Morgan Stanley · NYSE:MS

Morgan Stanley — Debt Investor Presentation (November 2014)

34 slides from Morgan Stanley's debt investor presentation, Nov 12, 2014

1. Slide 1: Morgan Stanley 3Q14 Fixed Income Investor Update

   Morgan Stanley 3Q14 Fixed Income Investor Update November 12, 2014

2. Slide 2: Notice

   Notice The information provided herein may include certain non-GAAP financial measures. The reconciliation of such measures to the comparable GAAP figures are included in the Company’s Annual Report on Form 10-K, Definitive Proxy Statement, Quarterly Reports on Form 10-Q and the Company’s Current Re

3. Slide 3: Agenda

   Agenda  A Business Update  B Prudent Liability Management  C Liquidity Management  D Regulatory Topics  E Capital Management 3

4. Slide 4: Strategic Moves Enhance Business Outlook and Funding Profile

   Strategic Moves Enhance Business Outlook and A Funding Profile Revenue Split (1),(2) Funding Stack(2) <1%  Repositioned Business Mix & Balance 14% Sheet… 26%  Powerful set of businesses 15%  Enhanced earnings consistency 20% 32%  Durable funding; strong balance sheet 8%  …Result & Looking Forwa

5. Slide 5: Wealth Management Benefits From Scale, Revenue Consistency and Significant Asset Growth

   Wealth Management Benefits From Scale, Revenue Consistency and Significant Asset Growth Total Client Assets ($Tn)(1) Assets by Client Segment ($Bn) 4Q09 3Q14 %∆ $2.0 $10MM or more 410 744 +81% $1MM - $10MM 613 810 +32% $1.6 $100K - $1MM 408 409 0% <$100K 51 40 -22% Wealth Management Approximate Dail

6. Slide 6: Wealth Management Revenue Mix and Expense Discipline Drive Margins Higher

   Wealth Management Revenue Mix and Expense Discipline Drive Margins Higher Wealth Management Net Interest Income ($Bn)(1) Wealth Management Pre-tax Margin (%)(1),(2) 2.0 30% (4) 25% 22-25% 1.5 21% 21% 20% 19% 18% (3) 1.0 15% 14% 10% 10% 0.5 5% 0.0 0% 2010 2011 2012 2013 9M14 2011 2012 2013 1Q14 2Q14

7. Slide 7: Powerful Growth Opportunity As We Execute Bank Strategy

   Powerful Growth Opportunity As We Execute Bank Strategy In Wealth Management & Institutional Securities Lending growth enhancing stability of revenues and earnings Firmwide Deposits ($Bn)(1),(2) Funded U.S. Banks Loans ($Bn)(3) ~$75 ~$140 $124 ~$60 $57 $38 $64 $28 $28 2006 2010 3Q14 Pro-forma 2012 2

8. Slide 8: Investment Banking: Revenues Stable in Low Growth Environment

   Investment Banking: Revenues Stable in Low Growth Environment – Upside As Pipelines Strengthen Total Investment Banking Revenues ($Bn) Growth Opportunities $4.5 $4.4 Increased M&A activity in areas of strength: $4.3 $4.2 $3.9 $3.9 • Large transactions • Cross-border deals • Situations requiring comp

9. Slide 9: Equity Sales and Trading: Consistent, Leading Franchise

   Equity Sales and Trading: Consistent, Leading Franchise Total Equity Sales and Trading Revenues ex-DVA ($Bn)(1),(2),(3),(4) Morgan Stanley 10 Competitor 1 Competitor 2 Competitor 3 8 6 4 2 0 2010 2011 2012 2013 9M14 Morgan Stanley 3 2 2 2 1 Rank (1) Revenues ex-DVA for fiscal years ending December 3

10. Slide 10: Fixed Income and Commodities Sales and Trading: Executing Against Strategy

    Fixed Income and Commodities Sales and Trading: Executing Against Strategy Delivering for clients with an appropriately sized franchise • Global platform sized to meet client demands, with attractive returns in credit and securitized products • Upside from:  Synergies with Wealth Management, Invest

11. Slide 11: Have Successfully Reduced RWAs and Capital In Certain Areas of Fixed Income

    Have Successfully Reduced RWAs and Capital In Certain Areas of Fixed Income RWAs down by >50% since 3Q11 Fixed Income and Commodities U.S. Basel III Risk-Weighted Assets ($Bn)(1),(2) $390 $320 $280 $210 $191 <$180 3Q11 2Q12 Year End Year End 3Q14 Year End 2012 2013 2015 Target (1) For the periods pr

12. Slide 12: Investment Management: Steady Growth in AUM

    Investment Management: Steady Growth in AUM With Continued Upside From Fundraising and Asset Gathering Increased AUM driven by higher flows and markets Total Assets Under Management or Supervision ($Bn) $ 420 Merchant Banking and Real Estate $398 400 • Raising new funds 380 $373 • Wide range of prod

13. Slide 13: Disciplined Expense Management

    Disciplined Expense Management Compensation Metrics Will Continue to Improve • Target Future Compensation/Net Revenue ratios(1): – Institutional Securities ≤ 40% – Wealth Management ≤ 55% – Investment Management ≤ 40% Non-Compensation Ratios Declining Non-Compensation Efficiency Ratio(2) Target: Dec

14. Slide 14: Prudent Liability Management: Centralized Structure and Strict Governance

    B Prudent Liability Management: Centralized Structure and Strict Governance Prudent Liability Management & Funding Durability – Setting the Stage  A prudent liability management framework supported by centralized, strong governance ensuring funding durability, providing critical stability in all en

15. Slide 15: Prudent Liability Management: Illustrative Asset-Liability Funding Model

    Prudent Liability Management: Illustrative Asset-Liability Funding Model (1)  Funding governance requires alignment of more liquid assets with shorter-term liabilities and less liquid assets with longer-term liabilities and equity Liabilities & Assets Equity Bank Deposits Assets(2) Deposits Equity

16. Slide 16: Prudent Liability Management: Maturity Profile of Long-Term Debt

    Prudent Liability Management: Maturity Profile of Long- Term Debt Total Short-Term and Long-Term Maturities(1),(2),(3) ($Bn) 40 35 34 30 26 25 24 23 24 21 20 20 16 15 15 10 8 9 7 7 6 5 5 3 3 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025-292030-34 2035+ 2011 – 2013 2014

17. Slide 17: Four Pillars of Secured Funding Ensure Durability and Stability

    Four Pillars of Secured Funding Ensure Durability and Stability 1 Significant Weighted Average Maturity  Enhances durability 2 Maturity Limit Structure  Reduces roll-over risk 3 Investor Limit Structure  Minimizes concentration with any single investor, in aggregate and in any given month 4 Spare

18. Slide 18: Strict Governance Framework Ensures Appropriate Term Consistent with Asset Fundability

    Strict Governance Framework Ensures Appropriate Term Consistent with Asset Fundability Rules-Based Criteria Determine Asset Fundability… Highly Liquid (Governments, Fundability Criteria Agencies, Open Market Operations and Central  Eligible for financing through Open Market Operations (OMO) and/or

19. Slide 19: Secured Funding Pillar 1: Longer WAM Provides Appropriate Flexibility

    Secured Funding Pillar 1: Longer WAM Provides Appropriate Flexibility …Fundability Category Determines Required Weighted Average Maturity: >120 Days(1)  Criteria-based model sources appropriate term funding consistent with liquidity profile of underlying assets  Assets tiered by fundability  Matu

20. Slide 20: Weighted Average Maturity: Importance of Durability

    Weighted Average Maturity: Importance of Durability – Morgan Stanley Early Leader  The Federal Reserve Bank of New York published a study(1) in June 2014 on weighted average maturity (WAM) of risk assets(2) within the U.S. tri-party repo market  The study concluded that while the maturity in tri-p

21. Slide 21: Secured Funding Pillars 2 and 3: Monthly Maturity and Investor Concentration Targets

    Secured Funding Pillar 2: Monthly Maturity Target Secured Funding Pillar 3: Investor Concentration Target  Monthly Maturity Target: Target less than 15% of non-Super Green liabilities maturing in any given month  Investor Concentration Target: Maximum total exposure per investor of 15% of non-Supe

22. Slide 22: Secured Funding Pillar 4: Spare Capacity Provides Flexibility

    Secured Funding Pillar 4: Spare Capacity Provides Flexibility in Both Favorable and Stressed Markets  Spare Capacity is equivalent to total non-Super Green liabilities in excess of non-Super Green inventory  Spare Capacity has created excess contractual term-funding, which provides valuable flexib

23. Slide 23: More Durable Liquidity: Significant Global Liquidity Position

    C More Durable Liquidity: Significant Global Liquidity Position Highly Liquid and Unencumbered - Changes in bank liquidity levels reflect execution of bank strategy Period End Liquidity Composition of the Liquidity Reserve ($Bn) at 3Q14 $198 $202 $203 $ 200 $192 Type of Investment ($Bn) $186 $190 $1

24. Slide 24: More Durable Liquidity: Build and Stress Test Liquidity on a Legal Entity Basis

    More Durable Liquidity: Build and Stress Test Liquidity on a Legal Entity Basis • Stress testing sizes contingency outflow requirements at a legal entity level (1),(2) Liquidity (% of Total) Contingent cash outflows are (1),(2) measured independently from the Parent 29% inflows resulting from mitig

25. Slide 25: Estimated LCR Reflects Benefits of Funding Governance & Liquidity Risk Management

    D Estimated LCR Reflects Benefits of Funding Governance & Liquidity Risk Management Liquidity Coverage Ratio (LCR)(1) • Morgan Stanley’s Position: Pro-forma LCR estimate based on the final Federal Reserve Bank rule is >100%  The Firm’s stress test scenarios incorporate and build on the current Base

26. Slide 26: Composition of Morgan Stanley's Deposits

    Composition of Morgan Stanley’s Deposits  Deposits are primarily sourced from the Firm’s Wealth Management clients  Default sweep for clients’ excess cash – effectively working capital in client accounts – rooted in deep and broad franchise relationships anchored in investment advice; highly tenur

27. Slide 27: Capital Management: Strong Capital Under Basel I and Basel III Regimes

    Capital Management: Strong Capital Under Basel I and E Basel III Regimes Tier 1 Common Ratio & Common Equity Tier 1 Ratio(1) (Common after deductions and adjustments) / RWA (%) 14.1% 14.4% 13.9% 12.6% 12.8%  Common Equity Tier 1 capital ratio is 14.4%(1) 11.5% 11.8% 10.6%  Tier 1 Capital ratio is

28. Slide 28: Capital Management: Optimizing Capital Stack Under Basel III

    Capital Management: Optimizing Capital Stack Under Basel III Morgan Stanley Total Capital 4Q12 3Q14(1)  Issued ~$1.7Bn of preferred stock in 2013 and ~$2.8Bn <1% in 2014 to date 4% 5% 9% 6% 1%  TruPS qualify as either Tier 6% 2% 1 or Tier 2 capital in 2014; 7% TruPS phase-out of capital over time

29. Slide 29: Strong Risk-Based And Leverage Capital Ratios

    Strong Risk-Based And Leverage Capital Ratios Risk-Based & Leverage Capital Ratios(1),(2) 3Q14 Basel III CET1 Under Advanced Approach  Fully Phased-in (Pro-forma): 12.7%  Transitional: 14.4% 3Q14 Basel III CET1 Under Standardized Approach  Fully Phased-in (Pro-forma): 11.8%  Transitional: 15.2%

30. Slide 30: Appendix

    Appendix Morgan Stanley

31. Slide 31: Pro-Forma Top U.S.-Based Depository Institution With Remaining Deposits

    Pro-Forma Top 10 U.S.-Based Depository Institution With Remaining Deposits Top U.S.-Based Depositories as of 2Q14(1),(2) ($Bn) 1. JPMorgan Chase & Co. 1,320 2. Bank of America Corporation 1,134 3. Wells Fargo & Company 1,119 4. Citigroup Inc. 966 5. Bank of New York Mellon Corporation 282 6. U.S. Ba

32. Slide 32: Available for Sale Securities

    Available for Sale Securities At September 30, 2014 ($MM) Gross Gross Other-than- Amortized Unrealized Unrealized Temporary Cost Gains Losses Impairment Fair Value Available for Sale Debt Securities Total U.S. Government and Agency Securities $48,540 $83 $224 – $48,399 Corporate and Other Debt Comme

33. Slide 33: Loans and Lending Commitments

    Loans and Lending Commitments Quarter Ended Percentage Change From: Sept 30, 2014 June 30, 2014 Sept 30, 2013 June 30, 2014 Sept 30, 2013 Institutional Securities Corporate Funded Loans Loans held for investment, net of allowance $ 8.2 $ 9.3 $ 7.2 (12%) 14% Loans held for sale 5.9 5.3 4.5 11% 31% Lo

34. Slide 34: Morgan Stanley 3Q14 Fixed Income Investor Update

    Morgan Stanley 3Q14 Fixed Income Investor Update November 12, 2014

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