Strategic Update
James P. Gorman, Chairman and Chief Executive Officer
January 19, 2016
Notice
2
The information provided herein may include certain non-GAAP financial measures. The
reconciliation of such measures to theparable GAAP figures are included in this
presentation or in thepany’s most recent Annual Report on Form 10-K, Definitive Proxy
Statement, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
applicable, which are ailable on morganstanley.
This presentation may contain forward-looking statements including the attainment of
certain financial and other targets and goals. You are cautioned not to place undue reliance
on forward-looking statements, which speak only as of the date on which they are made,
which reflect management’s current estimates, projections, expectations or beliefs and
which are subject to risks and uncertainties that may cause actual results to differ
materially. Thepany does not undertake to update the forward-looking statements to reflect
the impact of circumstances or events that may arise after the date of forward- looking
statements. For a discussion of risks and uncertainties that may affect the future results of
thepany, please see thepany’s most recent Annual Report on Form 10- K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as applicable, which are ailable
on morganstanley. This presentation is not an offer to buy or sell any security.
Please note this presentation is ailable at morganstanley.
Investment
Management
Investment
Management
Full Year 2009
Net Revenues, ex-DVA: $(1)(2)
Full Year 2015
Net Revenues, ex-DVA: $(1)(2)
Wealth
Management
Fixed Ie and
modities (ex-
DVA)
Investment
Banking
Equity Sales
and Trading
(ex-DVA)
Wealth
Management
Fixed Ie and
modities (ex-
DVA)
Investment
Banking
Equity Sales
and Trading
(ex-DVA)
Strategy: Multi-Year Transformation of Business Mix
(1) The End Notes are an integral part of this Strategic Update. See slide 19 for information related to the financial metrics presented on this page.
3
Continued Execution in Areas of Leadership in
Institutional Securities
2012
118
166
188
2013 2014 2015 2012 2013 2014 2015
Industry Announced M&A Volumes(1) ($Tn) Industry IPO Volumes(1) ($Bn)
Morgan Stanley – #2 in Global Announced M&A in 2015 Morgan Stanley – #1 in IPOs in 2015
252
2012 2013 2014 2015
Equity Sales & Trading Net Revenues, ex-DVA ($Bn)(2)(3)(4)
Global
Rank 2 2 1 1
As of
3Q YTD
(1) The End Notes are an integral part of this Strategic Update. See slide 19 for information related to the financial metrics presented on this page.
4
Execution: Mark to Market(1) on 2015 Strategic Plan
1 Achieved FY 2015 22% pre-tax margin(2)Ongoing Wealth Management upside through
additional margin improvement
2 Achieved 46% NII growth in . Banks versus 2014 in a flat rate environment(3)
Continued execution of . Bank strategy in Wealth
Management and Institutional Securities
Failed to meet objective:
Initiated major restructuring3 Progress in Fixed Ie andmodities ROE
4 Tailwind from lower funding costs Ongoing
5 Maintaining focus on expense management • Achieved 37% ISGpensation ratio
(4)
• Expense initiatives underway
Steadily increase capital return to shareholders Received non-objection to 2015 plan to increase buyback and dividend6
(1) The End Notes are an integral part of this Strategic Update. See slide 19 for information related to the financial metrics presented on this page.
5
Results: Performance and Return on Equity(1)
Target = 10% ROE
Gap = ~300bps
2015 Earnings: $
= 7% ROE
2015 Equity: $67Bn
(1) The End Notes are an integral part of this Strategic Update. See slide 19 for information related to the financial metrics presented on this page.
6
Path to 10% ROE
A Capital Sufficiency
B Expense Efficiency
C Wealth Management Revenue Growth
D Capital Return
7
De-Risked Balance Sheet, Increased Capital Return
and Grew Capital
$460Bn
$397Bn
2012 2015
Advanced Fully Phased-in Pro
Forma RWAs(1)(2)
$
$
2012 2015
$60Bn
$67Bn
2012 2015
Buyback &mon Dividend eragemon Equity, ex-DVA(3)
$781Bn $788Bn
2012 2015
Assets
+1%
(14%)
+740%
+12%
(1) The End Notes are an integral part of this Strategic Update. See slide 20 for information related to the financial metrics presented on this page.
8
Firm Has Sufficient Capital to Support Our BusinessA
Pro Formamon Equity Tier 1 Ratio
Advanced, Fully Phased-in
% 10% in %
Pro Forma Supplementary Leverage Ratio
Fully Phased-in
% 5% in %
CCAR Stress Test
Continued
Capital
Return
Unknown
impact of
G-SIB buffer
Continued
Capital
Return
(1) The End Notes are an integral part of this Strategic Update. See slide 20 for information related to the financial metrics presented on this page.
9
Key Capital Requirement(1)(2)(3) 4Q15 Requirement(4)(5)1Q14
Reducing Capital Allocated to Fixed Ie and
modities
3Q15 YE 2017 End State Reduction
$158Bn <$120Bn <$110BnPro Forma
Advanced RWA
~$50Bn
Pro Forma
SLR Exposure
$417Bn <$300Bn <$250Bn ~$170Bn
~$5Bn-$8Bn of excess capital over time
4Q15(2)(3)
$136Bn
$354Bn
(1) The End Notes are an integral part of this Strategic Update. See slide 20 for information related to the financial metrics presented on this page.
10
• We significantly exceeded our 2015 RWA year-end target of <$180Bn
• We he set new targets of <$110Bn RWA and <$250Bn SLR exposure
Fixed Ie andmodities (excluding Lending)(1)
Restructuring the Fixed Ie andmodities
Businesses
• Recently announced management changes will strengthen FIC team
• Headcount reduction of 25% on strategic lines; significantpensation run-rate sings
• Ongoing reduction of capital, balance sheet and expense base
• Exit / unwind areas not strategically important to the Firm
• Improve asset velocity
Action Plan Ongoing
Right-sizing for a critical and credible Fixed Ie andmodities business
11
Continuedpensation Expense Discipline
<39% 37% <37%
2015 Target 2015 2017 Target
in Flat Revenue
Institutional Securities, ex-DVA(1)
57% <56%
2015 2017 Target
41% <40%
2015 2017 Target
Wealth Management(1) Investment Management(1)
B
12
(1) The End Notes are an integral part of this Strategic Update. See slide 20 for information related to the financial metrics presented on this page.
Next Phase of Expense Reduction: Project Streamline
2016 - 2017
Ongoing area of focus and execution with benefit over the medium term
Ongoing Focus on
Structurally Simplifying
the Organization
Location
Strategy
Acceleration of ongoing efforts to further optimize location strategy in first
half of 2016; achievable given existing centers of excellence
Leverage Technology
to Rationalize
Infrastructure
High level of near term focus
Opportunity for meaningful cost sings while investing over medium term
through cross asset-class and cross-business technology conversion
Outsource to vendors and industry consortia
Consolidate
Processes
Multiple initiatives underway in business and support levels
Further
Outsourcing
Currently re-examining additional processes suitable for outsourcing
Execution to occur over medium term
13
Expense Efficiency
79% 77% 74%
Previous Expense
Efficiency Target
2015 2017 Target
on Flat Revenues
• The 2015 Firm expense efficiency ratio of 77% exceeded the target of 79%
• Through the FIC restructuring, a renewed Firmwide expense reduction plan, and continued
pensation discipline, we will drive our efficiency ratio to 74%, in a flat revenue environment
Firm Expense Efficiency Ratio, ex-DVA(1)
Planned $1Bn+
reduction in
expenses
(1) The End Notes are an integral part of this Strategic Update. See slide 21 for information related to the financial metrics presented on this page.
14
Continued High Quality Lending in Wealth Management
19
25
16
213
4
YE 2014 YE 2015 Pro-Forma
YE 2016
Pro-Forma
YE 2017
$38Bn
$49Bn
~$60Bn
~$70Bn
Wealth Management Lending in US Banks(1)
Percentage of Wealth Management
Clients With a Loan at Morgan Stanley(2)
%
% %
2013 2014 3Q15 YTD
9%
12%
15%
2013 2014 3Q15 YTD
Securities-Based Lending Tailored LendingResidential Lending
C
(1) The End Notes are an integral part of this Strategic Update. See slide 21 for information related to the financial metrics presented on this page.
15
Wealth Management Margin Potential Driven By Revenue
Growth and Expense Discipline
FY 2015 Pre-tax Margin 22%
2017 Pre-tax Margin Potential ~23%-25%
Net Interest Ie Growth
• Wealth Management ~$20Bn lending growth through YE 2017 will
drive NII upside in US Banks
• Deposits in Bank Deposit Program (BDP) of $149Bn as of YE 2015
~% – %
1
Expense Discipline
• Sings acrosspensation and nonpensation expenses
~% – %2
Retention Deals: Upside beyond 2017 as FA notes issued in 2009 roll off in January 2019,
resulting in a ~% PBT margin benefit
Business Growth
• Ongoing shift to fee-based managed accounts, digital strategy, ISG
connectivity, FA productivity
~% – %
3
16
Continued Return of Capital to Shareholders
$
$
$
$
$
$
$
2012 CCAR
Annual Dividend
per Share (cents)
4-Quarter
Share Repurchases
2013 CCAR(2) 2014 CCAR(3)
In 2012 and 2013, the Firm acquired the
remaining 14% and 35% interest of the
Wealth Management JV, respectively
2015 CCAR(4)
• Our goal is to continue to increase our dividends and buybacks over time, subject to regulatory
approval
Morgan Stanley’s Capital Returns(1)
D
(1) The End Notes are an integral part of this Strategic Update. See slide 21 for information related to the financial metrics presented on this page.
17
7%
9%-11%
2017
Path to a Return on Equity of 10% and Higher
Target Return on Equity Key Drivers
$1Bn+pensation and non- pensation
sings, assuming flat revenue
environment (not including any one-
time outsized litigation expense or
penalties)
Tangible
Expense Targets
Modest
Revenue Growth
(3%-5% annually)
Wealth Management margin
improvement to ~23%-25%
Retain strength in Investment Banking
and Equity Sales & Trading
Steady performance in Investment
Management business
Sufficient Capital
Right-sized FIC business
Increasing capital returns, subject to
regulatory approval
(1) The End Notes are an integral part of this Strategic Update. See slide 21 for information related to the financial metrics presented on this page.
18
2015 (1)
End Notes
19
These notes refer to the financial metrics presented on Slide 3.
1. 2009 and 2015 Net Revenues of $28,693 million and $34,537 million, respectively, excluding the negative impact of $5,510 million and the positive impact of $618
million from Debt Valuation Adjustment (‘DVA’), respectively. Net Revenue, ex-DVA is a non-GAAP financial measure thepany considers useful for investors to allow
betterparability of period to period operating performance.
2. 2009 and 2015 Net Revenues exclude $94 million and $314 million, respectively, of ‘Other’ net losses. ‘Other’ includes Other Sales & Trading, Investments, Other
Revenue and Intersegment eliminations.
These notes refer to the financial metrics presented on Slide 4.
1. Industry volumes and league table rankings are for the period of January 1, 2015 to December 31, 2015 from Thomson Reuters as of January 4, 2016.
2. Net Revenues, excluding the positive / (negative) impact from DVA for years ending December 31st: 2015 - $163 million; 2014 - $232 million; 2013 - $(78) million; and
2012 - $(1,130) million. Equity Sales and Trading Net Revenues, ex-DVA is a non-GAAP financial measure thepany considers useful for investors to allow better
parability of period to period operating performance.
3. 2012 and 2013 he been recast to include the International Wealth Management business, previously reported in the Wealth Management business segment.
4. Morgan Stanley Global Rank for 2015 as of September 30th, year-to-date. Peers included in Global Rank include Goldman Sachs, JP Morgan, Bank of America,
Citigroup, UBS, Deutsche Bank, Credit Suisse, and Barclays.
These notes refer to the financial metrics presented on Slide 5.
1. Represents progress during the calendar year against the goals established at the beginning of 2015.
2. Pre-tax margin represents ie (loss) from continuing operations before taxes divided by Net Revenues. Pre-tax margin is a non-GAAP financial measure that the pany
considers useful for investors to assess operating performance.
3. Net Interest Ie (‘NII’) growth in . Banks represents the year-over-year NII percentage increase for thepany’s . Bank operating subsidiaries, Morgan Stanley
Bank, . and Morgan Stanley Private Bank, National Association.
4. ISGpensation ratio of 37% for 2015 representspensation and benefits expense ($6,467 million) as a percentage of Net Revenues, ex-DVA ($17,335 million excluding
the positive impact of $618 million from DVA). The ISGpensation ratio, ex-DVA is a non-GAAP financial measure thepany considers useful for investors to assess
operating performance.
This note refers to the financial metrics presented on Slide 6.
1. The 7% Return on Equity (‘ROE’) represents ROE excluding DVA and the 2015 net discrete tax benefits (‘Discrete Tax Benefits’). The calculation of ROE uses net ie
applicable to Morgan Stanley less preferred dividends as a percentage of eragemon equity. To determine ROE, ex-DVA and Discrete Tax Benefits both the numerator
and denominator were adjusted to exclude these items. ROE and ROE, ex-DVA and Discrete Tax Benefits are non-GAAP financial measures that the Firm considers
useful for investors to assess operating performance. The reconciliation of ROE to ROE, ex-DVA and Discrete Tax Benefits is as follows:
FY 2015
ROE, ex-DVA and Tax Benefits %
DVA impact %
Discrete Tax Benefits impact %
ROE %
End Notes
20
These notes refer to the financial metrics presented on Slide 8.
1. The pro forma estimate of Advanced Fully Phased-in Risk weighted assets (‘RWA’) is based on thepany’s current understanding of . Basel III and other factors,
which may be subject to change as thepany receives additional clarification and implementation guidance from the Federal . This pro forma putation is a preliminary
estimate as of January 19, 2016 and could be subject to revision in Morgan Stanley’s Annual Report on Form 10-K for the year ended December 31, 2015.
2. The pro forma estimate of Advanced Fully Phased-in RWAs is a non-GAAP financial measure that thepany considers to be a useful measure for evaluating
pliance with new regulatory capital requirements that he not yet be effective.
3. eragemon Equity excluding DVA is adjusted for inception-to-date DVA. eragemon Equity, ex-DVA a non-GAAP financial measure that the Firm considers useful
for investors to allow betterparability of period-to-period operating performance.
These notes refer to the financial metrics presented on Slide 9.
1. Thepany estimates its pro forma fully phased-in Basel IIImon Equity Tier 1 ratio based on thepany’s current assessment of the Basel III final rules and other factors,
including thepany’s expectations and interpretations of the proposed requirements, which may be subject to change as thepany receives additional clarification and
guidance from the Federal . This pro formaputation is a preliminary estimate as of January 19, 2016 and could be subject to revision in Morgan Stanley’s Annual Report
on Form 10-K for the year ended December 31, 2015.
2. Pro-forma fully phased-in . Supplementary Leverage Ratio is based on preliminary analysis of the . final rules from September 2014 and estimated as of
December 31, 2015. These estimates are preliminary and are subject to change.
3. Pro-forma Basel IIImon Equity Tier 1mon ratio and pro-forma . Supplementary Leverage ratio, are non-GAAP financial measures that thepany consider to be useful
measures to thepany and investors to evaluatepliance with future regulatory capital requirements.
4. As of January 1, 2015, thepany is subject to a minimummon Equity Tier 1 capital ratio of %. On a fully phased-in basis by 2019, thepany will be subject to %mon
Equity Tier 1 capital conservation buffer and a G-SIB buffer. In July 2015, the Federal issued a final rule imposing risk-based capital surcharges on . bank
holdingpanies that are identified as G-SIBs, which include thepany. Under the Federal ’s calculation for thepany, the pany’s G-SIB surcharge would be 3%.
5. As of January 1, 2018, thepany will be subject to a supplementary leverage ratio requirement of at least %, which includes a Tier 1 supplementary leverage capital
buffer of at least % in addition to the % minimum supplementary leverage ratio.
These notes refer to the financial metrics presented on Slide 10.
1. All figures presented exclude RWAs and leverage exposure associated with lending.
2. Thepany estimates its pro forma fully phased-in Advanced risk-weighted assets and pro forma fully phased-in Supplementary leverage exposure based on the pany’s
current assessment of the Basel III final rules and other factors, including thepany’s expectations and interpretations of the proposed requirements, which may be
subject to change as thepany receives additional clarification and guidance from the Federal . These pro formaputations are preliminary estimates as of January 19,
2016 and could be subject to revision in Morgan Stanley’s Annual Report on Form 10-K for the year ended December 31, 2015.
3. Pro forma fully phased-in Advanced risk-weighted assets and pro forma fully phased-in Supplementary leverage exposure, are non-GAAP financial measures that the
pany consider to be useful measures to thepany and investors to evaluatepliance with future regulatory capital requirements
These notes refer to the financial metrics presented on Slide 12.
ratio is calculated aspensation and benefits expense as a percentage of Net Revenues (or for ISG, Net Revenues, ex-DVA). When the pensation ratio is
based on Net Revenues ex-DVA, such ratios are non-GAAP financial measures that thepany considers useful for investors to assess operating performance.
End Notes
21
These notes refer to the financial metrics presented on Slide 14.
1. Firm Expense Efficiency ratio represents total non-interest expenses as a percentage of Net Revenues excluding DVA. For 2015, the 77% Expense Efficiency ratio was
calculated as non-interest expenses of $26,660 million divided by Net Revenues of $34,537 which excludes the positive impact of $618 million from DVA. The
Expense Efficiency ratio, ex-DVA is a non-GAAP financial measure thepany considers useful for investors to assess operating performance.
These notes refer to the financial metrics presented on Slide 15.
1. . Banks represents thepany’s . Bank operating subsidiaries, Morgan Stanley Bank, . and Morgan Stanley Private Bank, National Association. Sum of ponents
may not match totals due to rounding.
2. “Percentage of Wealth Management Clients With a Loan at Morgan Stanley” is a Morgan Stanley internal designation referring to the percentage of clients or eligible
clients who he one of these lending products with Morgan Stanley. Data is as of third quarter-to-date as data for FY 2015 is not yet ailable.
These notes refer to the financial metrics presented on Slide 17.
1. In 2012, 2013, 2014, and 2015 the Firm received a “non-objection” from the Federal for each respective year’s CCAR submission.
2. In 2013, the Firm received a non-objection to repurchase up to $500MM ofmon stock beginning in 3Q13 through 1Q14 under rules permitting annual capital
distributions.
3. In 2014, the Firm received a non-objection to repurchase up to $1Bn ofmon stock beginning in 2Q14 through 1Q15 and to increase the Firm’s quarterlymon stock
dividend to $ per share from $ per share beginning with the dividend declared in 2Q14.
4. In 2015, the Firm received a non-objection to repurchase up to $ ofmon stock beginning in 2Q15 through 2Q16, $ annually, and to increase the Firm’s
quarterlymon stock dividend to $ per share from $ per share beginning with the dividend declared in 2Q15.
These notes refer to the financial metrics presented on Slide 18.
1. The 7% Return on Equity represents ROE excluding DVA and the 2015 net discrete tax benefits (‘Discrete Tax Benefits’). See note 1 pertaining to Slide 6.
Strategic Update
James P. Gorman, Chairman and Chief Executive Officer
January 19, 2016
