15,601 | i 163 | i 23,035 | i 211 | ||||||||||||
Corporate
and other debt: | ||||||||||||||||||
Agency CMBS | i 2,294 | i 26 | i 681 | i 31 | i 2,975 | i 57 | ||||||||||||
Corporate
bonds | i 194 | i 1 | i 44 | i — | i 238 | i 1 | ||||||||||||
FFELP
student loan ABS | i 91 | i — | i 1,165 | i 28 | i 1,256 | i 28 | ||||||||||||
Total
corporate and other debt | i 2,579 | i 27 | i 1,890 | i 59 | i 4,469 | i 86 | ||||||||||||
Total
AFS securities | i 10,013 | i 75 | i 17,491 | i 222 | i 27,504 | i 297 | ||||||||||||
HTM
securities | ||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||
U.S.
Treasury securities | i 6,042 | i 52 | i 651 | i — | i 6,693 | i 52 | ||||||||||||
U.S.
agency securities | i 2,524 | i 18 | i 2,420 | i 39 | i 4,944 | i 57 | ||||||||||||
Total
U.S. government and agency securities | i 8,566 | i 70 | i 3,071 | i 39 | i 11,637 | i 109 | ||||||||||||
Corporate
and other debt: | ||||||||||||||||||
Non-agency CMBS | i 167 | i 1 | i 65 | i — | i 232 | i 1 | ||||||||||||
Total
HTM securities | i 8,733 | i 71 | i 3,136 | i 39 | i 11,869 | i 110 | ||||||||||||
Total
investment securities | $ | i 18,746 | $ | i 146 | $ | i 20,627 | $ | i 261 | $ | i 39,373 | $ | i 407 |
March 2020 Form 10-Q | 60 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | Amortized Cost1 | Fair Value | Annualized Average Yield | |||||
AFS
securities | ||||||||
U.S. government and agency securities: | ||||||||
U.S. Treasury securities: | ||||||||
Due within 1 year | $ | i 3,728 | $ | i 3,770 | i 2.0 | % | ||
After
1 year through 5 years | i 27,748 | i 28,791 | i 1.7 | % | ||||
After
5 years through 10 years | i 3,124 | i 3,337 | i 1.6 | % | ||||
Total | i 34,600 | i 35,898 | ||||||
U.S.
agency securities: | ||||||||
Due within 1 year | i 235 | i 236 | i 0.8 | % | ||||
After
1 year through 5 years | i 78 | i 78 | i 1.4 | % | ||||
After
5 years through 10 years | i 1,293 | i 1,322 | i 1.8 | % | ||||
After
10 years | i 21,081 | i 21,686 | i 2.3 | % | ||||
Total | i 22,687 | i 23,322 | ||||||
Total
U.S. government and agency securities | i 57,287 | i 59,220 | i 1.9 | % | ||||
Corporate
and other debt: | ||||||||
Agency CMBS: | ||||||||
After 1 year through 5 years | i 599 | i 605 | i 1.8 | % | ||||
After
5 years through 10 years | i 3,273 | i 3,488 | i 2.5 | % | ||||
After
10 years | i 893 | i 908 | i 2.0 | % | ||||
Total | i 4,765 | i 5,001 | ||||||
Corporate
bonds: | ||||||||
Due within 1 year | i 44 | i 44 | i 2.3 | % | ||||
After
1 year through 5 years | i 1,439 | i 1,439 | i 2.6 | % | ||||
After
5 years through 10 years | i 345 | i 326 | i 2.9 | % | ||||
Total | i 1,828 | i 1,809 | ||||||
State
and municipal securities: | ||||||||
After 1 year through 5 years | i 2 | i 2 | i 3.4 | % | ||||
After
5 years through 10 years | i 139 | i 142 | i 3.1 | % | ||||
After
10 Years | i 1,312 | i 1,309 | i 2.8 | % | ||||
Total | i 1,453 | i 1,453 | ||||||
FFELP
student loan ABS: | ||||||||
After 1 year through 5 years | i 98 | i 87 | i 0.8 | % | ||||
After
5 years through 10 years | i 307 | i 270 | i 0.9 | % | ||||
After
10 years | i 1,130 | i 1,031 | i 1.2 | % | ||||
Total | i 1,535 | i 1,388 | ||||||
Total
corporate and other debt | i 9,581 | i 9,651 | i 2.3 | % | ||||
Total
AFS securities | i 66,868 | i 68,871 | i 2.0 | % | ||||
$ in millions | Amortized Cost1 | Fair Value | Annualized Average Yield | |||||
HTM securities | ||||||||
U.S. government and agency securities: | ||||||||
U.S.
Treasury securities: | ||||||||
Due within 1 year | i 3,282 | i 3,332 | i 2.6 | % | ||||
After
1 year through 5 years | i 17,769 | i 18,733 | i 2.0 | % | ||||
After
5 years through 10 years | i 7,818 | i 8,777 | i 2.2 | % | ||||
After
10 years | i 1,082 | i 1,365 | i 2.5 | % | ||||
Total | i 29,951 | i 32,207 | ||||||
U.S.
agency securities: | ||||||||
After 5 years through 10 years | i 50 | i 51 | i 1.8 | % | ||||
After
10 years | i 16,492 | i 17,098 | i 2.4 | % | ||||
Total | i 16,542 | i 17,149 | ||||||
Total
U.S. government and agency securities | i 46,493 | i 49,356 | i 2.2 | % | ||||
Corporate
and other debt: | ||||||||
Non-agency CMBS: | ||||||||
Due within 1 year | i 100 | i 99 | i 4.8 | % | ||||
After
1 year through 5 years | i 107 | i 104 | i 3.7 | % | ||||
After
5 years through 10 years | i 549 | i 536 | i 3.9 | % | ||||
After
10 years | i 37 | i 38 | i 4.4 | % | ||||
Total
corporate and other debt | i 793 | i 777 | i 4.0 | % | ||||
Total
HTM securities | i 47,286 | i 50,133 | i 2.3 | % | ||||
Total
investment securities | $ | i 114,154 | $ | i 119,004 | i 2.1 | % |
1. | Amounts
are net of any allowance for credit losses. |
Three Months Ended March 31, | ||||||
$
in millions | 2020 | 2019 | ||||
Gross realized gains | $ | i 49 | $ | i 19 | ||
Gross
realized (losses) | ( i 8 | ) | ( i 9 | ) | ||
Total1 | $ | i 41 | $ | i 10 |
1. | Realized
gains and losses are recognized in Other revenues in the income statements. |
61 | March 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | Gross Amounts | Amounts Offset | Net Amounts Presented | Amounts Not Offset1 | Net Amounts | ||||||||||
Assets | |||||||||||||||
Securities
purchased under agreements to resell | $ | i 249,124 | $ | ( i 144,324 | ) | $ | i 104,800 | $ | ( i 98,800 | ) | $ | i 6,000 | |||
Securities
borrowed | i 76,276 | ( i 3,976 | ) | i 72,300 | ( i 67,384 | ) | i 4,916 | ||||||||
Liabilities | |||||||||||||||
Securities
sold under agreements to repurchase | $ | i 189,937 | $ | ( i 144,121 | ) | $ | i 45,816 | $ | ( i 39,114 | ) | $ | i 6,702 | |||
Securities
loaned | i 15,810 | ( i 4,179 | ) | i 11,631 | ( i 11,241 | ) | i 390 | ||||||||
Net
amounts for which master netting agreements are not in place or may not be legally enforceable | |||||||||||||||
Securities purchased under agreements to resell | $ | i 5,403 | |||||||||||||
Securities
borrowed | i 1,010 | ||||||||||||||
Securities sold under agreements to repurchase | i 5,325 | ||||||||||||||
Securities
loaned | i 134 |
$ in millions | Gross Amounts | Amounts Offset | Net Amounts Presented | Amounts Not Offset1 | Net Amounts | ||||||||||
Assets | |||||||||||||||
Securities
purchased under agreements to resell | $ | i 247,545 | $ | ( i 159,321 | ) | $ | i 88,224 | $ | ( i 85,200 | ) | $ | i 3,024 | |||
Securities
borrowed | i 109,528 | ( i 2,979 | ) | i 106,549 | ( i 101,850 | ) | i 4,699 | ||||||||
Liabilities | |||||||||||||||
Securities
sold under agreements to repurchase | $ | i 213,519 | $ | ( i 159,319 | ) | $ | i 54,200 | $ | ( i 44,549 | ) | $ | i 9,651 | |||
Securities
loaned | i 11,487 | ( i 2,981 | ) | i 8,506 | ( i 8,324 | ) | i 182 | ||||||||
Net
amounts for which master netting agreements are not in place or may not be legally enforceable | |||||||||||||||
Securities purchased under agreements to resell | $ | i 2,255 | |||||||||||||
Securities
borrowed | i 1,181 | ||||||||||||||
Securities sold under agreements to repurchase | i 8,033 | ||||||||||||||
Securities
loaned | i 101 |
1. | Amounts
relate to master netting agreements that have been determined by the Firm to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance. |
$ in millions | Overnight and Open | Less than 30
Days | 30-90 Days | Over 90 Days | Total | ||||||||||
Securities sold under agreements to repurchase | $ | i 65,591 | $ | i 60,940 | $ | i 25,746 | $ | i 37,660 | $ | i 189,937 | |||||
Securities
loaned | i 6,824 | i 214 | i 2,034 | i 6,738 | i 15,810 | ||||||||||
Total
included in the offsetting disclosure | $ | i 72,415 | $ | i 61,154 | $ | i 27,780 | $ | i 44,398 | $ | i 205,747 | |||||
Trading
liabilities— Obligation to return securities received as collateral | i 15,270 | i — | i — | i — | i 15,270 | ||||||||||
Total | $ | i 87,685 | $ | i 61,154 | $ | i 27,780 | $ | i 44,398 | $ | i 221,017 |
$ in millions | Overnight and Open | Less than 30 Days | 30-90 Days | Over 90 Days | Total | ||||||||||
Securities sold under agreements to repurchase | $ | i 67,158 | $ | i 81,300 | $ | i 26,904 | $ | i 38,157 | $ | i 213,519 | |||||
Securities
loaned | i 2,378 | i 3,286 | i 516 | i 5,307 | i 11,487 | ||||||||||
Total
included in the offsetting disclosure | $ | i 69,536 | $ | i 84,586 | $ | i 27,420 | $ | i 43,464 | $ | i 225,006 | |||||
Trading
liabilities— Obligation to return securities received as collateral | i 23,877 | i — | i — | i — | i 23,877 | ||||||||||
Total | $ | i 93,413 | $ | i 84,586 | $ | i 27,420 | $ | i 43,464 | $ | i 248,883 |
$ in millions | ||||||
Securities sold under agreements to repurchase | ||||||
U.S. Treasury and agency securities | $ | i 77,557 | $ | i 68,895 | ||
State
and municipal securities | i 689 | i 905 | ||||
Other
sovereign government obligations | i 88,871 | i 109,414 | ||||
ABS | i 2,278 | i 2,218 | ||||
Corporate
and other debt | i 7,369 | i 6,066 | ||||
Corporate
equities | i 12,710 | i 25,563 | ||||
Other | i 463 | i 458 | ||||
Total | $ | i 189,937 | $ | i 213,519 | ||
Securities
loaned | ||||||
Other sovereign government obligations | $ | i 4,876 | $ | i 3,026 | ||
Corporate
equities | i 10,277 | i 8,422 | ||||
Other | i 657 | i 39 | ||||
Total | $ | i 15,810 | $ | i 11,487 | ||
Total
included in the offsetting disclosure | $ | i 205,747 | $ | i 225,006 | ||
Trading
liabilities—Obligation to return securities received as collateral | ||||||
Corporate equities | $ | i 15,263 | $ | i 23,873 | ||
Other | i 7 | i 4 | ||||
Total | $ | i 15,270 | $ | i 23,877 | ||
Total | $ | i 221,017 | $ | i 248,883 |
March
2020 Form 10-Q | 62 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | ||||||
Trading assets | $ | i 40,345 | $ | i 41,201 | ||
Loans
(before allowance for credit losses) | i 1,158 | i 750 | ||||
Total
| $ | i 41,503 | $ | i 41,951 |
$ in millions | ||||||
Collateral received with right to sell or repledge | $ | i 604,450 | $ | i 679,280 | ||
Collateral
that was sold or repledged1 | i 483,708 | i 539,412 |
1. | Does
not include securities used to meet federal regulations for the Firm’s U.S. broker-dealers. |
$ in millions | ||||
Segregated securities1 | i 35,491 | i 25,061 |
1. | Securities
segregated under federal regulations for the Firm’s U.S. broker-dealers are sourced from Securities purchased under agreements to resell and Trading assets in the balance sheets. |
$ in millions | ||||||
Customer receivables representing margin loans | $ | i 26,181 | $ | i 31,916 |
$ in millions | Loans Held for Investment | Loans Held for Sale | Total Loans | ||||||
Corporate1 | $ | i 61,474 | $ | i 15,525 | $ | i 76,999 | |||
Consumer2 | i 31,948 | i — | i 31,948 | ||||||
Residential
real estate | i 31,100 | i 14 | i 31,114 | ||||||
Commercial
real estate | i 7,430 | i 1,823 | i 9,253 | ||||||
Total
loans, before allowance | i 131,952 | i 17,362 | i 149,314 | ||||||
Allowance
for credit losses | ( i 617 | ) | i — | ( i 617 | ) | ||||
Total
loans, net | $ | i 131,335 | $ | i 17,362 | $ | i 148,697 | |||
Fixed
rate loans, net | $ | i 25,155 | |||||||
Floating or adjustable rate loans, net | i 123,542 | ||||||||
Loans
to non-U.S. borrowers, net | i 24,633 |
63 | March
2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | Loans Held for Investment | Loans Held for Sale | Total Loans | ||||||
Corporate1 | $ | i 48,756 | $ | i 10,515 | $ | i 59,271 | |||
Consumer2 | i 31,610 | i — | i 31,610 | ||||||
Residential
real estate | i 30,184 | i 13 | i 30,197 | ||||||
Commercial
real estate | i 7,859 | i 2,049 | i 9,908 | ||||||
Total
loans, before allowance | i 118,409 | i 12,577 | i 130,986 | ||||||
Allowance
for credit losses | ( i 349 | ) | i — | ( i 349 | ) | ||||
Total
loans, net | $ | i 118,060 | $ | i 12,577 | $ | i 130,637 | |||
Fixed
rate loans, net | $ | i 22,716 | |||||||
Floating or adjustable rate loans, net | i 107,921 | ||||||||
Loans
to non-U.S. borrowers, net | i 21,617 |
1. | Institutional Securities business segment Corporate
loans include relationship and event-driven loans, secured lending facilities and securities-based lending and other loans. Wealth Management business segment Corporate loans include securities-based and other loans, which are classified as Corporate based on the nature of the borrowing entity or the intended use of the loan proceeds. |
2. | Wealth Management business segment Consumer loans include securities-based lending and other loans. |
Corporate | |||||||||||||||
$ in millions | AA-A | BBB | BB | Other NIG | Total | ||||||||||
Revolving Loans | $ | i 3,418 | $ | i 16,474 | $ | i 19,772 | $ | i 8,193 | $ | i 47,857 | |||||
2020
YTD | i 122 | i 671 | i 456 | i 23 | i 1,272 | ||||||||||
2019 | i 631 | i 1,234 | i 1,940 | i 444 | i 4,249 | ||||||||||
2018 | i 37 | i 2,083 | i 1,096 | i 493 | i 3,709 | ||||||||||
2017 | i 358 | i 639 | i 500 | i 82 | i 1,579 | ||||||||||
2016 | i 74 | i 547 | i 505 | i 60 | i 1,186 | ||||||||||
Prior | i 641 | i 311 | i 595 | i 75 | i 1,622 | ||||||||||
Total | $ | i 5,281 | $ | i 21,959 | $ | i 24,864 | $ | i 9,370 | $ | i 61,474 |
$ in millions | Consumer1 | ||
Revolving Loans | $ | i 31,362 | |
2020
YTD | i 62 | ||
2019 | i 382 | ||
2018 | i — | ||
2017 | i 16 | ||
2016 | i 57 | ||
Prior | i 69 | ||
Total | $ | i 31,948 |
1. | Consumer
loans primarily comprise securities-based loans, which are subject to collateral maintenance provisions, and at March 31, 2020, these loans are predominantly over-collateralized. For more information on the ACL methodology related to Consumer loans, see Note 2. |
Residential Real Estate | ||||||||||||||||||||
by FICO Scores | by LTV Ratio | Total | ||||||||||||||||||
$ in millions | ≥ 740 | 680-739 | ≤
679 | ≤ 80% | > 80% | |||||||||||||||
Revolving Loans | $ | i 103 | $ | i 40 | $ | i 6 | $ | i 149 | $ | i — | $ | i 149 | ||||||||
2020
YTD | i 1,865 | i 369 | i 35 | i 2,143 | i 126 | i 2,269 | ||||||||||||||
2019 | i 6,239 | i 1,397 | i 179 | i 7,290 | i 525 | i 7,815 | ||||||||||||||
2018 | i 2,699 | i 770 | i 90 | i 3,277 | i 282 | i 3,559 | ||||||||||||||
2017 | i 3,248 | i 817 | i 116 | i 3,882 | i 299 | i 4,181 | ||||||||||||||
2016 | i 3,924 | i 1,074 | i 152 | i 4,804 | i 346 | i 5,150 | ||||||||||||||
Prior | i 5,659 | i 1,963 | i 355 | i 7,101 | i 876 | i 7,977 | ||||||||||||||
Total | $ | i 23,737 | $ | i 6,430 | $ | i 933 | $ | i 28,646 | $ | i 2,454 | $ | i 31,100 |
Commercial Real Estate | |||||||||||||||
$ in millions | AA-A | BBB | BB | Other NIG | Total | ||||||||||
Revolving Loans | $ | i 5 | $ | i — | $ | i — | $ | i — | $ | i 5 | |||||
2020
YTD | i — | i — | i 167 | i 23 | i 190 | ||||||||||
2019 | i — | i 539 | i 2,056 | i 360 | i 2,955 | ||||||||||
2018 | i 10 | i 723 | i 764 | i 421 | i 1,918 | ||||||||||
2017 | i — | i 217 | i 577 | i 344 | i 1,138 | ||||||||||
2016 | i 134 | i 100 | i 352 | i 172 | i 758 | ||||||||||
Prior | i 10 | i — | i 285 | i 171 | i 466 | ||||||||||
Total | $ | i 159 | $ | i 1,579 | $ | i 4,201 | $ | i 1,491 | $ | i 7,430 |
$ in millions | Corporate | Consumer | Residential
Real Estate | Commercial Real Estate | ||||||||
Current | $ | i 61,466 | $ | i 31,948 | $ | i 30,883 | $ | i 7,430 | ||||
Past
due1 | i 8 | i — | i 217 | i — | ||||||||
Total | $ | i 61,474 | $ | i 31,948 | $ | i 31,100 | $ | i 7,430 |
1. | The
majority of the amounts are less than 60 days past due as of March 31, 2020. |
$ in millions | Corporate | Consumer | Residential Real Estate | Commercial Real Estate | Total | ||||||||||
Pass | $ | i 47,681 | $ | i 31,605 | $ | i 30,060 | $ | i 7,664 | $ | i 117,010 | |||||
Special
mention | i 464 | i — | i 28 | i 3 | i 495 | ||||||||||
Substandard | i 605 | i 5 | i 96 | i 192 | i 898 | ||||||||||
Doubtful | i 6 | i — | i — | i — | i 6 | ||||||||||
Total | $ | i 48,756 | $ | i 31,610 | $ | i 30,184 | $ | i 7,859 | $ | i 118,409 |
1. |
March
2020 Form 10-Q | 64 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | Corporate | Consumer | Residential Real Estate | Commercial Real Estate | Total | ||||||||||
Loans | |||||||||||||||
With allowance | $ | i 268 | $ | i — | $ | i — | $ | i 85 | $ | i 353 | |||||
Without
allowance1 | i 32 | i 5 | i 87 | i — | i 124 | ||||||||||
Total
impaired loans | $ | i 300 | $ | i 5 | $ | i 87 | $ | i 85 | $ | i 477 | |||||
UPB | i 309 | i 5 | i 90 | i 85 | i 489 | ||||||||||
Lending
commitments | |||||||||||||||
With allowance | $ | i 4 | $ | i — | $ | i — | $ | i 14 | $ | i 18 | |||||
Without
allowance1 | i 32 | i — | i — | i — | i 32 | ||||||||||
Total
impaired lending commitments | $ | i 36 | $ | i — | $ | i — | $ | i 14 | $ | i 50 |
1. | No
allowance was recorded for these loans and lending commitments as the present value of the expected future cash flows or value of the collateral equaled or exceeded the carrying value. |
$ in millions | Americas | EMEA | Asia | Total | ||||||||
Impaired
loans | $ | i 392 | $ | i 85 | $ | i — | $ | i 477 | ||||
Total
Allowance for credit losses | i 270 | i 76 | i 3 | i 349 |
$ in millions | ||||||
Loans, before allowance | $ | i 132 | $ | i 92 | ||
Lending
commitments | i 33 | i 32 | ||||
Allowance
for credit losses on Loans and Lending commitments | i 26 | i 16 |
$ in millions | Corporate | Consumer | Residential Real Estate | Commercial Real
Estate | Total | ||||||||||
$ | i 241 | $ | i 8 | $ | i 25 | $ | i 75 | $ | i 349 | ||||||
Effect
of CECL adoption | ( i 31 | ) | ( i 6 | ) | i 21 | i 25 | i 9 | ||||||||
Gross
charge-offs | ( i 32 | ) | i — | i — | i — | ( i 32 | ) | ||||||||
Provision
(release) | i 215 | i 1 | i 1 | i 75 | i 292 | ||||||||||
Other | i — | i — | i — | ( i 1 | ) | ( i 1 | ) | ||||||||
$ | i 393 | $ | i 3 | $ | i 47 | $ | i 174 | $ | i 617 |
$
in millions | Corporate | Consumer | Residential Real Estate | Commercial Real Estate | Total | ||||||||||
$ | i 144 | $ | i 7 | $ | i 20 | $ | i 67 | $ | i 238 | ||||||
Provision
(release) | i 26 | ( i 1 | ) | i 2 | i — | i 27 | |||||||||
Other | ( i 6 | ) | i — | i — | i — | ( i 6 | ) | ||||||||
$ | i 164 | $ | i 6 | $ | i 22 | $ | i 67 | $ | i 259 | ||||||
Inherent | $ | i 150 | $ | i 6 | $ | i 22 | $ | i 67 | $ | i 245 | |||||
Specific | i 14 | i — | i — | i — | i 14 |
$ in millions | Corporate | Consumer | Residential Real Estate | Commercial Real
Estate | Total | ||||||||||
$ | i 232 | $ | i 2 | $ | i — | $ | i 7 | $ | i 241 | ||||||
Effect
of CECL adoption | ( i 53 | ) | ( i 1 | ) | i 3 | i 1 | ( i 50 | ) | |||||||
Provision
(release) | i 110 | i — | i — | i 5 | i 115 | ||||||||||
Other | ( i 1 | ) | i — | i — | ( i 1 | ) | ( i 2 | ) | |||||||
$ | i 288 | $ | i 1 | $ | i 3 | $ | i 12 | $ | i 304 |
$
in millions | Corporate | Consumer | Residential Real Estate | Commercial Real Estate | Total | ||||||||||
$ | i 198 | $ | i 2 | $ | i — | $ | i 3 | $ | i 203 | ||||||
Provision
(release) | i 8 | i — | i — | i 1 | i 9 | ||||||||||
Other | i — | ( i 1 | ) | i — | i — | ( i 1 | ) | ||||||||
$ | i 206 | $ | i 1 | $ | i — | $ | i 4 | $ | i 211 | ||||||
Inherent | $ | i 202 | $ | i 1 | $ | i — | $ | i 4 | $ | i 207 | |||||
Specific | i 4 | i — | i — | i — | i 4 |
65 | March 2020 Form 10-Q |
Notes
to Consolidated Financial Statements (Unaudited) |
$ in millions | ||||||
Currently employed by the Firm1 | $ | i 2,867 | N/A | |||
No
longer employed by the Firm2 | i 150 | N/A | ||||
Balance | $ | i 3,017 | $ | i 2,980 | ||
Allowance
for credit losses3 | ( i 180 | ) | ( i 61 | ) | ||
Balance,
net | $ | i 2,837 | $ | i 2,919 | ||
Remaining
repayment term, weighted average in years | i 5.0 | i 4.8 |
1. | These
loans are predominantly current. |
2. | These loans are predominantly past due for a period of 90 days or more. |
3. | The change in Allowance for credit losses includes a $ i 124
million increase due to the adoption of CECL in the first quarter of 2020. |
March 2020 Form 10-Q | 66 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | ||||||
Investments | $ | i 2,413 | $ | i 2,363 |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Income (loss) | $ | i 29 | $ | ( i 10 | ) |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Income (loss) from investment in MUMSS | $ | i 32 | $ | i 3 |
$ in millions | ||||||
Savings
and demand deposits | $ | i 188,504 | $ | i 149,465 | ||
Time
deposits | i 46,735 | i 40,891 | ||||
Total | $ | i 235,239 | $ | i 190,356 | ||
Deposits
subject to FDIC insurance | $ | i 176,034 | $ | i 149,966 | ||
Time
deposits that equal or exceed the FDIC insurance limit | $ | i 12 | $ | i 12 |
$ in millions | |||
2020 | $ | i 16,656 | |
2021 | i 16,836 | ||
2022 | i 4,883 | ||
2023 | i 4,070 | ||
2024 | i 2,788 | ||
Thereafter | i 1,502 | ||
Total | $ | i 46,735 |
$
in millions | ||||||
Original maturities of one year or less | $ | i 2,211 | $ | i 2,567 | ||
Original
maturities greater than one year | ||||||
Senior | $ | i 181,477 | $ | i 179,519 | ||
Subordinated | i 11,168 | i 10,541 | ||||
Total | $ | i 192,645 | $ | i 190,060 | ||
Total
borrowings | $ | i 194,856 | $ | i 192,627 | ||
Weighted
average stated maturity, in years1 | 7.6 | i 6.9 |
1. | Only
includes borrowings with original maturities greater than one year. |
67 | March 2020 Form 10-Q |
Notes
to Consolidated Financial Statements (Unaudited) |
$
in millions | ||||||
Original maturities: | ||||||
One year or less | $ | i 7,304 | $ | i 7,103 | ||
Greater
than one year | i 4,682 | i 6,480 | ||||
Transfers
of assets accounted for as secured financings | i 1,072 | i 1,115 | ||||
Total | $ | i 13,058 | $ | i 14,698 |
Years
to Maturity at March 31, 2020 | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Lending: | |||||||||||||||
Corporate | $ | i 23,055 | $ | i 28,998 | $ | i 41,269 | $ | i 3,174 | $ | i 96,496 | |||||
Consumer | i 8,112 | i 23 | i 3 | i — | i 8,138 | ||||||||||
Residential
and commercial real estate | i 163 | i 1,179 | i 49 | i 252 | i 1,643 | ||||||||||
Forward-starting
secured financing receivables | i 80,666 | i 219 | i — | i — | i 80,885 | ||||||||||
Central
counterparty1 | i 300 | i — | i — | i 12,344 | i 12,644 | ||||||||||
Underwriting | i 206 | i — | i — | i — | i 206 | ||||||||||
Investment
activities | i 992 | i 226 | i 58 | i 265 | i 1,541 | ||||||||||
Letters
of credit and other financial guarantees | i 174 | i 2 | i — | i 2 | i 178 | ||||||||||
Total | $ | i 113,668 | $ | i 30,647 | $ | i 41,379 | $ | i 16,037 | $ | i 201,731 | |||||
Corporate
lending commitments participated to third parties | $ | i 7,226 | |||||||||||||
Forward-starting secured financing receivables settled within three business days | $ | i 71,096 |
1. | Beginning
in the first quarter of 2020, commitments to central counterparties are presented separately; these commitments were previously included in Corporate Lending commitments and Forward-starting secured financing receivables depending on the type of agreement. These commitments relate to the Firm's membership in certain clearinghouses and are contingent upon the default of a clearinghouse member or other stress events. |
Years to Maturity at March 31, 2020 | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Credit
derivatives | $ | i 33,900 | $ | i 38,934 | $ | i 136,167 | $ | i 68,581 | $ | i 277,582 | |||||
Other
credit contracts | i — | i — | i — | i 107 | i 107 | ||||||||||
Non-credit
derivatives | i 1,571,566 | i 1,474,498 | i 902,550 | i 769,204 | i 4,717,818 | ||||||||||
Standby
letters of credit and other financial guarantees issued1 | i 1,200 | i 1,006 | i 1,301 | i 3,840 | i 7,347 | ||||||||||
Market
value guarantees | i 102 | i 35 | i — | i — | i 137 | ||||||||||
Liquidity
facilities | i 4,047 | i — | i — | i — | i 4,047 | ||||||||||
Whole
loan sales guarantees | i — | i — | i 2 | i 23,193 | i 23,195 | ||||||||||
Securitization
representations and warranties | i — | i — | i — | i 68,881 | i 68,881 | ||||||||||
General
partner guarantees | i 59 | i 137 | i 12 | i 92 | i 300 | ||||||||||
Client
clearing guarantees | i 17 | i — | i — | i — | i 17 |
$
in millions | Carrying Amount Asset (Liability) | ||
Credit derivatives2 | $ | ( i 9,855 | ) |
Other
credit contracts | ( i 4 | ) | |
Non-credit derivatives2 | ( i 146,854 | ) | |
Standby
letters of credit and other financial guarantees issued1 | i 111 | ||
Market value guarantees | i — | ||
Liquidity
facilities | i 6 | ||
Whole loan sales guarantees | i — | ||
Securitization
representations and warranties3 | ( i 42 | ) | |
General partner guarantees | ( i 62 | ) | |
Client
clearing guarantees | i — |
1. | These amounts include certain issued standby
letters of credit participated to third parties, totaling $ i 0.7 billion of notional and collateral/recourse, due to the nature of the Firm’s obligations under these arrangements. As of March 31, 2020, the carrying amount of standby letters of credit and other financial guarantees issued includes an allowance for credit losses of $ i 57
million. |
2. |
3. | Primarily
related to residential mortgage securitizations. |
March
2020 Form 10-Q | 68 |
Notes to Consolidated Financial Statements (Unaudited) |
69 | March 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
March 2020 Form 10-Q | 70 |
Notes
to Consolidated Financial Statements (Unaudited) |
$ in millions | VIE Assets | VIE Liabilities | VIE Assets | VIE Liabilities | ||||||||
OSF | $ | i 728 | $ | i 415 | $ | i 696 | $ | i 391 | ||||
MABS1 | i 368 | i 108 | i 265 | i 4 | ||||||||
Other2 | i 934 | i 44 | i 987 | i 66 | ||||||||
Total | $ | i 2,030 | $ | i 567 | $ | i 1,948 | $ | i 461 |
1. | Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets and may be in loan or security form. The value of assets is determined based on the fair value of the liabilities and the interests owned by the Firm in such VIEs as the fair values for the liabilities and interests owned are more observable. |
2. | Other primarily includes operating entities, investment funds
and structured transactions. |
$ in millions | ||||||
Assets | ||||||
Cash and cash equivalents | $ | i 328 | $ | i 488 | ||
Trading
assets at fair value | i 1,234 | i 943 | ||||
Customer
and other receivables | i 16 | i 18 | ||||
Intangible
assets | i 107 | i 111 | ||||
Other
assets | i 345 | i 388 | ||||
Total | $ | i 2,030 | $ | i 1,948 | ||
Liabilities | ||||||
Other
secured financings | $ | i 519 | $ | i 422 | ||
Other
liabilities and accrued expenses | i 48 | i 39 | ||||
Total | $ | i 567 | $ | i 461 | ||
Noncontrolling
interests | $ | i 245 | $ | i 192 |
71 | March
2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | MABS1 | CDO | MTOB | OSF | Other2 | ||||||||||
VIE
assets (UPB) | $ | i 124,211 | $ | i 1,881 | $ | i 6,585 | $ | i 2,263 | $ | i 51,280 | |||||
Maximum
exposure to loss3 | |||||||||||||||
Debt and equity interests | $ | i 15,173 | $ | i 254 | $ | i 277 | $ | i 1,086 | $ | i 10,468 | |||||
Derivative
and other contracts | i — | i — | i 4,047 | i — | i 3,659 | ||||||||||
Commitments,
guarantees and other | i 572 | i — | i — | i — | i 334 | ||||||||||
Total | $ | i 15,745 | $ | i 254 | $ | i 4,324 | $ | i 1,086 | $ | i 14,461 | |||||
Carrying
value of variable interests—Assets | |||||||||||||||
Debt and equity interests | $ | i 15,173 | $ | i 254 | $ | i 277 | $ | i 1,084 | $ | i 10,468 | |||||
Derivative
and other contracts | i — | i — | i 6 | i — | i 835 | ||||||||||
Total | $ | i 15,173 | $ | i 254 | $ | i 283 | $ | i 1,084 | $ | i 11,303 | |||||
Additional
VIE assets owned4 | $ | i 11,024 | |||||||||||||
Carrying
value of variable interests—Liabilities | |||||||||||||||
Derivative and other contracts | $ | i — | $ | i — | $ | i — | $ | i — | $ | i 272 |
$ in millions | MABS1 | CDO | MTOB | OSF | Other2 | ||||||||||
VIE assets (UPB) | $ | i 125,603 | $ | i 2,976 | $ | i 6,965 | $ | i 2,288 | $ | i 51,305 | |||||
Maximum
exposure to loss3 | |||||||||||||||
Debt and equity interests | $ | i 16,314 | $ | i 240 | $ | i — | $ | i 1,009 | $ | i 11,977 | |||||
Derivative
and other contracts | i — | i — | i 4,599 | i — | i 2,995 | ||||||||||
Commitments,
guarantees and other | i 631 | i — | i — | i — | i 266 | ||||||||||
Total | $ | i 16,945 | $ | i 240 | $ | i 4,599 | $ | i 1,009 | $ | i 15,238 | |||||
Carrying
value of variable interests–Assets | |||||||||||||||
Debt and equity interests | $ | i 16,314 | $ | i 240 | $ | i — | $ | i 1,008 | $ | i 11,977 | |||||
Derivative
and other contracts | i — | i — | i 6 | i — | i 388 | ||||||||||
Total | $ | i 16,314 | $ | i 240 | $ | i 6 | $ | i 1,008 | $ | i 12,365 | |||||
Additional
VIE assets owned4 | $ | i 11,453 | |||||||||||||
Carrying
value of variable interests—Liabilities | |||||||||||||||
Derivative and other contracts | $ | i — | $ | i — | $ | i — | $ | i — | $ | i 444 |
1. | Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets. and may be in loan or security form. |
2. | Other primarily includes exposures to commercial real estate property and investment funds. |
3. | Where
notional amounts are utilized in quantifying the maximum exposure related to derivatives, such amounts do not reflect changes in fair value recorded by the Firm. |
4. | Additional VIE assets owned represents the carrying value of total exposure to non-consolidated VIEs for which the maximum exposure to loss is less than specific thresholds, primarily interests issued by securitization SPEs. The Firm’s primary risk exposure is to the most subordinate class of beneficial interest and maximum exposure to loss generally equals the fair value of the assets owned. These assets are primarily included in Trading assets and Investment securities and are measured at fair value (see Note 3). The
Firm does not provide additional support in these transactions through contractual facilities, guarantees or similar derivatives. |
$ in millions | UPB | Debt and Equity Interests | UPB | Debt and Equity Interests | ||||||||
Residential
mortgages | $ | i 20,460 | $ | i 3,298 | $ | i 30,353 | $ | i 3,993 | ||||
Commercial
mortgages | i 52,672 | i 3,677 | i 53,892 | i 3,881 | ||||||||
U.S.
agency collateralized mortgage obligations | i 45,958 | i 6,257 | i 36,366 | i 6,365 | ||||||||
Other
consumer or commercial loans | i 5,121 | i 1,941 | i 4,992 | i 2,075 | ||||||||
Total | $ | i 124,211 | $ | i 15,173 | $ | i 125,603 | $ | i 16,314 |
$ in millions | RML | CML | U.S. Agency CMO | CLN and Other3 | ||||||||
SPE
assets (UPB)4 | $ | i 9,501 | $ | i 79,516 | $ | i 15,480 | $ | i 11,109 | ||||
Retained
interests | ||||||||||||
Investment grade | $ | i 26 | $ | i 780 | $ | i 763 | $ | i — | ||||
Non-investment
grade | i 13 | i 238 | i — | i 87 | ||||||||
Total | $ | i 39 | $ | i 1,018 | $ | i 763 | $ | i 87 | ||||
Interests
purchased in the secondary market | ||||||||||||
Investment grade | $ | i — | $ | i 65 | $ | i 78 | $ | i — | ||||
Non-investment
grade | i 29 | i 68 | i — | i — | ||||||||
Total | $ | i 29 | $ | i 133 | $ | i 78 | $ | i — | ||||
Derivative
assets | $ | i — | $ | i — | $ | i — | $ | i 830 | ||||
Derivative
liabilities | i — | i — | i — | i 186 |
March
2020 Form 10-Q | 72 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | RML | CML | U.S. Agency CMO | CLN and Other3 | ||||||||
SPE assets (UPB)4 | $ | i 9,850 | $ | i 86,203 | $ | i 19,132 | $ | i 8,410 | ||||
Retained
interests | ||||||||||||
Investment grade | $ | i 29 | $ | i 720 | $ | i 2,376 | $ | i 1 | ||||
Non-investment
grade | i 17 | i 254 | i — | i 92 | ||||||||
Total | $ | i 46 | $ | i 974 | $ | i 2,376 | $ | i 93 | ||||
Interests
purchased in the secondary market | ||||||||||||
Investment grade | $ | i 6 | $ | i 197 | $ | i 77 | $ | i — | ||||
Non-investment
grade | i 75 | i 51 | i — | i — | ||||||||
Total | $ | i 81 | $ | i 248 | $ | i 77 | $ | i — | ||||
Derivative
assets | $ | i — | $ | i — | $ | i — | $ | i 339 | ||||
Derivative
liabilities | i — | i — | i — | i 145 |
Fair
Value At March 31, 2020 | |||||||||
$ in millions | Level 2 | Level 3 | Total | ||||||
Retained interests | |||||||||
Investment grade | $ | i 790 | $ | i — | $ | i 790 | |||
Non-investment
grade | i 7 | i 83 | i 90 | ||||||
Total | $ | i 797 | $ | i 83 | $ | i 880 | |||
Interests
purchased in the secondary market | |||||||||
Investment grade | $ | i 141 | $ | i 2 | $ | i 143 | |||
Non-investment
grade | i 85 | i 12 | i 97 | ||||||
Total | $ | i 226 | $ | i 14 | $ | i 240 | |||
Derivative
assets | $ | i 820 | $ | i 10 | $ | i 830 | |||
Derivative
liabilities | i 185 | i 1 | i 186 |
Fair
Value at December 31, 2019 | |||||||||
$ in millions | Level 2 | Level 3 | Total | ||||||
Retained interests | |||||||||
Investment grade | $ | i 2,401 | $ | i 4 | $ | i 2,405 | |||
Non-investment
grade | i 6 | i 97 | i 103 | ||||||
Total | $ | i 2,407 | $ | i 101 | $ | i 2,508 | |||
Interests
purchased in the secondary market | |||||||||
Investment grade | $ | i 278 | $ | i 2 | $ | i 280 | |||
Non-investment
grade | i 68 | i 58 | i 126 | ||||||
Total | $ | i 346 | $ | i 60 | $ | i 406 | |||
Derivative
assets | $ | i 337 | $ | i 2 | $ | i 339 | |||
Derivative
liabilities | i 144 | i 1 | i 145 |
1. | The Transferred Assets with Continuing Involvement tables include transactions with SPEs in which the Firm, acting as principal, transferred financial assets with continuing involvement and received sales treatment. |
2. | As permitted by applicable guidance, certain transfers of assets where the Firm’s only continuing involvement is a derivative are only reported in the following
Assets Sold with Retained Exposure table. |
3. | Amounts include CLO transactions managed by unrelated third parties. |
4. | Amounts include assets transferred by unrelated transferors. |
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
New transactions1 | $ | i 8,471 | $ | i 4,733 | ||
Retained
interests | i 4,088 | i 2,887 | ||||
Sales
of corporate loans to CLO SPEs1, 2 | i 66 | i — |
1. | Net
gains on new transactions and sales of corporate loans to CLO entities at the time of the sale were not material for all periods presented. |
2. | Sponsored by non-affiliates. |
$ in millions | ||||||
Gross cash proceeds from sale of assets1 | $ | i 28,213 | $ | i 38,661 | ||
Fair
value | ||||||
Assets sold | $ | i 28,068 | $ | i 39,137 | ||
Derivative
assets recognized in the balance sheets | i 862 | i 647 | ||||
Derivative
liabilities recognized in the balance sheets | i 1,004 | i 152 |
1. | The
carrying value of assets derecognized at the time of sale approximates gross cash proceeds. |
73 | March
2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
• | A greater than i 2.5%
capital conservation buffer; |
• | The G-SIB capital surcharge, currently at i 3%; and |
• | Up
to a i 2.5% CCyB, currently set by U.S. banking agencies at zero. |
$ in millions | Required Ratio1 | Amount | Ratio | ||||
Risk-based
capital | |||||||
Common Equity Tier 1 capital | i 10.0 | % | $ | i 65,195 | i 15.2 | % | |
Tier
1 capital | i 11.5 | % | i 73,896 | i 17.3 | % | ||
Total
capital | i 13.5 | % | i 83,847 | i 19.6 | % | ||
Total
RWA | i 427,782 | ||||||
Leverage-based capital | |||||||
Tier
1 leverage | i 4.0 | % | $ | i 73,896 | i 8.1 | % | |
Adjusted
average assets2 | i 910,499 | ||||||
SLR | i 5.0 | % | i 73,896 | i 6.2 | % | ||
Supplementary
leverage exposure3 | i 1,185,734 |
$ in millions | Required Ratio1 | Amount | Ratio | ||||
Risk-based capital | |||||||
Common Equity Tier 1 capital | i 10.0 | % | $ | i 64,751 | i 16.4 | % | |
Tier
1 capital | i 11.5 | % | i 73,443 | i 18.6 | % | ||
Total
capital | i 13.5 | % | i 82,708 | i 21.0 | % | ||
Total
RWA | i 394,177 | ||||||
Leverage-based capital | |||||||
Tier
1 leverage | i 4.0 | % | $ | i 73,443 | i 8.3 | % | |
Adjusted
average assets2 | i 889,195 | ||||||
SLR | i 5.0 | % | i 73,443 | i 6.4 | % | ||
Supplementary
leverage exposure3 | i 1,155,177 |
1. | Required
ratios are inclusive of any buffers applicable as of the date presented. Failure to maintain the buffers would result in restrictions on the Firm’s ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. |
2. | Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations,
investments in the Firm's own capital instruments, certain defined tax assets and other capital deductions. |
3. | Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures. |
March 2020 Form 10-Q | 74 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | Well-Capitalized Requirement | Required Ratio1 | Amount | Ratio | |||||
Risk-based
capital | |||||||||
Common Equity Tier 1 capital | i 6.5 | % | i 7.0 | % | $ | i 16,839 | i 18.2 | % | |
Tier
1 capital | i 8.0 | % | i 8.5 | % | i 16,839 | i 18.2 | % | ||
Total
capital | i 10.0 | % | i 10.5 | % | i 17,349 | i 18.7 | % | ||
Leverage-based
capital | |||||||||
Tier 1 leverage | i 5.0 | % | i 4.0 | % | $ | i 16,839 | i 11.2 | % | |
SLR | i 6.0 | % | i 3.0 | % | i 16,839 | i 8.8 | % |
$ in millions | Well-Capitalized Requirement | Required Ratio1 | Amount | Ratio | |||||
Risk-based capital | |||||||||
Common
Equity Tier 1 capital | i 6.5 | % | i 7.0 | % | $ | i 15,919 | i 18.5 | % | |
Tier
1 capital | i 8.0 | % | i 8.5 | % | i 15,919 | i 18.5 | % | ||
Total
capital | i 10.0 | % | i 10.5 | % | i 16,282 | i 18.9 | % | ||
Leverage-based
capital | |||||||||
Tier 1 leverage | i 5.0 | % | i 4.0 | % | $ | i 15,919 | i 11.3 | % | |
SLR | i 6.0 | % | i 3.0 | % | i 15,919 | i 8.7 | % |
$ in millions | Well-Capitalized Requirement | Required Ratio1 | Amount | Ratio | |||||
Risk-based
capital | |||||||||
Common Equity Tier 1 capital | i 6.5 | % | i 7.0 | % | $ | i 8,487 | i 22.9 | % | |
Tier
1 capital | i 8.0 | % | i 8.5 | % | i 8,487 | i 22.9 | % | ||
Total
capital | i 10.0 | % | i 10.5 | % | i 8,556 | i 23.0 | % | ||
Leverage-based
capital | |||||||||
Tier 1 leverage | i 5.0 | % | i 4.0 | % | $ | i 8,487 | i 9.7 | % | |
SLR | i 6.0 | % | i 3.0 | % | i 8,487 | i 9.3 | % |
$ in millions | Well-Capitalized Requirement | Required Ratio1 | Amount | Ratio | |||||
Risk-based capital | |||||||||
Common
Equity Tier 1 capital | i 6.5 | % | i 7.0 | % | $ | i 7,962 | i 24.8 | % | |
Tier
1 capital | i 8.0 | % | i 8.5 | % | i 7,962 | i 24.8 | % | ||
Total
capital | i 10.0 | % | i 10.5 | % | i 8,016 | i 25.0 | % | ||
Leverage-based
capital | |||||||||
Tier 1 leverage | i 5.0 | % | i 4.0 | % | $ | i 7,962 | i 9.9 | % | |
SLR | i 6.0 | % | i 3.0 | % | i 7,962 | i 9.4 | % |
1. | Required
ratios are inclusive of any buffers applicable as of the date presented. Failure to maintain the buffers would result in restrictions on the U.S. Bank Subsidiaries' ability to make capital distributions, including the payment of dividends. |
$ in millions | ||||||
Net capital | $ | i 10,887 | $ | i 13,708 | ||
Excess
net capital | i 6,620 | i 10,686 |
$ in millions | ||||||
Net capital | $ | i 2,924 | $ | i 3,387 | ||
Excess
net capital | i 2,774 | i 3,238 |
75 | March 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Repurchases
of common stock under the Firm's Share Repurchase Program | $ | i 1,347 | $ | i 1,180 |
Three
Months Ended March 31, | ||||||
2020 | 2019 | |||||
Dividends declared per common share | $ | i 0.35 | $ | i 0.30 |
Three Months Ended March 31, | ||||
in millions | 2020 | 2019 | ||
Weighted average common shares outstanding, basic | i 1,555 | i 1,658 | ||
Effect
of dilutive Stock options, RSUs and PSUs | i 18 | i 19 | ||
Weighted
average common shares outstanding and common stock equivalents, diluted | i 1,573 | i 1,677 | ||
Weighted
average antidilutive common stock equivalents (excluded from the computation of diluted EPS) | i 12 | i 6 |
Shares Outstanding | Carrying Value | ||||||||||
$ in millions, except per share data | Liquidation Preference per Share | ||||||||||
Series | |||||||||||
A | i 44,000 | $ | i 25,000 | $ | i 1,100 | $ | i 1,100 | ||||
C1 | i 519,882 | i 1,000 | i 408 | i 408 | |||||||
E | i 34,500 | i 25,000 | i 862 | i 862 | |||||||
F | i 34,000 | i 25,000 | i 850 | i 850 | |||||||
H | i 52,000 | i 25,000 | i 1,300 | i 1,300 | |||||||
I | i 40,000 | i 25,000 | i 1,000 | i 1,000 | |||||||
J | i 60,000 | i 25,000 | i 1,500 | i 1,500 | |||||||
K | i 40,000 | i 25,000 | i 1,000 | i 1,000 | |||||||
L | i 20,000 | i 25,000 | i 500 | i 500 | |||||||
Total | $ | i 8,520 | $ | i 8,520 | |||||||
Shares
authorized | i 30,000,000 |
1. | Series
C is composed of the issuance of i 1,160,791 shares of Series C Preferred Stock to MUFG for an aggregate purchase price of $ i 911
million, less the redemption of i 640,909 shares of Series C Preferred Stock of $ i 503
million, which were converted to common shares of approximately $ i 705 million in 2009. |
$ in millions, except per share data | Three
Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | ||||||||||
Per Share1 | Total | Per Share1 | Total | |||||||||
Series | ||||||||||||
A | $ | i 253 | $ | i 11 | $ | i 250 | $ | i 11 | ||||
C | i 25 | i 13 | i 25 | i 13 | ||||||||
E | i 445 | i 15 | i 445 | i 15 | ||||||||
F | i 430 | i 14 | i 430 | i 15 | ||||||||
G2 | i — | i — | i 414 | i 8 | ||||||||
H3 | i 344 | i 18 | i — | i — | ||||||||
I | i 398 | i 16 | i 398 | i 16 | ||||||||
J4 | i — | i — | i — | i — | ||||||||
K | i 366 | i 15 | i 366 | i 15 | ||||||||
L | i 305 | i 6 | i — | i — | ||||||||
Total | $ | i 108 | $ | i 93 |
1. | Dividends
on all series are payable quarterly, unless otherwise noted. |
2. | Series G preferred stock was redeemed during the first quarter of 2020. For further information, see Note 16 to the 2019 Form 10-K. |
3. | Series H was payable semiannually until July 15, 2019, and is now payable quarterly. |
4. | Series
J is payable semiannually until July 15, 2020, and then quarterly thereafter. |
March 2020 Form 10-Q | 76 |
Notes
to Consolidated Financial Statements (Unaudited) |
$
in millions | CTA | AFS Securities | Pension, Postretirement and Other | DVA | Total | ||||||||||
$ | ( i 897 | ) | $ | i 207 | $ | ( i 644 | ) | $ | ( i 1,454 | ) | $ | ( i 2,788 | ) | ||
OCI
during the period | ( i 141 | ) | i 1,325 | i 25 | i 3,674 | i 4,883 | |||||||||
$ | ( i 1,038 | ) | $ | i 1,532 | $ | ( i 619 | ) | $ | i 2,220 | $ | i 2,095 | ||||
$ | ( i 889 | ) | $ | ( i 930 | ) | $ | ( i 578 | ) | $ | i 105 | $ | ( i 2,292 | ) | ||
OCI
during the period | ( i 12 | ) | i 429 | i 1 | ( i 599 | ) | ( i 181 | ) | |||||||
$ | ( i 901 | ) | $ | ( i 501 | ) | $ | ( i 577 | ) | $ | ( i 494 | ) | $ | ( i 2,473 | ) |
1. | Amounts are net of tax and noncontrolling interests. |
Three Months Ended March 31, 2020 | |||||||||||||||
$ in millions | Pre-tax Gain (Loss) | Income Tax Benefit (Provision) | After-tax Gain (Loss) | Non- controlling Interests | Net | ||||||||||
CTA | |||||||||||||||
OCI
activity | $ | ( i 20 | ) | $ | ( i 112 | ) | $ | ( i 132 | ) | $ | i 9 | $ | ( i 141 | ) | |
Reclassified
to earnings | i — | i — | i — | i — | i — | ||||||||||
Net
OCI | $ | ( i 20 | ) | $ | ( i 112 | ) | $ | ( i 132 | ) | $ | i 9 | $ | ( i 141 | ) | |
Change
in net unrealized gains (losses) on AFS securities | |||||||||||||||
OCI activity | $ | i 1,773 | $ | ( i 416 | ) | $ | i 1,357 | $ | i — | $ | i 1,357 | ||||
Reclassified
to earnings | ( i 41 | ) | i 9 | ( i 32 | ) | i — | ( i 32 | ) | |||||||
Net
OCI | $ | i 1,732 | $ | ( i 407 | ) | $ | i 1,325 | $ | i — | $ | i 1,325 | ||||
Pension,
postretirement and other | |||||||||||||||
OCI activity | $ | i 25 | $ | ( i 4 | ) | $ | i 21 | $ | i — | $ | i 21 | ||||
Reclassified
to earnings | i 5 | ( i 1 | ) | i 4 | i — | i 4 | |||||||||
Net
OCI | $ | i 30 | $ | ( i 5 | ) | $ | i 25 | $ | i — | $ | i 25 | ||||
Change
in net DVA | |||||||||||||||
OCI activity | $ | i 5,015 | $ | ( i 1,216 | ) | $ | i 3,799 | $ | i 129 | $ | i 3,670 | ||||
Reclassified
to earnings | i 5 | ( i 1 | ) | i 4 | i — | i 4 | |||||||||
Net
OCI | $ | i 5,020 | $ | ( i 1,217 | ) | $ | i 3,803 | $ | i 129 | $ | i 3,674 |
Three
Months Ended March 31, 2019 | |||||||||||||||
$ in millions | Pre-tax Gain (Loss) | Income Tax Benefit (Provision) | After-tax Gain (Loss) | Non- controlling Interests | Net | ||||||||||
CTA | |||||||||||||||
OCI activity | $ | ( i 4 | ) | $ | ( i 18 | ) | $ | ( i 22 | ) | $ | ( i 10 | ) | $ | ( i 12 | ) |
Reclassified
to earnings | i — | i — | i — | i — | i — | ||||||||||
Net
OCI | $ | ( i 4 | ) | $ | ( i 18 | ) | $ | ( i 22 | ) | $ | ( i 10 | ) | $ | ( i 12 | ) |
Change
in net unrealized gains (losses) on AFS securities | |||||||||||||||
OCI activity | $ | i 570 | $ | ( i 133 | ) | $ | i 437 | $ | i — | $ | i 437 | ||||
Reclassified
to earnings | ( i 10 | ) | i 2 | ( i 8 | ) | i — | ( i 8 | ) | |||||||
Net
OCI | $ | i 560 | $ | ( i 131 | ) | $ | i 429 | $ | i — | $ | i 429 | ||||
Pension,
postretirement and other | |||||||||||||||
OCI activity | $ | i — | $ | ( i 1 | ) | $ | ( i 1 | ) | $ | i — | $ | ( i 1 | ) | ||
Reclassified
to earnings | i 3 | ( i 1 | ) | i 2 | i — | i 2 | |||||||||
Net
OCI | $ | i 3 | $ | ( i 2 | ) | $ | i 1 | $ | i — | $ | i 1 | ||||
Change
in net DVA | |||||||||||||||
OCI activity | $ | ( i 824 | ) | $ | i 201 | $ | ( i 623 | ) | $ | ( i 21 | ) | $ | ( i 602 | ) | |
Reclassified
to earnings | i 4 | ( i 1 | ) | i 3 | i — | i 3 | |||||||||
Net
OCI | $ | ( i 820 | ) | $ | i 200 | $ | ( i 620 | ) | $ | ( i 21 | ) | $ | ( i 599 | ) |
Three Months Ended | |||
$ in millions | |||
Financial Instruments—Credit Losses | $ | ( i 100 | ) |
Three
Months Ended | |||
$ in millions | |||
Leases | $ | i 63 |
77 | March
2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Interest income | ||||||
Investment securities | $ | i 445 | $ | i 475 | ||
Loans | i 1,154 | i 1,195 | ||||
Securities
purchased under agreements to resell and Securities borrowed1 | i 398 | i 947 | ||||
Trading
assets, net of Trading liabilities | i 749 | i 713 | ||||
Customer
receivables and Other2 | i 757 | i 960 | ||||
Total
interest income | $ | i 3,503 | $ | i 4,290 | ||
Interest
expense | ||||||
Deposits | $ | i 406 | $ | i 462 | ||
Borrowings | i 997 | i 1,380 | ||||
Securities
sold under agreements to repurchase and Securities loaned3 | i 509 | i 600 | ||||
Customer
payables and Other4 | i 235 | i 834 | ||||
Total
interest expense | $ | i 2,147 | $ | i 3,276 | ||
Net
interest | $ | i 1,356 | $ | i 1,014 |
1. | Includes
fees paid on Securities borrowed. |
2. | Includes interest from Cash and cash equivalents. |
3. | Includes fees received on Securities loaned. |
4. | Includes
fees received from prime brokerage customers for stock loan transactions entered into to cover customers’ short positions. |
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Recurring1 | $ | ( i 99 | ) | $ | ( i 107 | ) |
Intermittent | ( i 31 | ) | ( i 101 | ) |
Three
Months Ended March 31, 2020 | |||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||
Investment banking | $ | i 1,144 | $ | i 158 | $ | i — | $ | ( i 31 | ) | $ | i 1,271 | ||||
Trading | i 3,416 | ( i 347 | ) | ( i 37 | ) | i 24 | i 3,056 | ||||||||
Investments | ( i 25 | ) | i — | i 63 | i — | i 38 | |||||||||
Commissions
and fees1 | i 874 | i 588 | i — | ( i 102 | ) | i 1,360 | |||||||||
Asset
management1 | i 113 | i 2,680 | i 665 | ( i 41 | ) | i 3,417 | |||||||||
Other | ( i 1,079 | ) | i 62 | i 7 | ( i 1 | ) | ( i 1,011 | ) | |||||||
Total
non-interest revenues | i 4,443 | i 3,141 | i 698 | ( i 151 | ) | i 8,131 | |||||||||
Interest
income | i 2,423 | i 1,193 | i 8 | ( i 121 | ) | i 3,503 | |||||||||
Interest
expense | i 1,961 | i 297 | i 14 | ( i 125 | ) | i 2,147 | |||||||||
Net
interest | i 462 | i 896 | ( i 6 | ) | i 4 | i 1,356 | |||||||||
Net
revenues | $ | i 4,905 | $ | i 4,037 | $ | i 692 | $ | ( i 147 | ) | $ | i 9,487 | ||||
Income
before provision for income taxes | $ | i 950 | $ | i 1,055 | $ | i 143 | $ | ( i 2 | ) | $ | i 2,146 | ||||
Provision
for income taxes | i 151 | i 191 | i 25 | ( i 1 | ) | i 366 | |||||||||
Net
income | i 799 | i 864 | i 118 | ( i 1 | ) | i 1,780 | |||||||||
Net
income applicable to noncontrolling interests | i 42 | i — | i 40 | i — | i 82 | ||||||||||
Net
income applicable to Morgan Stanley | $ | i 757 | $ | i 864 | $ | i 78 | $ | ( i 1 | ) | $ | i 1,698 |
March
2020 Form 10-Q | 78 |
Notes to Consolidated Financial Statements (Unaudited) |
Three
Months Ended March 31, 2019 | |||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||
Investment banking | $ | i 1,151 | $ | i 109 | $ | i — | $ | ( i 18 | ) | $ | i 1,242 | ||||
Trading | i 3,130 | i 302 | ( i 3 | ) | i 12 | i 3,441 | |||||||||
Investments | i 81 | i 1 | i 191 | i — | i 273 | ||||||||||
Commissions
and fees1 | i 621 | i 406 | i — | ( i 61 | ) | i 966 | |||||||||
Asset
management1 | i 107 | i 2,361 | i 617 | ( i 36 | ) | i 3,049 | |||||||||
Other | i 222 | i 80 | i 3 | ( i 4 | ) | i 301 | |||||||||
Total
non-interest revenues | i 5,312 | i 3,259 | i 808 | ( i 107 | ) | i 9,272 | |||||||||
Interest
income | i 3,056 | i 1,413 | i 4 | ( i 183 | ) | i 4,290 | |||||||||
Interest
expense | i 3,172 | i 283 | i 8 | ( i 187 | ) | i 3,276 | |||||||||
Net
interest | ( i 116 | ) | i 1,130 | ( i 4 | ) | i 4 | i 1,014 | ||||||||
Net
revenues | $ | i 5,196 | $ | i 4,389 | $ | i 804 | $ | ( i 103 | ) | $ | i 10,286 | ||||
Income
before provision for income taxes | $ | i 1,595 | $ | i 1,188 | $ | i 174 | $ | ( i 2 | ) | $ | i 2,955 | ||||
Provision
for income taxes | i 190 | i 264 | i 33 | i — | i 487 | ||||||||||
Net
income | i 1,405 | i 924 | i 141 | ( i 2 | ) | i 2,468 | |||||||||
Net
income applicable to noncontrolling interests | i 34 | i — | i 5 | i — | i 39 | ||||||||||
Net
income applicable to Morgan Stanley | $ | i 1,371 | $ | i 924 | $ | i 136 | $ | ( i 2 | ) | $ | i 2,429 |
1. | Substantially all revenues are from contracts with customers. |
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Institutional Securities Advisory | $ | i 362 | $ | i 406 | ||
Institutional
Securities Underwriting | i 782 | i 745 | ||||
Firm
Investment banking revenues from contracts with customers | i 89 | % | i 85 | % |
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Interest rate | $ | i 1,074 | $ | i 785 | ||
Foreign
exchange | i 338 | i 241 | ||||
Equity
security and index1 | i 1,072 | i 1,451 | ||||
Commodity
and other | i 266 | i 422 | ||||
Credit | i 306 | i 542 | ||||
Total | $ | i 3,056 | $ | i 3,441 |
1. | Dividend
income is included within equity security and index contracts. |
$ in millions | ||||||
Net cumulative unrealized performance-based fees at risk of reversing | $ | i 714 | $ | i 774 |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Fee waivers | $ | i 11 | $ | i 11 |
Three Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Americas | $ | i 6,646 | $ | i 7,321 | ||
EMEA | i 1,148 | i 1,702 | ||||
Asia | i 1,693 | i 1,263 | ||||
Total | $ | i 9,487 | $ | i 10,286 |
79 | March 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Three
Months Ended March 31, | ||||||
$ in millions | 2020 | 2019 | ||||
Non-interest revenues | $ | i 614 | $ | i 671 |
$ in millions | ||||||
Customer and other receivables | $ | i 2,199 | $ | i 2,916 |
$ in millions | ||||||
Institutional Securities | $ | i 707,489 | $ | i 691,201 | ||
Wealth
Management | i 233,824 | i 197,682 | ||||
Investment
Management | i 6,482 | i 6,546 | ||||
Total1 | $ | i 947,795 | $ | i 895,429 |
March 2020 Form 10-Q | 80 |
Three Months Ended March 31, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
$
in millions | Average Daily Balance | Interest | Annualized Average Rate | Average Daily Balance | Interest | Annualized Average Rate | ||||||||||
Interest earning
assets | ||||||||||||||||
Investment securities1 | $ | 110,277 | $ | 445 | 1.6 | % | $ | 94,906 | $ | 475 | 2.0 | % | ||||
Loans1 | 134,441 | 1,154 | 3.5 | 116,698 | 1,195 | 4.2 | ||||||||||
Securities
purchased under agreements to resell and Securities borrowed2: | ||||||||||||||||
U.S. | 121,106 | 378 | 1.3 | 141,806 | 934 | 2.7 | ||||||||||
Non-U.S. | 56,865 | 20 | 0.1 | 77,256 | 13 | 0.1 | ||||||||||
Trading
assets, net of Trading liabilities3: | ||||||||||||||||
U.S. | 78,771 | 626 | 3.2 | 74,152 | 631 | 3.5 | ||||||||||
Non-U.S. | 22,903 | 123 | 2.2 | 11,861 | 82 | 2.8 | ||||||||||
Customer
receivables and Other4: | ||||||||||||||||
U.S. | 68,772 | 555 | 3.2 | 63,649 | 697 | 4.4 | ||||||||||
Non-U.S. | 60,787 | 202 | 1.3 | 55,142 | 263 | 1.9 | ||||||||||
Total | $ | 653,922 | $ | 3,503 | 2.2 | % | $ | 635,470 | $ | 4,290 | 2.7 | % | ||||
Interest
bearing liabilities | ||||||||||||||||
Deposits1 | $ | 199,574 | $ | 406 | 0.8 | % | $ | 181,017 | $ | 462 | 1.0 | % | ||||
Borrowings1,
5 | 192,061 | 997 | 2.1 | 189,181 | 1,380 | 3.0 | ||||||||||
Securities
sold under agreements to repurchase and Securities loaned6: | ||||||||||||||||
U.S. | 31,461 | 328 | 4.2 | 26,615 | 450 | 6.9 | ||||||||||
Non-U.S. | 29,682 | 181 | 2.5 | 32,350 | 150 | 1.9 | ||||||||||
Customer
payables and Other7: | ||||||||||||||||
U.S. | 128,744 | 109 | 0.3 | 117,932 | 554 | 1.9 | ||||||||||
Non-U.S. | 63,914 | 126 | 0.8 | 65,498 | 280 | 1.7 | ||||||||||
Total | $ | 645,436 | $ | 2,147 | 1.3 | % | $ | 612,593 | $ | 3,276 | 2.2 | % | ||||
Net
interest income and net interest rate spread | $ | 1,356 | 0.9 | % | $ | 1,014 | 0.5 | % |
1. | Amounts
include primarily U.S. balances. |
2. | Includes fees paid on Securities borrowed. |
3. | Excludes non-interest earning assets and non-interest bearing liabilities, such as equity securities. |
4. | Includes Cash and cash equivalents.
|
5. | Includes borrowings carried at fair value, whose interest expense is considered part of fair value and therefore is recorded within Trading revenues. |
6. | Includes fees received on Securities loaned. The annualized average rate was calculated using (a) interest expense incurred on all securities sold under agreements to repurchase and securities loaned transactions, whether or not such transactions were reported in the balance sheets and (b) net average on-balance sheet balances, which exclude
certain securities-for-securities transactions. |
7. | Includes fees received from prime brokerage customers for stock loan transactions entered into to cover customers’ short positions. |
81 | March 2020 Form 10-Q |
Glossary of Common Terms and Acronyms |
2019 Form 10-K | Annual report on Form 10-K for year ended December 31, 2019 filed with the SEC |
ABS | Asset-backed
securities |
AFS | Available-for-sale |
AML | Anti-money laundering |
AOCI | Accumulated other comprehensive income (loss) |
AUM | Assets
under management or supervision |
Balance sheets | Consolidated balance sheets |
BEAT | Base erosion and anti-abuse tax |
BHC | Bank holding company |
bps | Basis
points; one basis point equals 1/100th of 1% |
Cash flow statements | Consolidated cash flow statements |
CCAR | Comprehensive Capital Analysis and Review |
CCyB | Countercyclical
capital buffer |
CDO | Collateralized debt obligation(s), including Collateralized loan obligation(s) |
CDS | Credit default swaps |
CECL | Current
Expected Credit Losses, as calculated under the Financial Instruments—Credit Losses accounting update |
CFTC | U.S. Commodity Futures Trading Commission |
CLN | Credit-linked note(s) |
CLO | Collateralized
loan obligation(s) |
CMBS | Commercial mortgage-backed securities |
CMO | Collateralized mortgage obligation(s) |
CVA | Credit valuation adjustment |
DVA | Debt
valuation adjustment |
EBITDA | Earnings before interest, taxes, depreciation and amortization |
ELN | Equity-linked note(s) |
EMEA | Europe,
Middle East and Africa |
EPS | Earnings per common share |
E.U. | European Union |
FDIC | Federal Deposit Insurance Corporation |
FFELP | Federal
Family Education Loan Program |
FFIEC | Federal Financial Institutions Examination Council |
FHC | Financial Holding Company |
FICC | Fixed Income
Clearing Corporation |
FICO | Fair Isaac Corporation |
Financial statements | Consolidated financial statements |
FVA | Funding valuation adjustment |
GILTI | Global
Intangible Low-Taxed Income |
G-SIB | Global systemically important banks |
HELOC | Home Equity Line of Credit |
HQLA | High-quality liquid assets |
HTM | Held-to-maturity |
I/E | Intersegment
eliminations |
IHC | Intermediate holding company |
IM | Investment Management |
Income statements | Consolidated income statements |
IRS | Internal
Revenue Service |
IS | Institutional Securities |
LCR | Liquidity coverage ratio, as adopted by the U.S. banking agencies |
LIBOR | London Interbank
Offered Rate |
M&A | Merger, acquisition and restructuring transaction |
MSBNA | Morgan Stanley Bank, N.A. |
MS&Co. | Morgan Stanley &
Co. LLC |
MSIP | Morgan Stanley & Co. International plc |
March 2020 Form 10-Q | 82 |
Glossary of Common Terms and Acronyms |
MSMS | Morgan Stanley MUFG Securities Co., Ltd. |
MSPBNA | Morgan
Stanley Private Bank, National Association |
MSSB | Morgan Stanley Smith Barney LLC |
MUFG | Mitsubishi UFJ Financial Group, Inc. |
MUMSS | Mitsubishi
UFJ Morgan Stanley Securities Co., Ltd. |
MWh | Megawatt hour |
N/A | Not Applicable |
NAV | Net asset value |
N/M | Not
Meaningful |
Non-GAAP | Non-generally accepted accounting principles |
NSFR | Net stable funding ratio, as proposed by the U.S. banking agencies |
OCC | Office
of the Comptroller of the Currency |
OCI | Other comprehensive income (loss) |
OIS | Overnight index swap |
OTC | Over-the-counter |
OTTI | Other-than-temporary
impairment |
PRA | Prudential Regulation Authority |
PSU | Performance-based stock unit |
RMBS | Residential mortgage-backed securities |
ROE | Return
on average common equity |
ROTCE | Return on average tangible common equity |
ROU | Right-of-use |
RSU | Restricted stock unit |
RWA | Risk-weighted
assets |
SEC | U.S. Securities and Exchange Commission |
SLR | Supplementary leverage ratio |
SOFR | Secured Overnight Financing Rate |
S&P | Standard &
Poor’s |
SPE | Special purpose entity |
SPOE | Single point of entry |
TDR | Troubled debt restructuring |
TLAC | Total
loss-absorbing capacity |
U.K. | United Kingdom |
UPB | Unpaid principal balance |
U.S. | United States of America |
U.S. GAAP | Accounting
principles generally accepted in the United States of America |
VaR | Value-at-Risk |
VIE | Variable interest entity |
WACC | Implied weighted average
cost of capital |
WM | Wealth Management |
83 | March 2020 Form 10-Q |
$ in millions, except per share data | Total Number of Shares Purchased1 | Average Price Paid Per Share | Total
Shares Purchased as Part of Share Repurchase Program2,3 | Dollar Value of Remaining Authorized Repurchase | ||||||
January | 11,966,543 | $ | 55.82 | 4,860,960 | $ | 2,733 | ||||
February | 7,624,176 | $ | 52.63 | 7,135,908 | $ | 2,354 | ||||
March | 17,552,911 | $ | 40.65 | 17,278,471 | $ | 1,653 | ||||
Total | 37,143,630 | $ | 48.00 | 29,275,339 |
1. | Includes
7,868,291 shares acquired by the Firm in satisfaction of the tax withholding obligations on stock-based awards granted under the Firm’s stock-based compensation plans during the three months ended March 31, 2020. |
2. | Share purchases under publicly announced programs are made pursuant to open-market purchases, Rule 10b5-1 plans or privately negotiated transactions (including with employee benefit plans) as market conditions warrant and at prices the Firm deems appropriate and may be suspended at any time. On April 18, 2018, the Firm entered into a sales plan with Mitsubishi UFJ Financial Group, Inc.
(“MUFG”). See Note 16 to the financial statements for further information on the sales plan. |
3. | The Firm’s Board of Directors has authorized the repurchase of the Firm’s outstanding stock under a share repurchase program (the “Share Repurchase Program”). The Share Repurchase Program is a program for capital management purposes that considers, among other things, business segment capital needs, as well as equity-based compensation and benefit plan requirements. The Share Repurchase Program has no set expiration or termination date. |
Exhibit No. | Description |
15 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101 | Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline eXtensible Business Reporting Language (“Inline XBRL”). |
104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). |
March
2020 Form 10-Q | 84 |
MORGAN STANLEY (Registrant) | |
By: | /s/ JONATHAN PRUZAN |
Jonathan
Pruzan Executive Vice President and Chief Financial Officer | |
By: | /s/ PAUL C. WIRTH |
Paul C. Wirth Deputy Chief Financial Officer |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 1/29/21 Mirror Merger Sub 2, LLC 8-K:7,9 1/29/21 11:4.2M Broadridge Fin’l So… Inc 1/29/21 Morgan Stanley 424B3 1:3.5M Broadridge Fin’l So… Inc 1/19/21 Morgan Stanley S-4/A 9:4.2M Broadridge Fin’l So… Inc 12/04/20 Morgan Stanley S-4 7:3.7M Broadridge Fin’l So… Inc |