0000895421 srt:ArithmeticAverageMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateContractMember ms:MeasurementInputInterestRateCurveCorrelationMember us-gaap:ValuationTechniqueOptionPricingModelMember 2020-03-31



Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021

Commission File Number 1-11758

(Exact name of Registrant as specified in its charter)

Delaware

1585 Broadway

36-3145972

(212)

761-4000

(State or other jurisdiction of

incorporation or organization)

New York,

10036

(I.R.S. Employer Identification No.)

(Registrant’s telephone number, including area code)

(Address of principal executive offices, including zip code)



Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.01 par value	MS	New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate	MS/PA	New York Stock Exchange
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	MS/PE	New York Stock Exchange
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	MS/PF	New York Stock Exchange
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	MS/PI	New York Stock Exchange
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	MS/PK	New York Stock Exchange
Non-Cumulative Preferred Stock, Series K, $0.01 par value
Depository Shares, each representing 1/1000th interest in a share of 4.875%	MS/PL	New York Stock Exchange
Non-Cumulative Preferred Stock, Series L, $0.01 par value
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026	MS/26C	New York Stock Exchange
of Morgan Stanley Finance LLC (and Registrant’s guarantee with respect thereto)
Morgan Stanley Cushing® MLP High Income Index ETNs due March 21, 2031	MLPY	NYSE Arca, Inc.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, ~~2020,~~2021, there were ~~1,575,656,380~~1,860,588,915 shares of the Registrant’s Common Stock, par value $0.01 per share, outstanding.



Table of Contents

QUARTERLY REPORT ON FORM 10-Q

For the quarter ended March 31, ~~2020~~2021


Table of Contents		Part	Item	Page
Financial Information		I		1
Management’s Discussion and Analysis of Financial Condition and Results of Operations		I	2	1
Introduction				1
Executive Summary				2
Business Segments				6
Institutional Securities				7
Wealth Management				9
Investment Management				11
Supplemental Financial Information				13
Accounting Development Updates				13
Critical Accounting Policies				13
Liquidity and Capital Resources				13
Balance Sheet				13
Regulatory Requirements				17
Quantitative and Qualitative Disclosures about Risk		I	3	23
Market Risk				23
Credit Risk				25
Country and Other Risks				30
Report of Independent Registered Public Accounting Firm				32
Consolidated Financial Statements and Notes		I	1	33
Consolidated Income Statements (Unaudited)				33
Consolidated Comprehensive Income Statements (Unaudited)				33
Consolidated Balance Sheets (Unaudited at March 31, 2021)				34
Consolidated Statements of Changes in Total Equity (Unaudited)				35
Consolidated Cash Flow Statements (Unaudited)				36
Notes to Consolidated Financial Statements (Unaudited)				37
1.	Introduction and Basis of Presentation			37
2.	Significant Accounting Policies			38
3.	Acquisitions			38
4.	Cash and Cash Equivalents			39
5.	Fair Values			39
6.	Fair Value Option			45
7.	Derivative Instruments and Hedging Activities			45
8.	Investment Securities			49
9.	Collateralized Transactions			50
10.	Loans, Lending Commitments and Related Allowance for Credit Losses			52
11.	Other Assets—Equity Method Investments			54
12.	Deposits			54
13.	Borrowings and Other Secured Financings			55
14.	Commitments, Guarantees and Contingencies			55
15.	Variable Interest Entities and Securitization Activities			57
16.	Regulatory Requirements			60
17.	Total Equity			62
18.	Interest Income and Interest Expense			63
19.	Income Taxes			63
20.	Segment, Geographic and Revenue Information			64
Financial Data Supplement (Unaudited)				66
Glossary of Common Terms and Acronyms				67
Other Information		II		68
Legal Proceedings		II	1	68
Risk Factors		II	1A	68
Unregistered Sales of Equity Securities and Use of Proceeds		II	2	68
Controls and Procedures		I	4	68
Exhibits		II	6	68
Signatures				69

Table of Contents Part Item Page
Risk Factors
II 1A
1
Financial Information
I
2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
I 2
2
Introduction

2
Executive Summary

3
Business Segments

7
Supplemental Financial Information

15
Other Matters

15
Accounting Development Updates

15
Critical Accounting Policies

16
Liquidity and Capital Resources

16
Balance Sheet

16
Regulatory Requirements

21
Quantitative and Qualitative Disclosures about Risk
I 3
28
Market Risk

28
Credit Risk

30
Country and Other Risks

35
Report of Independent Registered Public Accounting Firm

38
Consolidated Financial Statements and Notes
I 1
39
Consolidated Income Statements (Unaudited)

39
Consolidated Comprehensive Income Statements (Unaudited)

40
Consolidated Balance Sheets (Unaudited at March 31, 2020)

41
Consolidated Statements of Changes in Total Equity (Unaudited)

42
Consolidated Cash Flow Statements (Unaudited)

43
Notes to Consolidated Financial Statements (Unaudited)

44
1.
Introduction and Basis of Presentation

44
2.
Significant Accounting Policies

45
3.
Cash and Cash Equivalents

47
4.
Fair Values

47
5.
Fair Value Option

54
6.
Derivative Instruments and Hedging Activities

55
7.
Investment Securities

59
8.
Collateralized Transactions

62
9.
Loans, Lending Commitments and Related Allowance for Credit Losses

63
10.
Other Assets—Equity Method Investments

67
11.
Deposits

67
12.
Borrowings and Other Secured Financings

67
13.
Commitments, Guarantees and Contingencies

68
14.
Variable Interest Entities and Securitization Activities

71
15.
Regulatory Requirements

73
16.
Total Equity

76
17.
Interest Income and Interest Expense

78
18.
Income Taxes

78
19.
Segment, Geographic and Revenue Information

78
Financial Data Supplement (Unaudited)

81
Glossary of Common Terms and Acronyms

82
Other Information
II
84
Legal Proceedings
II 1
84
Unregistered Sales of Equity Securities and Use of Proceeds
II 2
84
Controls and Procedures
I 4
84
Exhibits
II 6
84
Signatures

S-1


			i


Table of Contents

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website, www.sec.gov, that contains annual, quarterly and current reports, proxy and information statements and other information that issuers file electronically with the SEC. Our electronic SEC filings are available to the public at the SEC’s website.

Our website is www.morganstanley.com. You can access our Investor Relations webpage at www.morganstanley.com/about-us-ir. We make available free of charge, on or through our Investor Relations webpage, our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available, through our Investor Relations webpage, via a link to the SEC’s website, statements of beneficial ownership of our equity securities filed by our directors, officers, 10% or greater shareholders and others under Section 16 of the Exchange Act.

You can access information about our corporate governance at www.morganstanley.com/about-us-governance~~and~~, our sustainability initiatives at www.morganstanley.com/about-us/~~sustainability-at-morgan-stanley.~~sustainability-at-morgan-stanley and our commitment to diversity and inclusion at www.morganstanley.com/about-us/diversity. Our webpages include:


•	~~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.~~

•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;

•Sustainability Report;

•Task Force on Climate-related Financial Disclosures Report; and

•Diversity and Inclusion Report.

Our Code of Ethics and Business Conduct applies to all directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer and Deputy Chief Financial Officer. We will post any amendments to the Code of Ethics and Business Conduct and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange LLC (“NYSE”) on our website. You can request a copy of these documents, excluding exhibits, at no cost, by contacting Investor Relations, 1585 Broadway, New York, NY 10036 (212-761-4000). The information on our website is not incorporated by reference into this report.



~~Table of Contents~~

~~Risk Factors~~

In addition to “Risk Factors” in Part I, Item 1A of the 2019 Form 10-K, please refer to the risk factor under Item 8.01. “Other Matters,” in the Current Report on Form 8-K filed with the SEC on April 16, 2020 and the additional risk factors under “Risk Factors” in the Registration Statement on Form S-4 filed with the SEC on April 17, 2020.



			1ii			~~March 2020 Form 10-Q~~



Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. Disclosures reflect the effects of the acquisitions of E*TRADE Financial Corporation (“E*TRADE”) and Eaton Vance Corp. (“Eaton Vance”) prospectively from the acquisition dates, October 2, 2020 and March 1, 2021, respectively. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.

A description of the clients and principal products and services of each of our business segments is as follows:

Institutional Securities provides ~~investment banking, sales~~a variety of products and ~~trading, lending and other~~ services to corporations, governments, financial institutions and high to ultra-high net worth clients. Investment banking services consist of capital raising and financial advisory services, including services relating to the underwriting of debt, equity and other securities, as well as advice on mergers and acquisitions, restructurings, real estate and project finance. ~~Sales~~Our Equity and ~~trading services~~Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and ~~market-making activities in equity and fixed income products, including foreign exchange and commodities.~~certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to ~~sales and trading~~ customers. Other activities include ~~Asia wealth management services, investments and~~ research.

Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions covering: financial advisor-led brokerage and investment advisory services; self-directed brokerage services, including through the E*TRADE platform; financial and wealth planning services; workplace services including stock plan ~~administration services;~~administration; annuity and insurance products; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services.

Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and ~~alternative/other products.~~overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.

Management’s Discussion and Analysis includes certain metrics ~~which~~that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies.

The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; risk factors; legislative, legal and regulatory developments; and other factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements,” “Business—Competition,” “Business—Supervision and Regulation,” and “Risk Factors” in the ~~2019~~2020 Form 10-K, and “Liquidity and Capital Resources—Regulatory Requirements” herein. ~~In addition, see “Executive Summary” herein and “Risk Factors” for information on the current and possible future effects of the COVID-19 pandemic on our results.~~



March ~~2020~~2021 Form 10-Q			21



Table of Contents
Management’s Discussion and Analysis

Executive Summary

Overview of Financial Results

Consolidated ~~Results~~Results—Three Months Ended March 31, 2021

•Firm Net revenues were up 61% and Net income applicable to Morgan Stanley was up 143%, with strong contributions from each of our three business segments, and resulting in an annualized ROTCE of 21.1%, or 21.4% excluding integration-related expenses (see “Selected Non-GAAP Financial Information” herein).

•Institutional Securities Net revenues of $8.6 billion increased 66% reflecting strength across businesses and geographies on continued strong client engagement and higher volumes in a constructive market environment, notwithstanding losses related to a single client event in the quarter.

•Wealth Management delivered pre-tax income of $1.6 billion with a pre-tax profit margin of 26.9%, or 27.9% excluding integration-related expenses (see “Selected Non-GAAP Financial Information” herein). Results reflect strong levels of client engagement, net new assets of $105 billion and fee-based flows of $37 billion, in addition to growth in bank lending.

•Investment Management results reflect strong asset management fees on AUM of $1.4 trillion due to strong investment performance and positive flows across all asset classes, as well as the impact of the Eaton Vance acquisition.

•The Firm expense efficiency ratio was 66.6%, or 66.1% excluding the impact of integration-related expenses (see “Selected Non-GAAP Financial Information” herein).

•At March 31, 2021, our standardized Common Equity Tier 1 capital ratio was 16.7%.

•The Firm repurchased $2.1 billion of its outstanding common stock.

Strategic Transactions

•On March 1, 2021, we completed the acquisition of Eaton Vance. For further information, see “Business Segments—Investment Management” herein.

Net Revenues1

($ in millions)

1.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.

Net Income Applicable to Morgan Stanley

($ in millions)

Earnings per Diluted Common Share¹


1.	~~For further information on basic and diluted EPS, see Note 16 to the financial statements.~~

1.Adjusted Diluted EPS for the current quarter was $2.22 (see “Selected Non-GAAP Financial Information” herein).

We reported net revenues of ~~$9,487 million~~$15.7 billion in the quarter ended March 31, 2021 (“current quarter,” or “1Q 2021”), compared with $9.8 billion in the quarter ended March 31, 2020 (“~~current quarter,” or “1Q 2020”), compared with $10,286 million in the quarter ended~~ ~~March 31, 2019~~ (“prior year quarter,” or “1Q ~~2019”~~2020”). For the current quarter, net income applicable to Morgan Stanley was ~~$1,698 million,~~$4.1 billion, or ~~$1.01~~$2.19 per diluted common share, compared with ~~$2,429 million~~$1.7 billion or ~~$1.39~~$1.01 per diluted common share, in the prior year quarter.

~~See “Coronavirus Disease (COVID-19) Pandemic” herein for information on the current and possible future effects of the COVID-19 pandemic on our results.~~


			2			March 2021 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

Non-interest Expenses^1, 2

($ in millions)


1.	1.The percentages on the bars in the chart represent the contribution of compensation and benefits expenses and non-compensation expenses to the total. 2.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information. •

Compensation and benefits expenses of ~~$4,283~~$6,798 million in the current quarter ~~decreased 8%~~increased 59% from ~~$4,651 million in~~ the prior year ~~quarter. The decrease was~~quarter, primarily ~~due to decreases in the fair value~~as a result 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, both driven by higher revenues, higher expenses related to certain deferred compensation plans linked to investment performance and the ~~mix~~Firm’s share price, and incremental compensation as a result of ~~revenues.~~the E*TRADE and Eaton Vance acquisitions.

•Non-compensation expenses of ~~$3,058~~$3,675 million in the current quarter increased ~~14%~~25% from ~~$2,680~~the prior year quarter, primarily driven by incremental expenses as a result of the E*TRADE and Eaton Vance acquisitions, in addition to higher volume-related expenses and higher investments in technology.

Provision for Credit Losses

The Provision for credit losses on loans and lending commitments was a net release of $98 million in the current quarter primarily driven by improvements in the outlook for macroeconomic conditions and the impact of paydowns on Corporate loans, including by lower-rated borrowers. The Provision for credit losses on loans and lending commitments of $407 million in the prior year quarter was primarily driven by deterioration in the current and expected macroeconomic environment at that time. For further information on the Provision for credit losses, see “Credit Risk” herein.

Income Taxes

The increase in the Firm’s effective tax rate in the current quarter is primarily due to the lower impact of net discrete tax benefits. Net discrete tax benefits in the current quarter of $86 million and $130 million in the prior year ~~quarter. The increase was~~quarter were primarily ~~due to higher volume-related expenses and an increase in the provision for credit losses for lending commitments.~~

~~Income Taxes~~

~~The prior year quarter included intermittent net discrete tax benefits of $101 million, primarily associated with remeasurement of reserves and~~ related ~~interest as a result of new information pertaining~~ to the ~~resolution~~conversion of ~~multi-jurisdiction tax examinations. For further information, see “Supplemental Financial Information—Income Tax Matters” herein.~~

employee share-based awards.



	3	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

~~Selected Financial Information and Other Statistical Data~~

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 %
ROTCE^2,3
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 At
March 31,
2020 At
December 31,
2019
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 share^3,7
$ 43.28
$ 40.01
Worldwide employees 60,670
60,431

At
March 31,
2020 At
December 31,
2019
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.

Business Segment Results

Net Revenues by Segment^1, 2

($ in millions)

Net Income Applicable to Morgan Stanley by Segment¹

($ in millions)

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 sum to 100% due to intersegment eliminations. See Note 20 to the financial statements for details of intersegment eliminations.


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.

2.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.

•Institutional Securities net revenues of ~~$4,905~~$8,577 million in the current quarter ~~decreased 6%~~increased 66% from ~~$5,196 million in~~ the prior year quarter, primarily reflecting ~~losses on loans and lending commitments held for sale and an increase~~higher revenues in ~~the provision for credit losses on loans and lending commitments held for investment,~~equity underwriting driven by higher volumes, as well as ~~losses~~higher revenues in credit products and equity derivatives. The current quarter included a loss of $644 million related to a credit event for a single client, and $267 million of subsequent trading losses through the end of the quarter related to the same event.

•Wealth Management net revenues of $5,959 million in the current quarter increased 47% primarily due to higher transactional revenues reflecting gains from 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 byas well as higher ~~Asset~~asset management revenues on increased asset levels and ~~higher commissions driven by market volatility.~~positive fee-based flows. Net



March ~~2020~~2021 Form 10-Q			43



Table of Contents
Management’s Discussion and Analysis

interest also increased primarily reflecting incremental revenues as a result of the E*TRADE acquisition.

•Investment Management net revenues of ~~$692~~$1,314 million in the current quarter ~~decreased 14%~~increased 90% from ~~$804 million in~~ the prior year quarter, ~~primarily reflecting lower Investments revenues, partially offset by~~due to higher Asset management ~~revenues.~~and related fees driven by higher average AUM and the effect of the Eaton Vance acquisition, and higher Performance-based income and other revenues, driven by higher accrued carried interest.

Net Revenues by Region^{1, 2,}3

($ in millions)


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.~~

~~Both~~

1.The percentages on the ~~34% increase~~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 20 to the financial statements in the 2020 Form 10-K.

3.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.

Current quarter revenues in Asia increased 40% and EMEA increased 80%, both driven primarily by the ~~33% decrease in revenues in EMEA were primarily attributable to Equity sales~~equity and ~~trading~~fixed income businesses within the Institutional Securities business segment. Americas revenues increased 62%, primarily driven by the Wealth Management and the Institutional Securities business segments.

Selected Financial Information and Other Statistical Data


	Three Months Ended March 31,
$ in millions	2021			2020
Consolidated results
Net revenues1	$	15,719		$	9,779
Earnings applicable to Morgan Stanley common shareholders	$	3,982		$	1,590
Earnings per diluted common share	$	2.19		$	1.01
Consolidated financial measures
Expense efficiency ratio1, 2	66.6		%	73.9		%
Adjusted expense efficiency ratio1, 2, 4	66.1		%	73.9		%
ROE3	16.9		%	8.5		%
Adjusted ROE3, 4	17.1		%	8.5		%
ROTCE3, 4	21.1		%	9.7		%
Adjusted ROTCE3, 4	21.4		%	9.7		%
Pre-tax margin1, 5	34.0		%	21.9		%
Effective tax rate	22.0		%	17.1		%
Pre-tax margin by segment5
Institutional Securities1	39.3		%	18.3		%
Wealth Management1	26.9		%	26.0		%
Wealth Management, adjusted1, 4	27.9		%	26.0		%
Investment Management	28.2		%	20.7		%
Investment Management, adjusted4	29.0		%	20.7		%


in millions, except per share and employee data	At March 31, 2021			At December 31, 2020
Liquidity resources6	$	353,304		$	338,623
Loans7	$	159,123		$	150,597
Total assets	$	1,158,772		$	1,115,862
Deposits	$	323,138		$	310,782
Borrowings	$	215,826		$	217,079
Common shares outstanding	1,869			1,810
Common shareholders' equity	$	98,509		$	92,531
Tangible common shareholders’ equity4	$	72,828		$	75,916
Book value per common share8	$	52.71		$	51.13
Tangible book value per common share4, 8	$	38.97		$	41.95
Worldwide employees9 (in thousands)	71			68
Capital Ratios10
Common Equity Tier 1 capital—Standardized	16.7		%	17.4		%
Common Equity Tier 1 capital—Advanced	17.4		%	17.7		%
Tier 1 capital—Standardized	18.5		%	19.4		%
Tier 1 capital—Advanced	19.2		%	19.8		%
SLR11	6.7		%	7.4		%
Tier 1 leverage	7.5		%	8.4		%

1.Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.

2.The ~~Equity sales~~expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.

3.ROE and ~~trading revenues increase~~ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.

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

5.Pre-tax margin represents income before income taxes as a percentage of net revenues.

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

7.Amounts include loans held for investment (net of allowance) and loans held for sale but exclude loans at fair value, which are included in ~~Asia reflects higher client volumes, while in EMEA market volatility and reduced dividend expectations weighed on revenues~~Trading assets in the ~~derivatives~~balance sheets (see Note 10 to the financial statements).

8.Book value per common share and ~~financing businesses. Additionally, EMEA results reflected markdowns~~tangible book value per common share equal common shareholders’ equity and tangible common shareholders’ equity, respectively, divided by common shares outstanding.

9.As of ~~held-for-sale loans~~March 31, 2021, the number of employees includes Eaton Vance.

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

11.At March 31, 2021 and at December 31, 2020, our SLR reflects the impact of a Federal Reserve interim final rule that was in effect until March 31, 2021. For further information, see “Liquidity and Capital Resources—Regulatory Requirements—Regulatory Developments and Other Matters” herein.


			4			March 2021 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

Coronavirus Disease ~~(COVID-19)~~(“COVID-19”) Pandemic

The ~~coronavirus disease (“COVID-19”)~~COVID-19 pandemic and related voluntary and government-imposed ~~shelter-in-place~~social and business restrictions have had, and will likely continue to have, a ~~severe~~significant impact on global economic conditions and the environment in which we operate our businesses.

~~In responding to this unprecedented situation, we have taken measures to prioritize the health of our employees and their families, and~~ The Firm continues to be ~~prepared operationally to serve our clients, leveraging our business continuity planning and historical investments in technology. More than~~fully operational, with approximately 90% of ~~our~~ employees ~~are currently~~in the Americas and globally working from home ~~and to date, we have not experienced any significant loss~~as of operational capability, as we have implemented our pandemic-related responses. We believe we are prepared to continue to operate with the vast majority of our workforce working remotely for as long as health guidelines and prudence require, with limited impact to our operational capabilities.

~~The coronavirus disease has impacted many people’s health around the world, including many of our employees. Our~~

~~Chairman and CEO was diagnosed with the coronavirus in~~ March ~~but has fully recovered. The rest of the Firm’s Operating Committee remain healthy and are sheltering in place.~~

With the COVID-19 impacts on individuals, communities and organizations continuing to evolve, governments around the world have reacted to the health crisis caused by the pandemic, and central banks have taken steps to proactively address market disruptions by cutting interest rates and providing liquidity sources and other stimulus programs. See “Regulatory Developments in Response to COVID-19” herein for further details.

We also have taken several direct steps to provide assistance. Our balance sheet has increased as we: support market and client activity; take in increased deposits from our Wealth Management clients; extend credit to our institutional and retail clients to provide them with additional liquidity; and provide financing to support COVID-19 impacted clients across multiple sectors. Along with the seven other U.S. Banks comprising the Financial Services Forum, we voluntarily ceased our Share Repurchase Program to keep this capital available to help clients and took action on the Federal Reserve's encouragement to use its discount window by borrowing from it. We have also taken steps to participate in other Federal Reserve programs, notably the Primary Dealer Credit Facility (“PDCF”).

Our financial condition, balance sheet, capital and liquidity have remained strong. In March 2020, we saw deposit inflows of $38 billion as customers sought relative safety away from volatile markets, and we raised more than $5 billion in new long-term debt supplementing our liquidity position.

As further discussed in “Business Segments” herein, towards the end of the current quarter, we observed the impact of the pandemic on our business. The decline of asset prices, reduction in interest rates, widening of credit spreads, borrower and counterparty credit deterioration, market volatility and reduced investment banking activity had the most immediate negative impacts on our current quarter performance. Related to these effects, the Firm experienced mark-to-market losses, net of economic hedges of $610 million on loans and lending commitments held for sale, provisions of $407 million for credit losses on loans and lending commitments held for investment, and losses of $384 million on fund and business-related investments, net of hedges. At the same time, high levels of client trading activity, related to market volatility, significantly increased revenues for global macro products and Commodities in Institutional Securities, and the transactional businesses in Wealth Management.31, 2021.

Though we are unable to estimate the extent of the impact, the ~~continuing~~economic or other effects of the ongoing COVID-19 pandemic ~~and related global economic crisis will adversely impact~~may have adverse impacts on our future operating results. ~~Additionally, with the continuance of many of the same negative impacts, without the benefit of higher client trading activity experienced in the~~



	5	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

~~current quarter, it is uncertain that our financial objectives will be attained within the originally stated two year time frame.~~

~~We continue~~Refer to ~~use the elements of our Enterprise Risk Management framework manage the significant uncertainty~~“Risk Factors” and “Forward-Looking Statements” in the ~~present economic and market conditions. See “Quantitative and Qualitative Disclosures about Risk” in the 2019~~2020 Form 10-K for ~~further information about our Enterprise Risk Management Framework.~~more information.

~~In addition, refer to “Risk Factors” herein and Forward Looking Statements in the 2019 Form 10-K.~~

Selected Non-GAAP Financial Information

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

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

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

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


	Three Months Ended March 31,
$ in millions, except per share data		2021			2020
Earnings applicable to Morgan Stanley common shareholders		$	3,982		$	1,590
Impact of adjustments:
Integration-related expenses		75			—
Related tax benefit		(17)			—
Adjusted earnings applicable to Morgan Stanley common shareholders—non-GAAP1		$	4,040		$	1,590
Earnings per diluted common share		$	2.19		$	1.01
Impact of adjustments		0.03			—
Adjusted earnings per diluted common share—non-GAAP1		$	2.22		$	1.01
Expense efficiency ratio2		66.6		%	73.9		%
Impact of adjustments		(0.5)		%	—		%
Adjusted expense efficiency ratio—non-GAAP1, 2		66.1		%	73.9		%
Wealth Management Pre-tax margin2		26.9		%	26.0		%
Impact of adjustments		1.0		%	—		%
Adjusted Wealth Management pre-tax margin—non-GAAP1, 2		27.9		%	26.0		%
Investment Management Pre-tax margin		28.2		%	20.7		%
Impact of adjustments		0.8		%	—		%
Adjusted Investment Management pre-tax margin—non-GAAP1		29.0		%	20.7		%


$ in millions	At March 31, 2021		At December 31, 2020
Tangible equity
Common shareholders' equity	$	98,509	$	92,531
Less: Goodwill and net intangible assets	(25,681)		(16,615)
Tangible common shareholders' equity—non-GAAP	$	72,828	$	75,916


		Average Monthly Balance
	Three Months Ended March 31,
$ in millions		2021		2020
Tangible equity
Common shareholders' equity		$	94,343	$	74,724
Less: Goodwill and net intangible assets		(18,849)		(9,200)
Tangible common shareholders' equity—non-GAAP		$	75,494	$	65,524


	Three Months Ended March 31,
$ in billions		2021			2020
Average common equity
Unadjusted—GAAP		$	94.3		$	74.7
Adjusted1—Non-GAAP		94.4			74.7
ROE3
Unadjusted—GAAP		16.9		%	8.5		%
Adjusted1—Non-GAAP		17.1		%	8.5		%
Average tangible common equity—Non-GAAP
Unadjusted		$	75.5		$	65.5
Adjusted1		75.5			65.5
ROTCE3—Non-GAAP
Unadjusted		21.1		%	9.7		%
Adjusted1		21.4		%	9.7		%

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-GAAP^{1, 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 %
Adjusted^{1, 3}
9.5 % 14.2 %



March ~~2020~~2021 Form 10-Q			65



Table of Contents
Management’s Discussion and Analysis

Non-GAAP Financial Measures by Business Segment


	Three Months Ended March 31,
$ in billions		2021			2020
Average common equity4
Institutional Securities		$	43.5		$	42.8
Wealth Management		28.5			18.2
Investment Management		4.4			2.6
ROE5
Institutional Securities		23.0		%	6.3		%
Wealth Management		16.9		%	18.5		%
Investment Management		24.8		%	11.7		%
Average tangible common equity4
Institutional Securities		$	42.9		$	42.3
Wealth Management		13.4			10.4
Investment Management		1.2			1.7
ROTCE5
Institutional Securities		23.3		%	6.4		%
Wealth Management		36.0		%	32.3		%
Investment Management		88.2		%	18.1		%

Three Months Ended
March 31,
$ in billions 2020 2019
Average common equity^{4, 5}

Institutional Securities $ 42.8
$ 40.4
Wealth Management 18.2
18.2
Investment Management 2.6
2.5
Average tangible common equity^{4, 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 the effect of costs related to the integration of E*TRADE and Eaton Vance, net of tax as appropriate. The pre-tax adjustments were as follows: Wealth Management – Compensation expenses of $30 million and Non-compensation expenses of $34 million, Investment Management – Compensation expenses of $3 million and Non-compensation expenses of $8 million.

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.

~~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.~~Certain prior period amounts have been reclassified to conform to the current presentation. See “Business Segments” herein and Note 1 to the financial statements for more information.

3.ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. When excluding integration-related costs, both the numerator and average denominator are adjusted.

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). The sums of the segments' Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent equity.

5.The calculation of ROE and ROTCE by segment uses 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.


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.

Return on Tangible Common Equity Target

In January ~~2020,~~2021, we established ana 2-year ROTCE Target of ~~13%~~14% to ~~15% to be achieved over the next two years.~~16%, excluding integration-related expenses.

Our ROTCE Target is a forward-looking statement that was based on a normal market environment and may be materially affected by many factors, including, among other things: mergers and acquisitions; macroeconomic and market conditions; legislative, accounting, tax and regulatory developments; industry trading and investment banking volumes; equity market levels; interest rate environment; outsized legal expenses or penalties; the ability to ~~maintain a reduced level of~~control expenses; and capital levels.

~~With~~Given the ~~COVID–19 pandemic, and the current global~~ economic ~~crisis that includes negative impacts from many~~impact of the ~~aforementioned factors,~~COVID-19 pandemic, it is uncertain ~~that~~if the ROTCE Target will be met within the originally stated time frame. See “Coronavirus Disease (COVID–19) Pandemic” herein and “Risk Factors” in the 2020 Form 10-K for further information on market and economic conditions and their effects on our financial results.

For further information on non-GAAP measures (ROTCE excluding ~~intermittent net discrete tax items)~~integration-related expenses), see “Selected Non-GAAP Financial Information” herein. ~~For information on the impact of intermittent net discrete tax items, see “Supplemental Financial Information—Income Tax Matters” herein.~~

Business Segments

Substantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 20 to the financial statements for information on intersegment transactions.

For an overview of the components of our business segments, net revenues, compensation expense and income taxes, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments” in the ~~2019~~2020 Form 10-K.

As part of our effort to continually improve the transparency and comparability of our external financial reporting, several updates to our financial presentation were implemented in the first quarter of 2021. Prior period amounts have been reclassified to conform to the current presentation.

Provision for credit losses

The Provision for credit losses for loans and lending commitments is now presented as a separate line in the income statements. Previously, the provision for credit losses for loans was included in Other revenues and the provision for credit losses for lending commitments was included in Other expense.

Other revenues

Gains and losses on economic derivative hedges associated with certain held-for-sale and held-for-investment corporate loans, which were previously reported in Trading revenues, are now reported within Other revenues in the income statements. The new presentation better aligns with the recognition of mark-to-market gains and losses on held-for-sale loans which continue to be reported in Other revenues.

Institutional Securities

Equity—Financing, Equity—Execution services and Fixed income now include certain Investments and Other revenues to the extent directly attributable to those businesses. The remaining Investments and Other revenues not included in those businesses’ results are reported in Other. Other also includes revenues previously reported as Other Sales and Trading.

Investment Management

We have renamed the previously disclosed revenue line Asset management to Asset management and related fees and have combined the remaining revenue lines into a new category named Performance-based income and other.



			76			March ~~2020~~2021 Form 10-Q



Table of Contents
Management’s Discussion and Analysis

Institutional Securities

~~Income Statement Information~~

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 )%

~~Results in the Institutional Securities business segment reflect constructive markets in January and February 2020 and the significant effects of COVID-19 on markets in March. In particular, in March:~~Income Statement Information

~~Uncertainty, driven by market volatility and the overall environment, resulted in lower activity in Advisory and Equity underwriting.~~


	Three Months Ended March 31,
$ in millions	2021		2020		% Change
Revenues
Advisory	$	480	$	362	33	%
Equity	1,502		336		N/M
Fixed income	631		446		41	%
Total Underwriting	2,133		782		173	%
Total Investment Banking	2,613		1,144		128	%


Equity1	2,875		2,449		17	%
Fixed Income1	2,966		2,062		44	%
Other1	123		(477)		126	%
Net revenues1	$	8,577	$	5,178	66	%
Provision for credit losses1	(93)		388		(124)	%
Compensation and benefits	3,114		1,814		72	%
Non-compensation expenses1	2,185		2,026		8	%
Total non-interest expenses1	5,299		3,840		38	%
Income before provision for income taxes	3,371		950		N/M
Provision for income taxes	736		151		N/M
Net income	2,635		799		N/M
Net income applicable to noncontrolling interests	34		42		(19)	%
Net income applicable to Morgan Stanley	$	2,601	$	757	N/M

~~Market volumes and volatility were significantly higher than in the~~1.Certain 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, aggregatingperiod amounts have been reclassified to ~~$610 million for~~conform to the current ~~quarter; provisions~~presentation. See “Business Segments” herein and Note 1 to the financial statements 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~~

additional information.

~~products within Fixed Income; and losses on certain counterparties’ failure to meet margin requirements in Equity sales and trading.~~

~~These effects, in the context of the full quarter’s results, are further discussed herein.~~

Investment Banking Revenues

Investment Banking ~~Revenues~~Volumes


	Three Months Ended March 31,
$ in billions		2021		2020
Completed mergers and acquisitions1		$	225	$	119
Equity and equity-related offerings2, 3		36		14
Fixed income offerings2, 4		102		94

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 )%

~~Investment Banking Volumes~~

Three Months Ended
March 31,
$ in billions 2020 2019
Completed mergers and acquisitions¹
$ 109
$ 195
Equity and equity-related offerings^{2, 3}
13
14
Fixed income offerings^{2, 4}
82
58

Source: Refinitiv data as of April 1, ~~2020.~~2021. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions.

1.Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction.

~~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.


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.

Investment ~~banking revenues~~Banking Revenues

Revenues of ~~$1,144~~$2,613 million in the current quarter ~~were relatively unchanged from~~increased 128% compared with the prior year quarter, primarily reflecting ~~lower results~~an increase in ~~our advisory business offset by higher results in our fixed income~~equity underwriting ~~business.~~revenues.

•Advisory revenues ~~decreased in the current quarter~~increased primarily as a result of ~~lower~~higher volumes of completed M&A ~~activity, particularly large transactions.~~activity.

•Equity underwriting revenues ~~were relatively unchanged compared with subdued results~~increased on higher volumes, primarily in ~~the prior year quarter as lower revenues in~~initial public offerings, secondary block share trades ~~were offset by higher revenues in initial public offerings~~ and follow-on offerings.



~~March 2020 Form 10-Q~~	8



•~~Table of Contents~~
~~Management’s Discussion and Analysis~~

Fixed income underwriting revenues increased primarily in ~~the current quarter primarily due to higher overall volumes compared to the prior year quarter, with higher revenues in investment~~non-investment grade bond ~~and~~issuances on higher volumes, as well as in non-investment grade ~~loan issuances, partially offset by lower revenues from investment grade loan~~loans issuances.

See “Investment Banking Volumes” herein.

~~Sales and Trading Net Revenues~~

~~By Income Statement Line Item~~

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 %

~~By Business~~

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 %
Equity, Fixed Income and Other Net Revenues

~~Sales and Trading Revenues—~~Equity and Fixed Income Net Revenues


	Three Months Ended March 31, 2021
					Net Interest2		All Other3
$ in millions	Trading		Fees1		Net Interest2		All Other3		Total
Financing	$	645	$	130	$	182	$	3	$	960
Execution services	1,114		800		(62)		63		1,915
Total Equity	$	1,759	$	930	$	120	$	66	$	2,875
Total Fixed Income	$	2,313	$	81	$	439	$	133	$	2,966


	Three Months Ended March 31, 2020										Three Months Ended March 31, 20204
					Net										Net Interest2		All Other3
$ in millions	Trading		Fees¹		Interest²			Total		$ in millions	Trading		Fees1		Net Interest2		All Other3		Total
Financing	$	1,034	$	101	$	(37	)	$	1,098	Financing	$	1,034	$	101	$	(37)	$	5	$	1,103
Execution services	579		783		(38		)	1,324		Execution services	579		783		(38)		22		1,346
Total Equity	$	1,613	$	884	$	(75	)	$	2,422	Total Equity	$	1,613	$	884	$	(75)	$	27	$	2,449
Total Fixed Income	$	1,773	$	102	$	328		$	2,203	Total Fixed Income	$	1,773	$	102	$	328	$	(141)	$	2,062

1.Includes Commissions and fees and Asset management revenues.

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. 3.Includes Investments and Other revenues. 4.Certain prior period amounts have been reclassified to conform to the current period presentation. See “Business Segments” herein and Note 1 to the financial statements for additional information.


2.	~~Includes funding costs, which are allocated to the businesses based on funding usage.~~

Equity

~~Equity sales and trading net~~Net revenues of ~~$2,422~~$2,875 million in the current quarter increased ~~20% from the prior year quarter, reflecting higher results in both our financing and execution services businesses.~~

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~~17% compared with the prior year quarter, reflecting an increase in ~~market volumes~~execution services, partially offset by a decrease in ~~cash equities resulting in~~financing.

•Financing revenues decreased, primarily driven by a loss of $644 million, related to a credit event for a single client, partially offset by higher ~~Commissions and fees,~~average client balances and higher client ~~trading activity~~activity.

•Execution services revenues increased, primarily in derivatives ~~products, which was partially offset by~~due to the impact of market conditions on inventory held to facilitate client activity and higher client activity. Partially offsetting this increase was $267 million of trading losses ~~on certain counterparties’ failure~~related to ~~meet margin requirements and~~ the ~~impact of reduced dividend expectations on derivative valuations.~~same credit event.


March 2021 Form 10-Q			7


Table of Contents
Management’s Discussion and Analysis

Fixed Income

~~Fixed Income sales and trading net~~Net revenues of ~~$2,203~~$2,966 million in the current quarter ~~were 29% higher than~~increased 44% compared with the prior year quarter, primarily driven by ~~higher results in global macro products, partially offset by lower results in~~ credit products.

•Global macro products ~~Trading~~ revenues ~~increased primarily due to higher client activity~~decreased 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~~effect of ~~credit~~tighter bid-offer spreads ~~which resulted in losses~~compared with the prior year quarter, partially offset by the impact of market conditions on inventory held to facilitate client activity.

•Credit products revenues increased primarily due to the impact of market conditions on inventory held to facilitate client activity in securitized products, corporate credit products and municipal ~~securities,~~securities. In addition, higher client activity in securitized products was partially offset by ~~increased revenues from client activity~~the effect of tighter bid-offer spreads in corporate credit products ~~from higher volumes~~compared with the prior year quarter.

•Commodities products and ~~widening bid-offer spreads. Net interest~~other fixed income 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~~results.

Other ~~sales and trading~~Net Revenues

Net revenues of ~~$240~~$123 million in the current quarter increased ~~from~~126% compared with the prior year quarter ~~reflecting~~primarily due to lower mark-to-market losses on corporate loans held for sale, net of related economic hedges, and gains ~~on hedges~~from investments associated with ~~loans and lending commitments~~certain employee deferred compensation plans 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~~



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

~~Investments, Other Revenues, Non-interest Expenses, and Income Tax Items~~

~~Investments~~quarter.

Net ~~investment losses~~Interest

Net interest revenues of ~~$25~~$638 million in the current quarter are included within Equity, Fixed Income, and Other, and increased 38% compared ~~to gains in~~with the prior year quarter ~~were~~ primarily driven by ~~losses~~lower net costs associated with maintaining liquidity as well as higher revenues in ~~the current quarter on an energy-related investment~~corporate lending and ~~lower revenues from fund-related distributions.~~secured lending facilities.

~~Other Revenues~~Provision for Credit Losses

~~Other net losses of $1,079 million in the current quarter were primarily as a result of mark-to-market~~

The Provision for credit losses on loans and lending commitments ~~held~~was a net release of $93 million in the current quarter primarily driven by improvements in the outlook for ~~sale due to~~macroeconomic conditions and the ~~widening~~impact of paydowns on Corporate loans, including by lower-rated borrowers. The Provision for credit ~~spreads, compared with gains~~losses on loans and lending commitments of $388 million in the prior year quarter ~~as well as an increase~~was primarily driven by deterioration in the ~~provision~~current and expected macroeconomic environment at that time. For further information on the Provision for credit losses, ~~on loans held for investment.~~see “Credit Risk” herein.

Non-interest Expenses

Non-interest expenses of ~~$3,955~~$5,299 million in the current quarter increased ~~from~~38% compared with the prior year quarter, primarily reflecting a ~~20%~~72% increase in ~~Non-compensation~~Compensation and benefits expenses.

•Compensation and benefits expenses ~~remained relatively unchanged~~increased, primarily due to increases in ~~the current quarter as the benefit from a decrease in the fair value of investments~~discretionary incentive compensation driven by higher revenues, and higher expenses related to ~~which~~ certain deferred compensation plans ~~are referenced was offset by~~linked to investment performance.

•Non-compensation expenses increased, primarily reflecting 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~~and higher investments in ~~the provision for credit losses for lending commitments held for investment.~~technology.

Income Tax Items

~~Intermittent net~~Net discrete tax benefits of ~~$101~~$52 million and $66 million, were recognized in Provision for income taxes in the current quarter and the prior year ~~quarter. For further information, see “Supplemental Financial Information—Income Tax Matters” herein.~~

quarter, respectively.



~~March 2020 Form 10-Q~~	10



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

~~Wealth Management~~



			8						March 2021 Form 10-Q

~~Income Statement Information~~

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 )%

~~Results in the Wealth Management business segment reflect the significant effects of COVID-19 on the economy and markets in March 2020. In particular, in March:~~

~~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.~~

~~These effects, in the context of the full quarter’s results, are further discussed herein.~~

~~Financial Information and Statistical Data~~

At
March 31,
2020 At
December 31,
2019
$ 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.

Table of Contents

~~Transactional Revenues~~

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~~



~~Table of Contents~~
Management’s Discussion and Analysis

Wealth Management

Income Statement Information


	Three Months Ended March 31,
$ in millions	2021		2020		% Change
Revenues
Asset management	$	3,191	$	2,680	19	%
Transactional1	1,228		399		N/M









Net interest	1,385		896		55	%
Other1,2	155		81		91	%
Net revenues	5,959		4,056		47	%
Provision for credit losses2	(5)		19		(126)	%
Compensation and benefits	3,170		2,212		43	%
Non-compensation expenses	1,194		770		55	%
Total non-interest expenses	4,364		2,982		46	%
Income before provision for income taxes	$	1,600	$	1,055	52	%
Provision for income taxes	358		191		87	%
Net income applicable to Morgan Stanley	$	1,242	$	864	44	%

1.Transactional includes investment banking, trading, and commissions and fees revenues. Other includes investments and other revenues. For further information, see Note 20 to the financial statements.

2.Certain prior period amounts have been reclassified to conform to the current presentation. See "Business Segments" herein and Note 1 to the financial statements for additional information.

Acquisition of E*TRADE

The comparisons of current year results to prior periods are impacted by the acquisition of E*TRADE in the fourth quarter of 2020. For additional information on the acquisition of E*TRADE, see Note 3 to the financial statements in the Form 2020 10-K.

Wealth Management Metrics




$ in billions	At March 31, 2021		At December 31, 2020
Total client assets	$	4,231	$	3,999

U.S. Bank Subsidiary loans	$	104.9	$	98.1
Margin and other lending1	$	26.6	$	23.1
Deposits2	$	322	$	306
Weighted average cost of deposits3	0.18%		0.24%


	Three Months Ended March 31,

	2021		2020

Net new assets4	$	104.9	$	37.1

1.Margin and other lending represents Wealth Management margin lending arrangements, which allow customers to borrow against the value of qualifying securities and Wealth Management other lending which includes non‐purpose securities-based lending on non‐bank entities.

2.Deposits are sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. Excludes approximately $8 billion and $25 billion of off-balance sheet deposits as of March 31, 2021 and December 31, 2020, respectively.

3.Weighted average cost of deposits represents the annualized weighted average cost of deposits as of March 31, 2021 and December 31, 2020.

4.Net new assets represents client inflows (including dividends and interest) less client outflows (excluding activity from business combinations/divestitures and the impact of fees and commissions).

Advisor-led channel




$ in billions	At March 31, 2021		At December 31, 2020

Advisor-led client assets1	$	3,349	$	3,167
Fee-based client assets2	$	1,574	$	1,472

Fee-based client assets as a percentage of advisor-led client assets	47%		46%












	Three Months Ended March 31,
	2021		2020
Fee-based asset flows3	$	37.2	$	18.4

1.Advisor-led client assets represents client assets in accounts that have a Wealth Management representative assigned.

2.Fee‐based client assets represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.

3.Fee-based asset flows includes net new fee-based assets, net account transfers, dividends, interest and client fees, and excludes institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets in the 2020 Form 10-K.

Self-directed channel




$ in billions	At March 31, 2021		At December 31, 2020








Self-directed assets1	$	882	$	832

Self-directed households (in millions)2	7.2		6.7

















	Three Months Ended March 31,
	2021	2020
Daily average revenue trades (“DARTs”) (in thousands)3	1,619	5

1.Self-directed assets represents active accounts which are not advisor led. Active accounts are defined as having $25 or more in assets.

2.Self-directed households represents the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels will be included in each of the respective channel counts.

3.DARTs represent the total self-directed trades in a period divided by the number of trading days during that period.

Workplace channel1




$ in billions	At March 31, 2021		At December 31, 2020













Workplace unvested assets2	$	461	$	435
Number of participants (in millions)3	5.1		4.9

1.The workplace channel includes equity compensation solutions for companies, their executives and employees.

2.Workplace unvested assets represents the market value of public company securities at the end of the period.

3.Workplace participants represents total accounts with vested or unvested assets >0 in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.

Net Revenues

~~Transactional Revenues~~

Transactional revenues of $399 million in the current quarter decreased 51% from the prior year quarter as negative Trading revenues were partially offset by higher Commissions and fees and Investment banking revenues.

~~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.~~

~~Asset Management~~

Asset management revenues of $2,680 million in the current quarter increased 14% from the prior year quarter primarily due to higher fee-based assets levels at the beginning of the monthly billing cycles in 2020 due to market appreciation and positive net flows, partially offset by lower average fee rates.

~~See “Fee-Based Client Assets—Rollforwards” herein.~~

~~Other~~

~~Other revenues of $62 million in the current quarter decreased 23% from the prior year quarter primarily due to an increase in the provision for credit losses.~~

~~Net Interest~~

Net interest of $896 million in the current quarter decreased 21% from the prior year quarter primarily due to lower interest rates on Loans and the investment portfolio, changes in our funding mix, and higher prepayment amortization expense related to mortgage-backed securities. These decreases were partially offset by the impact of lower rates paid on brokerage sweep deposits and higher Loan balances.

~~Non-interest Expenses~~

Non-interest expenses of $2,982 million in the current quarter decreased 7% from the prior year quarter primarily as a result of lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses.

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

~~payout to Wealth Management representatives driven by the mix of revenues.~~

~~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.~~

~~Fee-Based Client Assets~~

~~Rollforwards~~

$ in billions At
December 31,
2019 Inflows Outflows
Market
Impact
At
March 31,
2020
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 At
December 31,
2018 Inflows Outflows
Market
Impact
At
March 31,
2019
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

~~Average Fee Rates~~

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.~~

For a description of fee-based client assets and rollforward items in the previous tables, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Wealth Management—Fee-Based Client Assets” in the 2019 Form 10-K.



~~March 2020 Form 10-Q~~	12



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

~~Investment Management~~

~~Income Statement Information~~

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 )%

~~Results in the Investment Management business segment reflect the significant effects of COVID-19 on the economy and markets in March 2020. In particular, in March:~~

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.

~~These effects, in the context of the full quarter’s results, are further discussed herein.~~

~~Net Revenues~~

~~Investments~~

Investments revenues of $63 million in the current quarter decreased 67% from the prior year quarter primarily as a result of the reversal of accrued carried interest and investment losses in certain private equity, real estate, and infrastructure funds and losses on seed investments in certain funds. Partially offsetting these decreases were higher carried interest and investment gains in an Asia private equity fund, principally driven by gains from an underlying investment, which is subject to certain sales restrictions.

Asset Management

Asset management revenues of ~~$665~~$3,191 million in the current quarter increased 8%19% compared with the prior year quarter, primarily due to higher fee-based asset levels in the current quarter as a result of market appreciation and positive fee-based flows.

See “Fee-Based Client Assets—Rollforwards” herein.


March 2021 Form 10-Q			9


Table of Contents
Management’s Discussion and Analysis

Transactional Revenues

Transactional revenues of $1,228 million in the current quarter increased substantially compared with the prior year quarter, primarily due to gains from investments associated with certain employee deferred compensation plans, and incremental revenues as a result of the E*TRADE acquisition.

Net Interest

Net interest of $1,385 million increased 55% compared with the prior year quarter, primarily due to incremental Net interest as a result of the E*TRADE acquisition, improved prepayment amortization related to mortgage-backed securities, growth in bank lending and increases in investment portfolio balances driven by higher brokerage sweep deposits. These increases were partially offset by the net effect of lower interest rates.

Other

Other revenues of $155 million in the current quarter increased 91% compared with the prior year quarter, primarily due to incremental revenues as a result of the E*TRADE acquisition.

Non-interest Expenses

Non-interest expenses of $4,364 million in the current quarter increased 46% compared with the prior year quarter, primarily as a result of higher Compensation and benefits expenses and Non-compensation expenses.

•Compensation and benefits expenses increased primarily due to higher expenses related to certain deferred compensation plans linked to investment performance, an increase in the formulaic payout to Wealth Management representatives driven by higher compensable revenues and incremental compensation as a result of the E*TRADE acquisition.

•Non-compensation expenses increased primarily due to incremental operating and other expenses as a result of the E*TRADE acquisition.

Fee-Based Client Assets Rollforwards


$ in billions	At December 31, 2020		Inflows		Outflows		Market Impact		At March 31, 2021
Separately managed1	$	359	$	13	$	(7)	$	20	$	385
Unified managed	379		27		(14)		13		405
Advisor	177		12		(9)		8		188
Portfolio manager	509		33		(18)		25		549
Subtotal	$	1,424	$	85	$	(48)	$	66	$	1,527
Cash management	48		8		(9)		—		47
Total fee-based client assets	$	1,472	$	93	$	(57)	$	66	$	1,574


$ in billions	At December 31, 2019		Inflows		Outflows		Market Impact		At March 31, 2020
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

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.

Average Fee Rates


	Three Months Ended March 31,
Fee rate in bps		2021	2020
Separately managed		14	14
Unified managed		97	99
Advisor		81	85
Portfolio manager		93	94
Subtotal		73	72
Cash management		5	5
Total fee-based client assets		71	71


			10			March 2021 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

Investment Management

Income Statement Information


	Three Months Ended March 31,
$ in millions	2021		2020		% Change
Revenues
Asset management and related fees	$	1,103	$	665	66	%
Performance-based income and other1	211		27		N/M

Net revenues	1,314		692		90	%
Compensation and benefits	514		257		100	%
Non-compensation expenses	430		292		47	%
Total non-interest expenses	944		549		72	%
Income before provision for income taxes	370		143		159	%
Provision for income taxes	81		25		N/M
Net income	289		118		145	%
Net income applicable to noncontrolling interests	14		40		(65)	%
Net income applicable to Morgan Stanley	$	275	$	78	N/M

1.Includes Investments, Trading, Commissions and fees, Net interest, and Other revenues. For further information, see Note 20 to the financial statements.

Acquisition of Eaton Vance

On March 1, 2021, we completed the acquisition of Eaton Vance via the issuance of approximately $5.3 billion of common shares and cash consideration of approximately $3.4 billion. The combination increases the capabilities and scale of our investment management franchise, and positions the Investment Management business segment as a premier asset manager. From the acquisition date onward, the business activities of Eaton Vance have been reported within the Investment Management business segment, the substantial majority of which are within Asset management and related fees. The comparisons of current year results to prior periods are impacted by this acquisition. For additional information on the acquisition of Eaton Vance, see Note 3 to the financial statements.

Net Revenues

Asset Management and related fees

Asset management and related fees of $1,103 million in the current quarter increased 66% compared with the prior year quarter, primarily as a result of higher average ~~AUM.~~AUM, driven by strong investment performance and positive net flows across all asset classes, as well as incremental revenues as a result of the Eaton Vance acquisition.

See “Assets Under Management or Supervision” herein.

Performance-based income and other

Performance-based income and other revenues of $211 million in the current quarter increased compared with the prior year quarter, primarily due to higher accrued carried interest, particularly in real estate funds.

Non-interest Expenses

Non-interest expenses of ~~$549~~$944 million in the current quarter ~~decreased 13% from~~increased 72% compared with the prior year quarter ~~primarily~~ as a result of ~~lower compensation and benefits expenses, partially offset by~~ higher ~~non-compensation expenses.~~

Compensation and benefits expenses ~~decreased~~and higher Non-compensation expenses.

•Compensation and benefits expenses increased in the current quarter primarily due to ~~lower~~higher discretionary incentive compensation driven by higher revenues, higher compensation associated with carried interest, and incremental compensation as a ~~decrease in~~result of the ~~fair value of investments to which certain deferred compensation plans are referenced.~~Eaton Vance acquisition.

•Non-compensation expenses in the current quarter increased ~~from~~compared with the prior year quarter primarily ~~as a result of~~due to higher fee sharing paid to intermediaries driven by higher average ~~AUM.~~AUM, as well as incremental expenses as a result of the Eaton Vance acquisition.



	13	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

Assets Under Management or Supervision

~~Rollforwards~~

$ in billions At
December 31, 2019 Inflows Outflows
Market
Impact
Other At
March 31,
2020
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 At
December 31, 2018 Inflows Outflows
Market
Impact
Other At
March 31,
2019
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

Rollforwards


$ in billions	Equity		Fixed income		Alternatives and Solutions		Long-term AUM Subtotal		Liquidity and Overlay Services		Total
December 31, 2020	$	242	$	98	$	153	$	493	$	288	$	781
Inflows	31		13		15		59		459		518
Outflows	(23)		(9)		(10)		(42)		(433)		(475)
Market Impact	4		(2)		10		12		—		12
Acquisition1	119		103		251		473		116		589
Other	(2)		(2)		(1)		(5)		(1)		(6)
March 31, 2021	$	371	$	201	$	418	$	990	$	429	$	1,419

1.Related to the Eaton Vance acquisition.


$ in billions	Equity		Fixed income		Alternatives and Solutions		Long-term AUM Subtotal		Liquidity and Overlay Services		Total
December 31, 2019	$	138	$	79	$	139	$	356	$	196	$	552
Inflows	14		10		8		32		446		478
Outflows	(12)		(9)		(4)		(25)		(395)		(420)
Market Impact	(18)		(4)		(7)		(29)		1		(28)
Other	(1)		(1)		5		3		(1)		2
March 31, 2020	$	121	$	75	$	141	$	337	$	247	$	584


March 2021 Form 10-Q			11

~~Average AUM~~

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


Table of Contents
Management’s Discussion and Analysis

Average AUM


	Three Months Ended March 31,
$ in billions		2021		2020
Equity		$	288	$	133
Fixed income		131		79
Alternatives and Solutions		242		139
Long-term AUM subtotal		661		351
Liquidity and Overlay Services		339		206
Total AUM		$	1,000	$	557

Average Fee Rates


	Three Months Ended March 31,
Fee rate in bps		2021	2020
Equity		77	77
Fixed income		33	31
Alternatives and Solutions		45	60
Long-term AUM		57	60
Liquidity and Overlay Services		8	17
Total AUM		40	44

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

While Asset management and related fees arising from the acquisition will be incremental to the Firm’s results, certain Eaton Vance products have lower average fee rates, and are expected to impact the averages in the previous table in future periods compared with the corresponding prior periods. For a description of the asset classes and rollforward items in the previous tables, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Investment Management—Assets Under Management or Supervision” in the ~~2019~~2020 Form ~~10-K.~~10-K, except for the following updates to the definitions below, which reflect the inclusion of certain Eaton Vance products.

•Alternatives and Solutions—includes products in fund of funds, real estate, infrastructure, private equity and credit strategies, multi-asset portfolios as well as custom separate account portfolios.

•Liquidity and Overlay Services—includes liquidity fund products as well as overlay services, which represent investment strategies that use passive exposure instruments to obtain, offset or substitute specific portfolio exposures, beyond those provided by the underlying holdings of the fund.



12	March ~~2020~~2021 Form 10-Q	14



Table of Contents
Management’s Discussion and Analysis

Supplemental Financial Information

~~Income Tax Matters~~

~~Effective Tax Rate from Continuing Operations~~

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.~~

The current quarter includes intermittent net discrete tax benefits associated with the remeasurement of prior years’ tax liabilities. The prior year quarter includes intermittent net discrete tax benefits primarily associated with remeasurement of reserves and related interest as a result of new information pertaining to the resolution of multi-jurisdiction tax examinations. See Note 18 to the financial statements for further information.

U.S. Bank Subsidiaries

Our U.S. bank subsidiaries, Morgan Stanley Bank N.A. (“MSBNA”) ~~and~~, Morgan Stanley Private Bank, National Association (“MSPBNA”), E*TRADE Bank (“ETB”), and E*TRADE Savings Bank (“ETSB”) (collectively, “U.S. Bank Subsidiaries”) accept ~~deposits;~~deposits, provide loans to a variety of customers, ~~from~~including large corporate and institutional clients toas well as high net worth ~~individuals;~~individuals, and invest in securities. Lending activity recorded in the U.S. Bank ~~subsidiaries~~Subsidiaries from the Institutional Securities business segment primarily includes secured lending facilities, commercial and residential real estate loans, and ~~lending commitments to~~ corporate ~~clients.~~loans. Lending activity recorded in the U.S. Bank ~~subsidiaries~~Subsidiaries from the Wealth Management business segment primarily includes securities-based lending, which allows clients to borrow money against the value of qualifying securities, and residential real estate loans.

For a further discussion of our credit risks, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk.” For a further discussion about loans and lending commitments, see Notes 910 and 1314 to the financial statements.

U.S. Bank Subsidiaries’ Supplemental Financial Information¹


$ in billions	At March 31, 2021		At December 31, 2020
Investment securities portfolio:
Investment securities—AFS	84.8		90.3
Investment securities—HTM	64.6		52.6
Total investment securities	$	149.4	$	142.9
Wealth Management Loans2
Residential real estate	$	36.8	$	35.2
Securities-based lending and Other3	68.1		62.9
Total	$	104.9	$	98.1
Institutional Securities Loans2
Corporate	$	9.5	$	7.9
Secured lending facilities	27.8		27.4
Commercial and Residential real estate	8.9		10.1
Securities-based lending and Other	6.3		5.4
Total	$	52.5	$	50.8
Total Assets	$	357.2	$	346.5
Deposits4	$	321.6	$	309.7

$ in billions At
March 31,
2020 At
December 31,
2019
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.


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~~2.For a further discussion of 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.~~

~~Other Matters~~

~~Planned Acquisition of E*TRADE~~

On February 20, 2020, we entered into a definitive agreement under which we will acquire E*TRADE Financial Corporation (“E*TRADE”) in an all-stock transaction. In the current quarter, we filed our application with the Federal Reserve and in early April the Hart-Scott-Rodino Antitrust waiting period expired. The acquisition is subject to customary closing conditions, including regulatory approvals and approval by E*TRADE shareholders, and we continue to expect the acquisition to close in the ~~fourth quarter of 2020.~~Wealth Management and Institutional Securities business segments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein.

3.Other loans primarily include tailored lending.

4.For further information on deposits, see “Liquidity and Capital Resources—Funding Management—Unsecured Financing” herein.

Accounting Development Updates

The Financial Accounting Standards Board has issued certain accounting updates, ~~that apply to us. Accounting updates not listed below were assessed and~~which we have either determined ~~to be~~are not applicable or are not expected to have a significant impact on our financial statements.



	15	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

~~The following accounting update is currently being evaluated to determine the potential impact of adoption:~~

•

~~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.

Critical Accounting Policies

Our financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions (see Note 1 to the financial statements). We believe that of our significant accounting policies (see Note 2 to the financial statements in the ~~2019~~2020 Form 10-K and Note 2 to the financial statements), the fair value, goodwill and intangible assets, legal and regulatory contingencies and income taxes policies involve a higher degree of judgment and complexity. For a further discussion about our critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in the ~~2019~~2020 Form 10-K. As discussed in Note 2 to the financial statements, our acquisition of Eaton Vance on March 1, 2021 included indefinite lived intangible assets. The initial valuation of an intangible asset, including indefinite lived intangible assets, as part of the acquisition method of accounting and the subsequent valuation of intangible assets as part of impairment assessments are subjective and based, in part, on inputs that are unobservable. These inputs include, but are not limited to, forecasted cash flows, revenue growth rates, attrition rates and discount rates.

Liquidity and Capital Resources

Senior management, with oversight by the Asset/Liability Management Committee and the Board of Directors (“Board”), establishes and maintains our liquidity and capital policies. Through various risk and control committees, senior management reviews business performance relative to these policies, monitors the availability of alternative sources of financing, and oversees the liquidity, interest rate and currency sensitivity of our asset and liability position. Our Treasury department, Firm Risk Committee, Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and controlling the impact that our business activities have on our balance sheet, liquidity and capital structure. Liquidity and capital matters are reported regularly to the Board and the Risk Committee of the Board.

Balance Sheet

We monitor and evaluate the composition and size of our balance sheet on a regular basis. Our balance sheet management process includes quarterly planning, business-specific thresholds, monitoring of business-specific usage versus key performance metrics and new business impact assessments.

We establish balance sheet thresholds at the consolidated and business segment levels. We monitor balance sheet utilization and review variances resulting from business activity and market fluctuations. On a regular basis, we review current performance versus established thresholds and assess the need to re-allocate our balance sheet based on business unit needs. We also monitor key metrics, including asset and liability size and capital usage.


March 2021 Form 10-Q			13


Table of Contents
Management’s Discussion and Analysis

Total Assets by Business Segment


	At March 31, 2021
$ in millions	IS		WM		IM		Total
Assets
Cash and cash equivalents	$	93,021	$	24,396	$	701	$	118,118
Trading assets at fair value	307,854		310		4,994		313,158
Investment securities	40,888		148,318		—		189,206
Securities purchased under agreements to resell	87,279		27,442		—		114,721
Securities borrowed	100,957		1,192		—		102,149
Customer and other receivables	80,475		33,381		1,187		115,043
Loans1	54,163		104,933		27		159,123
Other assets2	13,918		21,702		11,634		47,254
Total assets	$	778,555	$	361,674	$	18,543	$	1,158,772


	At March 31, 2020									At December 31, 2020
$ in millions	IS		WM		IM		Total		$ in millions	IS		WM		IM		Total
Assets									Assets
Cash and cash equivalents	$	101,615	$	29,803	$	91	$	131,509	Cash and cash equivalents	$	74,281	$	31,275	$	98	$	105,654
Trading assets at fair value	266,781		389		3,746		270,916		Trading assets at fair value	308,413		280		4,045		312,738
Investment securities	40,662		75,495		—		116,157		Investment securities	41,630		140,524		—		182,154
Securities purchased under agreements to resell	88,008		16,792		—		104,800		Securities purchased under agreements to resell	84,998		31,236		—		116,234
Securities borrowed	71,826		474		—		72,300		Securities borrowed	110,480		1,911		—		112,391
Customer and other receivables	58,523		15,216		685		74,424		Customer and other receivables	67,085		29,781		871		97,737
Loans¹	66,171		82,516		10		148,697		Loans1	52,449		98,130		18		150,597
Other assets²	13,903		13,139		1,950		28,992		Other assets2	13,986		22,458		1,913		38,357
Total assets	$	707,489	$	233,824	$	6,482	$	947,795	Total assets	$	753,322	$	355,595	$	6,945	$	1,115,862

At December 31, 2019
$ 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

IS—Institutional Securities

WM—Wealth Management

IM—Investment Management

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 10 to the financial statements).

~~WM—Wealth Management~~2.Other assets primarily includes Goodwill and Intangible assets, premises, equipment and software, ROU assets related to leases, other investments, and deferred tax assets.

~~IM—Investment Management~~


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.~~

A substantial portion of total assets consists of liquid marketable securities and short-term ~~receivables arising principally~~receivables. In the Institutional Securities business segment, these arise from sales and trading activities, and in the ~~Institutional Securities~~



~~March 2020 Form 10-Q~~	16



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

~~business segment. Total assets increased to $948 billion at March 31, 2020 from $895 billion at December 31, 2019.~~

~~Within~~ Wealth Management ~~assets increased in~~business segment, these arise from banking activities, including management of the investment portfolio, comprising Investment securities, Cash and cash equivalents ~~Investment securities~~ and Securities purchased under agreements to ~~resell, as a result of significantly higher deposits in this segment, and loans continued~~resell. Total assets increased slightly to ~~grow.~~

Institutional Securities’ assets were also higher reflecting increases within Cash and cash equivalents, primarily due to higher initial margin related to derivatives; Customer and other receivables, resulting$1,159 billion at March 31, 2021 from higher volumes of unsettled transactions in line with market conditions; and loan growth in March in support of client needs. Additionally, within Institutional Securities, Trading assets and Securities borrowed decreased, predominantly driven by corporate equities as the markets declined. The decrease in Trading assets includes a partial offset related to increased derivative exposures related to market volatility.$1,116 billion at December 31, 2020.

Liquidity Risk Management Framework

The core components of our Liquidity Risk Management Framework are the Required Liquidity Framework, Liquidity Stress Tests and Liquidity Resources, which support our target liquidity profile. For a further discussion about the Firm’s Required Liquidity Framework and Liquidity Stress Tests, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity Risk Management Framework” in the ~~2019~~2020 Form 10-K.

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we maintained sufficient liquidity to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests.

Liquidity Resources

We maintain sufficient liquidity resources, which ~~are comprised~~consist of HQLA and cash deposits with banks (“Liquidity Resources”) to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests. The total amount of Liquidity Resources is actively managed by us considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.

The amount of Liquidity Resources we hold is based on our risk tolerance and is subject to change depending on market and Firm-specific events. The Liquidity Resources are primarily held within the Parent Company and its major operating subsidiaries. The Total HQLA values in the tables immediately following are different from Eligible HQLA, which, in

accordance with the LCR rule, also takes into account certain regulatory weightings and other operational considerations.

Liquidity Resources by Type of Investment


$ in millions	At March 31, 2021		At December 31, 2020
Cash deposits with central banks	$	59,154	$	49,669
Unencumbered HQLA Securities1:
U.S. government obligations	135,008		136,555
U.S. agency and agency mortgage-backed securities	110,659		99,659
Non-U.S. sovereign obligations2	37,434		39,745
Other investment grade securities	2,015		2,053
Total HQLA1	$	344,270	$	327,681
Cash deposits with banks (non-HQLA)	9,034		10,942
Total Liquidity Resources	$	353,304	$	338,623

1.¹HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries.

2.Primarily composed of unencumbered French, U.K., Japanese, German and Dutch government obligations.

$ in millions At
March 31,
2020 At
December 31,
2019
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.~~

Liquidity Resources by Bank and Non-Bank Legal Entities¹


	At March 31, 2021		At December 31, 2020		Average Daily Balance Three Months Ended
$ in millions					March 31, 2021
Bank legal entities
U.S.	$	184,993	$	178,033	$	189,008
Non-U.S.	8,889		7,670		7,882
Total Bank legal entities	193,882		185,703		196,890
Non-Bank legal entities
U.S.:
Parent Company	54,854		59,468		57,194
Non-Parent Company	42,299		33,368		40,982
Total U.S.	97,153		92,836		98,176
Non-U.S.	62,269		60,084		58,735
Total Non-Bank legal entities	159,422		152,920		156,911
Total Liquidity Resources	$	353,304	$	338,623	$	353,801

$ in millions At
March 31,
2020 At
December 31,
2019
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.14			March 2021 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt and estimates of funding needs in a stressed environment, among other factors. ~~During the current quarter, cash deposits at central banks have increased, largely driven by an increase in deposits received from customers.~~



	17	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

Regulatory Liquidity Framework

~~Liquidity Coverage Ratio~~

We and our U.S. Bank Subsidiaries are subject to LCR requirements, including a requirement to calculate each entity’s LCR on each business day. The requirements are designed to ensure that banking organizations have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. The LCR calculation applies weightings (or asset haircuts) to HQLA and excludes certain HQLA held in subsidiaries.

~~As of~~ ~~March 31, 2020~~, we and our U.S. Bank Subsidiaries are compliant with the minimum required LCR of 100%. For further information on regulatory developments that have impacted our LCR, see “Liquidity and Capital Resources—Regulatory Requirements—Regulatory Developments” herein.

Liquidity Coverage Ratio

The Firm, MSBNA and MSPBNA are required to comply with, and subject to a transition period, ETB will be required to comply with, LCR requirements, including a requirement to calculate each entity’s LCR on each business day. The requirements are designed to ensure that banking organizations have sufficient Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded.

Average Daily Balance
Three Months Ended
$ in millions March 31,
2020 December 31,
2019
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 %
As of March 31, 2021, the Firm, MSBNA and MSPBNA are compliant with the minimum required LCR of 100%.

Liquidity Coverage Ratio


	Average Daily Balance Three Months Ended
$ in millions	March 31, 2021			December 31, 2020
Eligible HQLA1
Cash deposits with central banks	$	50,815		$	43,596
Securities2	166,060			162,509
Total Eligible HQLA1	$	216,875		$	206,105
LCR	125		%	129		%

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.~~

~~The reduction in~~ the LCR ~~was driven by lower average~~rule, Eligible HQLA ~~amounts, which included the removal from Eligible~~is calculated using weightings and excluding certain HQLA ~~of certain~~held in subsidiaries.

2.Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, ~~used to secure intraday credit, following a recent regulatory rule clarification.~~sovereign bonds and investment grade corporate bonds.

Net Stable Funding Ratio

The U.S. banking agencies have finalized a rule to implement the NSFR, which requires large banking organizations to maintain sufficiently stable sources of funding over a one-year ~~horizon. In 2016,~~time horizon, and will apply to us, MSBNA, MSPBNA and ETB. As of March 31, 2021, we estimate we are compliant with the ~~U.S. banking agencies issued a proposal to implement~~100% minimum NSFR and that we will be in compliance with the ~~NSFR in the U.S.; however, a~~ final rule ~~has not yet been issued. For an additional discussion~~on July 1, 2021, the effective date of the NSFR, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Liquidity Framework—Net Stable Funding Ratio” in the 2019 Form 10-K.requirements.

Funding Management

We manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor

of our liabilities equals or exceeds the expected holding period of the assets being financed.

We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies.

Secured Financing

For a discussion of our secured financing activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Funding Management—Secured Financing” in the ~~2019~~2020 Form 10-K.

Collateralized Financing Transactions


$ in millions	At March 31, 2021		At December 31, 2020
Securities purchased under agreements to resell and Securities borrowed	$	216,870	$	228,625
Securities sold under agreements to repurchase and Securities loaned	$	63,050	$	58,318
Securities received as collateral1	$	4,758	$	4,277


						Average Daily Balance Three Months Ended
$ in millions	At March 31, 2020		At December 31, 2019		$ in millions	March 31, 2021		December 31, 2020
Securities purchased under agreements to resell and Securities borrowed	$	177,100	$	194,773	Securities purchased under agreements to resell and Securities borrowed	$	214,610	$	195,376
Securities sold under agreements to repurchase and Securities loaned	$	57,447	$	62,706	Securities sold under agreements to repurchase and Securities loaned	$	61,152	$	54,528
Securities received as collateral¹	$	4,711	$	13,022

1.Included within Trading assets in the balance sheets.

Average Daily Balance
Three Months Ended
$ in millions March 31,
2020 December 31,
2019
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.~~

See “Total Assets by Business Segment” herein for more details on the assets shown in the previous table and Note 2 to the financial statements in the ~~2019~~2020 Form 10-K and Note 89 to the financial statements for more details on collateralized financing transactions.

In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheets, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheets. Our risk exposure on these transactions is mitigated by collateral maintenance ~~policies. We also hold related liquidity reserves.~~policies and the elements of our Liquidity Risk Management Framework.

Unsecured Financing

For a discussion of our unsecured financing activities, see “Management’s Discussion and Analysis of Financial Condition



~~March 2020 Form 10-Q~~	18



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

and Results of Operations—Liquidity and Capital Resources—Funding Management—Unsecured Financing” in the ~~2019~~2020 Form 10-K.

~~Deposits~~

$ in millions At
March 31,
2020 At
December 31,
2019
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.March 2021 Form 10-Q			~~Amounts represent balances swept from client brokerage accounts.~~15


Table of Contents
Management’s Discussion and Analysis

Deposits


$ in millions	At March 31, 2021		At December 31, 2020
Savings and demand deposits:
Brokerage sweep deposits1	$	253,411	$	232,071
Savings and other	45,576		47,150
Total Savings and demand deposits	298,987		279,221
Time deposits	24,151		31,561
Total2	$	323,138	$	310,782

1.Amounts represent balances swept from client brokerage accounts.

2.Excludes approximately $8 billion and $25 billion of off-balance sheet deposits at unaffiliated financial institutions as of March 31, 2021 and December 31, 2020, respectively. This client cash held by third parties is not reflected in our balance sheets and is not immediately available for liquidity purposes.

Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics. Total deposits at March 31, 2020 significantly increased compared with December 31, 2019, primarily driven by higher brokerage sweep and savings deposits as customers sought relative safety away from volatile marketsThe increase in ~~March. In addition,~~ total deposits ~~increased as a result~~in the current quarter was primarily due to the onboarding of ~~higher time deposits. See Management’s Discussion and Analysis~~approximately $20 billion of ~~Financial Condition and Results of Operations—Executive Summary—Coronavirus Disease (COVID-19) Pandemic herein for further information on market and economic conditions.~~E*TRADE Brokerage sweep deposits previously held off-balance sheet at unaffiliated financial institutions.

Borrowings by Remaining Maturity at March 31, ~~2020~~2021¹


$ in millions	Parent Company		Subsidiaries		Total
Original maturities of one year or less	$	1,501	$	6,058	$	7,559
Original maturities greater than one year
2021	$	12,517	$	4,487	$	17,004
2022	11,930		6,440		18,370
2023	17,056		5,880		22,936
2024	18,824		7,472		26,296
2025	11,859		6,940		18,799
Thereafter	81,975		22,887		104,862
Total	$	154,161	$	54,106	$	208,267
Total Borrowings	$	155,662	$	60,164	$	215,826
Maturities over next 12 months2					$	18,976

$ in millions Parent Company Subsidiaries 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.


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.~~

2.Includes only borrowings with original maturities greater than one year.

Borrowings of ~~$195~~$216 billion as of March 31, ~~2020~~2021 were relatively unchanged when compared with ~~$193~~$217 billion at December 31, ~~2019.~~2020.

We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit sensitive instruments. Borrowings

with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types.

The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall availability of credit. We also engage in, and may continue to

engage in, repurchases of our borrowings in the ordinary course of business.

For further information on Borrowings, see Note 1213 to the financial statements.

Credit Ratings

We rely on external sources to finance a significant portion of our daily operations. The cost and availability of financing generally are impacted by our credit ratings, among other things. In addition, our credit ratings can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. These include regulatory or legislative changes, the macroeconomic environment and perceived levels of support, among other things. See also “Risk Factors— Liquidity Risk” in the ~~2019~~2020 Form 10-K.

Parent Company, MSBNA and ~~U.S. Bank Subsidiaries'~~MSPBNA Issuer Ratings at April 30, ~~2020~~

2021



	Parent Company
	Short-Term Debt	Long-Term Debt	Rating Outlook
DBRS, Inc.	R-1 (middle)	A (high)	Stable
Fitch Ratings, Inc.	F1	A	~~Negative~~Stable
Moody’s Investors Service, Inc.	~~P-2~~P-1	A3A1	~~Ratings Under Review~~Stable
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~~Stable
Moody’s Investors Service, Inc.	P-1	A1Aa3	~~Ratings Under Review~~Stable
S&P Global Ratings	A-1	A+	Stable



	MSPBNA
	Short-Term Debt	Long-Term Debt	Rating Outlook
Moody’s Investors Service, Inc.	P-1	A1Aa3	~~Ratings Under Review~~Stable
S&P Global Ratings	A-1	A+	Stable

~~On February 21, 2020, Moody’s Investors Service, Inc. placed the Parent Company and U.S. Bank Subsidiaries on review for~~



	19	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

~~possible upgrade, changing their outlooks from Positive to Ratings Under Review.~~

On April 23, 2020, Fitch Ratings, Inc. placed the Parent Company and MSBNA ratings on Negative outlook, a change from Stable, related to their expectation of significant operating environment headwinds due to the disruption to economic activity and financial markets from the COVID-19 pandemic.

Incremental Collateral or Terminating Payments

In connection with certain OTC derivatives and certain other agreements where we are a liquidity provider to certain financing vehicles associated with the Institutional Securities business segment, we may be required to provide additional collateral, immediately settle any outstanding liability balances with certain counterparties or pledge additional collateral to certain clearing organizations in the event of a future credit rating downgrade irrespective of whether we are in a net asset or net liability position. See Note 67 to the financial statements for additional information on OTC derivatives that contain such contingent features.

While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact it


			16			March 2021 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

would have on our business and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency pre-downgrade, individual client behavior and future mitigating actions we might take. The liquidity impact of additional collateral requirements is included in our Liquidity Stress Tests.

Capital Management

We view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements and rating agency guidelines. In the future, we may expand or contract our capital base to address the changing needs of our businesses.

Common Stock Repurchases


	Three Months Ended March 31,
in millions, except for per share data		2021		2020
Number of shares		28		29
Average price per share		$	77.47	$	46.01
Total		$	2,135	$	1,347

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

On March 15, 2020, the Financial Services Forum announced that its eight U.S. Bank members, including us, had voluntarily suspended their share repurchase programs. See “Executive Summary—Coronavirus Disease (COVID-19) Pandemic”

~~herein for~~For additional information on ~~the current~~our common stock repurchases, see “Liquidity and ~~possible future effects of the COVID-19 pandemic on our results.~~Capital Resources—Regulatory Requirements—Capital Action Supervisory Restrictions” herein.

For further information on our common stock repurchases, see Note 1617 to the financial statements.

For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress ~~Tests.”~~Capital Buffer” herein.

Common Stock Dividend Announcement

For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Action Supervisory Restrictions” herein.

Preferred Stock Dividend Announcement


	Series M and N	All Other Series
Announcement date	~~March~~February 16, ~~2020~~2021	February 16, 2021
Date paid	March 15, 2021	April 15, ~~2020~~2021
Shareholders of record as of	March 1, 2021	March 31, ~~2020~~2021

For additional information on common and preferred stock, see Note 1617 to the financial statements.

Off-Balance Sheet Arrangements and Contractual Obligations

Off-Balance Sheet Arrangements

We enter into various off-balance sheet arrangements, including through unconsolidated SPEs and lending-related financial instruments (~~e.g.~~(e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments.

We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 1416 to the financial ~~statements.~~statements in the 2020 Form 10-K.

For information on our commitments, obligations under certain guarantee arrangements and indemnities, see Note 1314 to the financial statements. For a further discussion of our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending ~~Commitments.”~~Commitments” herein.

Contractual Obligations

For a discussion about our contractual obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations” in the ~~2019~~2020 Form 10-K.



~~March 2020 Form 10-Q~~	20



~~Table of Contents~~
~~Management’s Discussion and Analysis~~

Regulatory Requirements

Regulatory Capital Framework

We are an FHC under the Bank Holding Company Act of 1956, as amended (“BHC Act”), and are subject to the regulation and oversight of the Federal Reserve. The Federal Reserve establishes capital requirements for us, including “well-capitalized” standards, and evaluates our compliance with such capital requirements. Regulatory capital requirements established by the Federal Reserve are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). The OCC establishes similar capital requirements and standards for our U.S. Bank Subsidiaries. For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S. Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC. For additional information on regulatory capital requirements for our U.S. Bank Subsidiaries, see Note 1516 to the financial statements.

Regulatory Capital Requirements

We are required to maintain minimum risk-based and leverage-based capital and TLAC ratios. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Capital Requirements” in


March 2021 Form 10-Q			17


Table of Contents
Management’s Discussion and Analysis

the ~~2019~~2020 Form 10-K. For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein.

Risk-Based Regulatory Capital. Minimum risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital (which includes Tier 2 capital). Capital standards require certain adjustments to, and deductions from, capital for purposes of determining these ratios.

~~In addition to~~Risk-Based Regulatory Capital Ratio Requirements


			At March 31, 2021 and December 31, 2020
			Standardized	Advanced
Capital buffers
Capital conservation buffer			—	2.5%
SCB1			5.7%	N/A
G-SIB capital surcharge2			3.0%	3.0%
CCyB3			0%	0%
Capital buffer requirement4			8.7%	5.5%

			At March 31, 2021 and December 31, 2020
	Regulatory Minimum		Standardized	Advanced
Required ratios5
Common Equity Tier 1 capital ratio	4.5	%	13.2%	10.0%
Tier 1 capital ratio	6.0	%	14.7%	11.5%
Total capital ratio	8.0	%	16.7%	13.5%

1.For additional information on the ~~minimum risk-based capital ratio requirements, we are subject to~~SCB, see “Capital Plans, Stress Tests and the ~~following Common Equity Tier 1 buffers:~~Stress Capital Buffer” herein and in the 2020 Form 10-K.


•	~~A greater than 2.5% capital conservation buffer;~~2.


•	~~The G-SIB capital surcharge, currently at 3%; and~~


•	~~Up to a 2.5% CCyB, currently set by U.S. banking agencies at zero.~~

For a further discussion of the G-SIB capital surcharge, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—G-SIB Capital Surcharge” in the ~~2019~~2020 Form 10-K.

3.The CCyB can be set up to 2.5%, but is currently set by the U.S. banking agencies at zero.

4.The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid 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. Our Standardized Approach capital buffer requirement is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our Advanced Approach capital buffer requirement is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB.

5.Required ratios represent the regulatory minimum plus the capital buffer requirement.

Our risk-based capital ratios ~~for purposes of determining regulatory compliance~~ are ~~the lower of the capital ratios~~ computed under both (i) the standardized approaches for calculating credit risk and market risk RWA (“Standardized Approach”) orand (ii) the applicable advanced approaches for calculating credit risk, market risk and operational risk RWA (“Advanced Approach”). The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At March 31, ~~2020~~2021 and December 31, ~~2019, our ratios for determining regulatory compliance are based on~~2020, the ~~Advanced Approach~~difference between the actual and required ratio was lower under the Standardized ~~Approach rules, respectively.~~Approach.

Leverage-Based Regulatory ~~Capital~~Capital.. Minimum leverage-based capital requirements include a Tier 1 leverage ratio and an SLR. We are required to maintain an SLR of 5%, inclusive of an enhanced SLR capital buffer of at least 2%.

As of March 31, 2021 and December 31, 2020, our risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure are calculated excluding the effect of the adoption of CECL based on our election to defer this effect over a five-year transition ~~period.~~period which began in 2020. For further information, see “Liquidity and Capital Resources—Regulatory Requirements—Regulatory Developments” ~~herein.~~in the2020 Form 10-K.

Regulatory Capital Ratios


	Standardized					Advanced

$ in millions	Required Ratio1		At March 31, 2021			Required Ratio1		At March 31, 2021
Risk-based capital
Common Equity Tier 1 capital			$	76,176				$	76,176
Tier 1 capital			84,059					84,059
Total capital			92,823					92,605
Total RWA			455,071					438,839
Common Equity Tier 1 capital ratio	13.2	%	16.7		%	10.0	%	17.4		%
Tier 1 capital ratio	14.7	%	18.5		%	11.5	%	19.2		%
Total capital ratio	16.7	%	20.4		%	13.5	%	21.1		%

$ in millions			Required Ratio1					At March 31, 2021
Leverage-based capital
Adjusted average assets2								$	1,121,413
Tier 1 leverage ratio			4.0		%			7.5		%
Supplementary leverage exposure3,4								$	1,263,959
SLR4			5.0		%			6.7		%



			2118			March ~~2020~~2021 Form 10-Q



Table of Contents
Management’s Discussion and Analysis


	Standardized					Advanced
$ in millions	Required Ratio1		At December 31, 2020			Required Ratio1		At December 31, 2020
Risk-based capital
Common Equity Tier 1 capital			$	78,650				$	78,650
Tier 1 capital			88,079					88,079
Total capital			97,213					96,994
Total RWA			453,106					445,151
Common Equity Tier 1 capital ratio	13.2	%	17.4		%	10.0	%	17.7		%
Tier 1 capital ratio	14.7	%	19.4		%	11.5	%	19.8		%
Total capital ratio	16.7	%	21.5		%	13.5	%	21.8		%

$ in millions			Required Ratio1					At December 31, 2020
Leverage-based capital
Adjusted average assets2								$	1,053,510
Tier 1 leverage ratio			4.0		%			8.4		%
Supplementary leverage exposure3,4,								$	1,192,506
SLR4			5.0		%			7.4		%

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.

4.Based on a Federal Reserve interim final rule that was in effect until March 31, 2021, our SLR and Supplementary leverage exposure as of March 31, 2021 and December 31, 2020 reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. As of March 31, 2021 and December 31, 2020, the impact of the interim final rule on our SLR was an increase of 73 bps and 80 bps, respectively. For further information, see “Liquidity and Capital Resources—Regulatory Requirements—Regulatory Developments and Other Matters” herein and “Liquidity and Capital ~~Ratios~~

Resources—Regulatory Requirements—Regulatory Developments" in the 2020 Form 10-K.

At March 31, 2020
$ 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
At
March 31,
2020
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 %

At December 31, 2019
$ 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
At
December 31,
2019
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.

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.

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.

Regulatory Capital


$ in millions	At March 31, 2021		At December 31, 2020		Change
Common Equity Tier 1 capital
Common stock and surplus	$	19,229	$	15,799	$	3,430
Retained earnings	82,287		78,978		3,309
AOCI	(2,754)		(1,962)		(792)
Regulatory adjustments and deductions:
Net goodwill	(16,701)		(11,527)		(5,174)
Net intangible assets	(7,171)		(4,165)		(3,006)
Other adjustments and deductions1	1,286		1,527		(241)
Total Common Equity Tier 1 capital	$	76,176	$	78,650	$	(2,474)
Additional Tier 1 capital
Preferred stock	$	7,750	$	9,250	$	(1,500)
Noncontrolling interests	589		619		(30)
Additional Tier 1 capital	$	8,339	$	9,869	$	(1,530)
Deduction for investments in covered funds	(456)		(440)		(16)
Total Tier 1 capital	$	84,059	$	88,079	$	(4,020)
Standardized Tier 2 capital
Subordinated debt	$	7,476	$	7,737	$	(261)

Eligible ACL	1,173		1,265		(92)
Other adjustments and deductions	115		132		(17)
Total Standardized Tier 2 capital	$	8,764	$	9,134	$	(370)
Total Standardized capital	$	92,823	$	97,213	$	(4,390)
Advanced Tier 2 capital
Subordinated debt	$	7,476	$	7,737	$	(261)

Eligible credit reserves	955		1,046		(91)
Other adjustments and deductions	115		132		(17)
Total Advanced Tier 2 capital	$	8,546	$	8,915	$	(369)
Total Advanced capital	$	92,605	$	96,994	$	(4,389)

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.

$ in millions At
March 31,
2020 At
December 31,
2019 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.

and interest payments currently in place which are not classified as troubled debt restructurings amounted to approximately $300 million for our Institutional Securities business segment and approximately $200 million for our Wealth Management business segment. Incremental to this population, throughout 2020 and the current quarter, we have provided deferrals of principal and interest on approximately $3.2 billion of loans which have now exited such modification arrangements. The substantial majority of these loans are current as of March 31, 2021.

In addition to these principal and interest deferrals, we are working with clients regarding modifications of certain other terms under their original loan agreements that do not impact contractual loan payments. We have granted such relief to certain borrowers, primarily within Secured lending facilities and Corporate loans. Such modifications include agreements to modify margin calls for Secured lending facilities, typically in return for additional payments that improve LTV ratios. In some cases, we have agreed to temporarily not enforce certain covenants, for example debt or interest coverage ratios, typically in return for other structural enhancements.

Granting loan deferral or modification requests does not necessarily mean that we will incur credit losses, and we do not believe modifications have had a material impact on the risk profile of our loan portfolio. Modifications are considered in our evaluation of overall credit risk. Generally, loans with payment deferrals remain on accrual status, and loans with other modifications remain on current status.

Requests for deferrals and other modifications could continue in future periods given the ongoing uncertain global economic and market conditions. See “Executive Summary—Coronavirus Disease (COVID-19) Pandemic” herein and “Risk Factors” and “Forward Looking Statements” in the 2020 Form 10-K.

For additional information on regulatory guidance which permits certain loan modifications for borrowers impacted by COVID-19 to not be accounted for and reported as TDRs as well as the Firm’s accounting policies for such modifications, see “Liquidity and Capital Resources—Regulatory Requirements—Regulatory Developments” and Note 2 to the financial statements in the 2020 Form 10-K, respectively. For information on HFI loans on nonaccrual status and HFI loans modified and reported as TDRs, see “Status of Loans Held for Investment” herein and Note 10 to the financial statements, and for a discussion of the related accounting policies see Note 2 to the financial statements in the 2020 Form 10-K.

Allowance for Credit ~~Losses Rollforward—~~Losses—Loans and Lending Commitments

$ in millions
December 31, 2019¹
$ 590
Effect of CECL adoption (41 )
Gross charge-offs (32 )
Provision 407
Other (3 )
March 31, 2020 $ 921
Allowance for credit losses—Loans $ 617
Allowance for credit losses—Lending commitments 304

$ in millions

December 31, 20201

$	1,231
Gross charge-offs		(10)

1.		~~At December 31, 2019, the total allowance~~
Provision for credit losses ~~for~~ 2		(98)
Other		(7)
March 31, 2021		$	1,116
ACL—Loans ~~and~~		$	762
ACL—Lending commitments ~~was $349 million and $241 million, respectively.~~		354

1.At December 31, 2020, the ACL for Loans and Lending commitments was $835 million and $396 million, respectively.

2.In the current quarter, the Provision for credit losses on loans was a release of $58 million and the Provision for credit losses on lending commitments was a release of $40 million.

Credit exposure arising from our loans and lending commitments is measured in accordance with our internal risk management standards. Risk factors considered in determining the aggregate allowance for loan and commitment losses include the borrower’s financial strength, industry, facility structure, ~~loan-to-value~~LTV ratio, debt service ratio, collateral and covenants. Qualitative and environmental factors such as economic and business conditions, nature and volume of the portfolio and lending terms, and volume and severity of past due loans may also be considered.

The aggregate allowance for loans and lending commitments ~~increased~~decreased in the current quarter, ~~principally~~primarily reflecting a ~~provision~~release in the allowance for credit losses within the Institutional Securities business ~~segment resulting from~~segment. The allowance release was primarily a result of improvements in the ~~economic~~outlook for macroeconomic conditions and the impact of ~~COVID-19. This provision~~paydowns on Corporate loans, including by lower-rated borrowers. The base scenario used in our ACL models as of March 31, 2021 was ~~primarily~~generated using a combination of industry consensus economic forecasts, forward rates, and internally developed and validated models. Given the ~~result~~nature of ~~higher actual~~our lending portfolio, the most sensitive model input is U.S. gross domestic product. The base scenario, among other things, assumes a continued recovery over the forecast period with U.S. GDP reaching pre-COVID-19 levels by the third quarter of 2021, supported by fiscal stimulus and ~~expected future downgrades, an increase in funded balances, principally in Corporate relationship~~accommodative monetary policy. See Notes 10 and ~~event-driven loans, as well as revisions~~14 to ~~our forecasts in light of current and expected future market and macroeconomic conditions.~~the financial statements for further information. See Note 2 to the financial statements in the 2020 Form 10-K for a discussion of the Firm’s ~~allowance for credit loss~~ACL methodology under CECL.

Status of Loans Held for Investment


	At March 31, 2021				At December 31, 2020
	IS		WM		IS		WM
Accrual	99.4	%	99.7	%	99.2	%	99.7	%
Nonaccrual1	0.6	%	0.3	%	0.8	%	0.3	%

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.

At March 31, 2020 At December 31, 2019
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.~~



			3126			March ~~2020~~2021 Form 10-Q



Table of Contents
Risk Disclosures

Institutional Securities Loans and Lending Commitments¹


	At March 31, 2021
	Contractual Years to Maturity
$ in millions	Less than 1		1-3		3-5		Over 5		Total
Loans
AA	$	43	$	9	$	85	$	35	$	172
A	680		787		340		241		2,048
BBB	5,673		5,119		2,279		314		13,385
BB	11,381		7,783		4,325		673		24,162
Other NIG	5,557		6,323		3,472		6,931		22,283
Unrated2	223		122		370		2,982		3,697
Total loans, net of ACL	23,557		20,143		10,871		11,176		65,747
Lending commitments
AAA	—		50		—		—		50
AA	3,852		1,169		1,979		—		7,000
A	5,597		6,877		9,909		432		22,815
BBB	8,493		19,580		16,675		594		45,342
BB	3,282		11,102		7,252		2,543		24,179
Other NIG	1,965		7,250		6,849		3,291		19,355
Unrated2	—		2		10		1		13
Total lending commitments	23,189		46,030		42,674		6,861		118,754
Total exposure	$	46,746	$	66,173	$	53,545	$	18,037	$	184,501

At March 31, 2020
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


	At December 31, 2019											At December 31, 2020
	Contractual Years to Maturity											Contractual Years to Maturity
$ in millions	Less than 1		1-3		3-5		Over 5		Total		$ in millions	Less than 1		1-3		3-5		Over 5		Total
Loans											Loans
AA	$	7	$	50	$	—	$	5	$	62	AA	$	279	$	10	$	—	$	—	$	289
A	955		923		516		277		2,671		A	759		798		36		391		1,984
BBB	2,297		5,589		3,592		949		12,427		BBB	5,043		5,726		2,746		469		13,984
BB	9,031		11,189		9,452		1,449		31,121		BB	10,963		7,749		5,324		503		24,539
Other NIG	4,020		5,635		2,595		1,143		13,393		Other NIG	5,214		6,956		4,002		3,269		19,441
Unrated²	117		82		131		1,628		1,958		Unrated2	141		142		330		2,322		2,935
Total loans	16,427		23,468		16,286		5,451		61,632
Total loans, net of ACL											Total loans, net of ACL	22,399		21,381		12,438		6,954		63,172
Lending commitments	Lending commitments										Lending commitments
AAA	—		50		—		—		50		AAA	—		50		—		—		50
AA	2,838		908		2,509		—		6,255		AA	4,047		1,038		2,135		—		7,220
A	6,461		7,287		9,371		298		23,417		A	6,025		8,359		9,808		425		24,617
BBB	7,548		13,780		20,560		753		42,641		BBB	6,783		17,782		15,500		460		40,525
BB	2,464		5,610		8,333		1,526		17,933		BB	4,357		8,958		7,958		3,103		24,376
Other NIG	2,193		4,741		7,062		2,471		16,467		Other NIG	664		7,275		6,077		2,652		16,668
Unrated²	—		9		107		7		123		Unrated2	4		—		—		—		4
Total lending commitments	21,504		32,385		47,942		5,055		106,886		Total lending commitments	21,880		43,462		41,478		6,640		113,460
Total exposure	$	37,931	$	55,853	$	64,228	$	10,506	$	168,518	Total exposure	$	44,279	$	64,843	$	53,916	$	13,594	$	176,632

NIG–Non-investment grade


1.	~~Counterparty credit ratings are internally determined by CRM.~~ 1.Counterparty credit ratings are internally determined by the Credit Risk Management Department (“CRM”). 2.


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.

~~As a result of the economic impacts of COVID-19, there was an increase in~~ lending commitments ~~funded during the current quarter in the Institutional Securities business segment. The increase was~~are primarily ~~driven by clients with non-investment grade~~trading positions that are measured at fair value and ~~BBB internal credit ratings, who sought liquidity in~~risk-managed as a component of market risk. For a further discussion of our market risk, see “Market Risk” herein.

~~a period where, given the economic backdrop, capital markets alternatives to drawing on lines of credit were less available.~~

Institutional Securities Loans and Lending Commitments by Industry


$ in millions	At March 31, 2021		At December 31, 2020
Industry
Financials	$	52,174	$	44,358
Real estate	25,515		25,484
Industrials	17,310		15,861
Healthcare	13,656		12,650
Communications services	13,411		12,600
Information technology	11,502		11,358
Utilities	10,111		9,504
Consumer discretionary	9,982		11,177
Energy	9,380		10,064
Consumer staples	7,963		9,088
Materials	5,759		6,084
Insurance	4,410		3,889
Other	3,328		4,515
Total exposure	$	184,501	$	176,632

$ in millions At
March 31,
2020 At
December 31,
2019
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
Sectors Currently in Focus due to COVID-19

The ~~decline in~~continuing effect on economic activity ~~driven by the effects~~ of COVID-19 and ~~recent decline in oil prices,~~related governmental actions have ~~currently~~ impacted borrowers in many sectors and industries. While we are carefully monitoring all of our Institutional Securities business segment exposures, certain sectors are more sensitive to the current economic environment and are continuing to receive heightened focus. The sectors currently in focus are: air travel, retail, upstream energy, lodging and leisure, and healthcare services and systems. As of March 31, 2021, exposures to these sectors are included across the Industrials, Financials, Real estate, Consumer discretionary, Energy and Healthcare industries in the previous table, and in aggregate represent less than 10% of total Institutional Securities business segment lending exposure. Further, as of March 31, 2021, approximately 90% of these exposures are either investment grade and/or secured by collateral. The future developments of COVID-19 and ~~its~~ related government actions and their effect on the economic environment ~~are uncertain~~remain uncertain; therefore, the sectors impacted and the extent of the impacts may ~~continue to impact certain sectors and industries, in which we have, or may in the future have, exposure in the form of loans or lending commitments. In addition, refer~~change over time. Refer to “Risk Factors” ~~herein.~~in the 2020 Form 10-K.

Institutional Securities Lending Activities

The Institutional Securities business segment lending activities include Corporate, ~~relationship and event-driven lending,~~ Secured lending facilities, Commercial real estate ~~lending~~ and Securities-based lending and ~~other.~~

~~Corporate relationship and event-driven~~Other. Over 90% of our total lending exposure, which consists of loans and lending commitments, ~~typically consist of revolving lines of credit, term loans and bridge loans; may have varying terms; may be senior~~ is investment grade and/or subordinated; may be secured or unsecured; are generally contingent upon representations, warranties and contractual conditions applicable to the borrower; and may be syndicated, traded or hedged. For additional information on event-driven loans, see “Institutional Securities Event-Driven Loans and Lending Commitments” herein.

~~Secured lending facilities include loans provided to clients, which are primarily~~ secured by ~~loans on underlying real estate or other assets. The underlying loans are associated with various types~~collateral. For a description of ~~collateral, including residential real estate, commercial real estate, corporate~~Institutional Securities’ lending activities, see “Quantitative and ~~financial assets. These facilities generally provide for overcollateralization.~~ Qualitative Disclosures about Risk—Credit ~~risk with respect to these loans and lending commitments arises from the failure of a borrower to perform according to the terms of the loan agreement and/or a decline~~Risk” in the ~~underlying collateral~~2020 Form 10-K.



March ~~2020~~2021 Form 10-Q			3227



Table of Contents
Risk Disclosures

~~value. The Firm monitors collateral levels against the requirements of lending agreements.~~

~~Commercial real estate loans are primarily senior, secured by underlying real estate and typically in term loan form.~~

~~Securities-based lending and other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.~~

~~Institutional Securities Loans~~¹

$ in millions At
March 31,
2020 At
December 31,
2019
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.~~

Institutional Securities Event-Driven Loans and Lending Commitments¹

At March 31, 2020
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


	At March 31, 2021
	Contractual Years to Maturity
$ in millions	Less than 1		1-3		3-5		Over 5		Total
Loans, net of ACL	$	1,985	$	602	$	428	$	5,991	$	9,006
Lending commitments	4,238		5,502		2,380		4,596		16,716
Total exposure	$	6,223	$	6,104	$	2,808	$	10,587	$	25,722


	At December 31, 2020
	Contractual Years to Maturity
$ in millions	Less than 1		1-3		3-5		Over 5		Total
Loans, net of ACL	$	1,241	$	907	$	873	$	2,090	$	5,111
Lending commitments	2,810		4,649		2,678		4,650		14,787
Total exposure	$	4,051	$	5,556	$	3,551	$	6,740	$	19,898

At December 31, 2019
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.~~

Event-driven loans and lending commitments are associated with a particular event or transaction, such as to support client merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period. In the current quarter, credit spreads in the market for these loans and commitments widened significantly, resulting in a substantial slowdown in the volume of sales and syndications, which is a trend that could continue in the future given the current uncertain economic and market conditions. See “Executive Summary—Coronavirus Disease (COVID-19) Pandemic” and “Risk Factors” herein, and Forward Looking Statements in the 2019 Form 10-K.

Institutional Securities Loans and Lending Commitments Held for Investment


	At March 31, 2021
$ in millions	Loans		Lending Commitments		Total
Corporate	$	5,185	$	71,893	$	77,078
Secured lending facilities	25,886		9,085		34,971
Commercial real estate	7,277		276		7,553
Other	1,034		866		1,900
Total, before ACL	$	39,382	$	82,120	$	121,502
ACL	$	(671)	$	(350)	$	(1,021)


	At December 31, 2020
$ in millions		Loans		Lending Commitments		Total
Corporate		$	6,046	$	69,488	$	75,534
Secured lending facilities		25,727		8,312		34,039
Commercial real estate		7,346		334		7,680
Other		1,279		1,135		2,414
Total, before ACL		$	40,398	$	79,269	$	119,667
ACL		$	(739)	$	(391)	$	(1,130)

At March 31, 2020 At December 31, 2019
$ 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.~~

Institutional Securities Allowance for Credit ~~Losses Rollforward—~~Losses—Loans

$ in millions Corporate relationship and event-driven lending Secured lending facilities Commercial & residential real estate Securities-based lending and other Total
December 31, 2019 $ 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 )
March 31, 2020 $ 258
$ 88
$ 174
$ 10
$ 530

~~Institutional Securities Allowance for Credit Losses Rollforward—~~ and Lending Commitments

$ in millions Corporate relationship and event-driven lending Secured lending facilities Commercial & residential real estate Securities-based lending and other Total
December 31, 2019 $ 201
$ 27
$ 7
$ 1
$ 236
Effect of CECL adoption (41 ) (11 ) 1
—
(51 )
Provision 91
16
5
3
115
Other (2 ) —
—
—
(2 )
March 31, 2020 $ 249
$ 32
$ 13
$ 4
$ 298


$ in millions	Corporate		Secured lending facilities		Commercial real estate		Other		Total
At December 31, 2020
ACL—Loans	$	309	$	198	$	211	$	21	$	739
ACL—Lending commitments	323		38		11		19		391
Total	$	632	$	236	$	222	$	40	$	1,130
Gross charge-offs	(1)		—		(9)		—		(10)


Provision for credit losses1	(89)		(7)		3		—		(93)
Other	(3)		(1)		(2)		—		(6)
Total at March 31, 2021	$	539	$	228	$	214	$	40	$	1,021
ACL—Loans	$	250	$	193	$	206	$	22	$	671
ACL—Lending commitments	289		35		8		18		350

1.In the current quarter, the provision for credit losses on loans was a release of $53 million and the Provision for credit losses on lending commitments was a release of $40 million.

~~March 2020 Form 10-Q~~

~~Table of Contents~~

~~Risk Disclosures~~

Institutional Securities HFI Loans—Ratios of Allowance for Credit Losses to Balance Before Allowance

At
March 31,
2020 At
December 31,
2019
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 %


	At March 31, 2021		At December 31, 2020
Corporate	4.8	%	5.1	%
Secured lending facilities	0.7	%	0.8	%
Commercial real estate	2.8	%	2.9	%
Other	2.1	%	1.7	%
Total Institutional Securities loans	1.7	%	1.8	%

Wealth Management Loans and Lending Commitments


	At March 31, 2021
	Contractual Years to Maturity
$ in millions	Less than 1		1-3		3-5		Over 5		Total
Securities-based lending and Other	$	59,264	$	5,371	$	1,876	$	1,620	$	68,131
Residential real estate	7		1		3		36,791		36,802
Total loans, net of ACL	$	59,271	$	5,372	$	1,879	$	38,411	$	104,933
Lending commitments	11,294		2,281		131		257		13,963
Total exposure	$	70,565	$	7,653	$	2,010	$	38,668	$	118,896

At March 31, 2020
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


	At December 31, 2020
	Contractual Years to Maturity
$ in millions	Less than 1		1-3		3-5		Over 5		Total
Securities-based lending and Other	$	54,483	$	4,587	$	2,167	$	1,672	$	62,909
Residential real estate	9		1		1		35,210		35,221
Total loans, net of ACL	$	54,492	$	4,588	$	2,168	$	36,882	$	98,130
Lending commitments	11,666		2,356		120		253		14,395
Total exposure	$	66,158	$	6,944	$	2,288	$	37,135	$	112,525

At December 31, 2019
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

The principal Wealth Management business segment lending activities include securities-based lending and residential real estate loans.

Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities, or refinancing margin debt. For more information about our securities-based lending and residential real estate loans, see ~~“Quantitative~~


			28			March 2021 Form 10-Q


Table of Contents
Risk Disclosures

“Quantitative and Qualitative Disclosures about Risk—Credit Risk” in the ~~2019~~2020 Form 10-K.

~~For the current quarter, Loans and Lending commitments associated with the Wealth Management business segment increased primarily due to growth in tailored lending and Residential real estate loans.~~

Wealth Management Allowance for Credit ~~Losses Rollforward—~~Losses—Loans and Lending Commitments

$ in millions
December 31, 2019¹
$ 57
Effect of CECL adoption 17
Provision 19
March 31, 2020 $ 93
Allowance for credit losses—Loans $ 87
Allowance for credit losses—Lending commitments 6

$ in millions

December 31, 20201

$	101
Gross charge-offs		—
Provision for credit losses2		(5)
Other		(1)
March 31, 2021		$	95
ACL—Loans		$	91
ACL—Lending commitments		4

1.		~~At December 31, 2019, the total Allowance for credit losses for Loans and Lending commitments was $52 million and $5 million, respectively.~~

1.At December 31, 2020, the ACL for Loans and Lending commitments was $96 million and $5 million, respectively.

2.In the current quarter, the Provision for credit losses on loans was a release of $5 million.

At March 31, ~~2020, approximately~~2021, more than 75% of Wealth Management residential real estate loans were to borrowers with ~~"Exceptional"~~“Exceptional” or ~~"Very Good"~~“Very Good” FICO scores (i.e., , exceeding 740). Additionally, Wealth ~~Management's~~Management’s securities-based lending portfolio remains well-collateralized and subject to daily client margining, which includes requiring customers to deposit additional collateral, or reduce debt positions, when necessary.

Customer and Other Receivables

Margin Loans and Other lending


$ in millions	At March 31, 2021		At December 31, 2020
Institutional Securities	$	55,935	$	51,570
Wealth Management	26,609		23,144
Total	$	82,544	$	74,714

At March 31, 2020
$ in millions IS WM Total
Customer receivables representing margin loans $ 16,635
$ 9,546
$ 26,181

At December 31, 2019
$ in millions IS WM Total
Customer receivables representing margin loans $ 22,216
$ 9,700
$ 31,916

The Institutional Securities and Wealth Management business segments provide margin lending arrangements ~~which~~that allow customers to borrow against the value of qualifying securities, primarily for the purpose of purchasing additional securities, as well as to collateralize short positions. Institutional Securities primarily includes margin loans in the Equity Financing business. Wealth Management includes margin loans as well as non-purpose securities-based lending on non-bank entities.

Margin lending activities generally have lower credit risk due to the value of collateral held and their short-term nature. Amounts may fluctuate from period to period as overall client balances change as a result of market levels, client positioning and leverage.

Employee Loans

$ in millions At
March 31,
2020 At
December 31,
2019
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



~~Table of Contents~~
~~Risk Disclosures~~

Employee loans are granted in conjunction with a program established primarily to recruit certain Wealth Management representatives and are full recourse and generally require periodic repayments. The allowance for credit losses as of March 31, 2020 was calculated under CECL, while the allowance for credit losses at December 31, 2019 was calculated under the prior incurred loss model. The related provision is recorded in Compensation and benefits expense in the income statements. See Note 2 for a description of the CECL allowance methodology, including credit quality indicators, for employee loans. For ~~additional~~ information on employee loans and related ACL, see Note 9.10 to the financial statements.

Derivatives

Fair Value of OTC Derivative Assets


	Counterparty Credit Rating1
$ in millions	AAA		AA		A		BBB		NIG		Total
At March 31, 2021
Less than 1 year	$	1,346	$	15,620	$	45,783	$	23,734	$	12,533	$	99,016
1-3 years	591		4,755		15,600		12,197		7,535		40,678
3-5 years	703		4,907		10,115		8,153		3,695		27,573
Over 5 years	4,151		26,657		68,658		49,759		11,487		160,712
Total, gross	$	6,791	$	51,939	$	140,156	$	93,843	$	35,250	$	327,979
Counterparty netting	(3,245)		(40,745)		(109,294)		(71,170)		(19,149)		(243,603)
Cash and securities collateral	(2,879)		(8,735)		(24,958)		(16,801)		(7,961)		(61,334)
Total, net	$	667	$	2,459	$	5,904	$	5,872	$	8,140	$	23,042


	Counterparty Credit Rating¹																			Counterparty Credit Rating1
$ in millions	AAA			AA			A			BBB			NIG			Total			$ in millions	AAA		AA		A		BBB		NIG		Total
At March 31, 2020
<1 year	$	2,046		$	26,829		$	55,668		$	38,756		$	19,369		$	142,668
At December 31, 2020																			At December 31, 2020
Less than 1 year																			Less than 1 year	$	1,179	$	16,166	$	52,164	$	26,088	$	12,175	$	107,772
1-3 years	536			6,458			22,788			18,243			13,104			61,129			1-3 years	572		5,225		17,560		13,750		8,134		45,241
3-5 years	521			5,952			14,442			10,521			4,718			36,154			3-5 years	359		4,326		11,328		8,363		4,488		28,864
Over 5 years	4,257			32,785			93,165			68,387			17,506			216,100			Over 5 years	4,545		32,049		84,845		63,084		13,680		198,203
Total, gross	$	7,360		$	72,024		$	186,063		$	135,907		$	54,697		$	456,051		Total, gross	$	6,655	$	57,766	$	165,897	$	111,285	$	38,477	$	380,080
Counterparty netting	(3,472		)	(55,991		)	(150,333		)	(104,343		)	(30,638		)	(344,777		)	Counterparty netting	(3,269)		(44,306)		(134,310)		(84,171)		(22,227)		(288,283)
Cash and securities collateral	(3,336		)	(12,216		)	(29,345		)	(23,461		)	(16,979		)	(85,337		)	Cash and securities collateral	(3,124)		(10,973)		(26,712)		(20,708)		(8,979)		(70,496)
Total, net	$	552		$	3,817		$	6,385		$	8,103		$	7,080		$	25,937		Total, net	$	262	$	2,487	$	4,875	$	6,406	$	7,271	$	21,301

Counterparty Credit Rating¹

$ in millions AAA AA A BBB NIG Total
At December 31, 2019
<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	At March 31, 2021		At December 31, 2020
Industry
Financials	$	8,404	$	6,195
Utilities	4,082		3,954
Consumer discretionary	2,350		1,866
Energy	1,007		965
Healthcare	961		1,494
Industrials	906		1,291
Information technology	894		1,104
Regional governments	845		806
Sovereign governments	708		650
Insurance	554		518
Not-for-profit organizations	538		701
Real estate	474		378
Communications services	473		529
Materials	363		430
Consumer staples	332		339
Other	151		81
Total	$	23,042	$	21,301

$ in millions At
March 31,
2020 At
December 31,
2019
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.	1.Counterparty credit ratings are determined internally by CRM.

We are exposed to credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the possibility that a counterparty may fail to perform according to the terms of the contract. In the current quarter, our exposure to credit risk arising from OTC derivatives has increased, primarily as a function of the effect of market factors and volatility on the valuation of our positions. For more information on derivatives, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Derivatives” in the ~~2019~~2020 Form 10-K and Note 67 to the financial statements.


March 2021 Form 10-Q			29


Table of Contents
Risk Disclosures

Country Risk

Country risk exposure is the risk that events in, or that affect, a foreign country (any country other than the U.S.) might adversely affect us. We actively manage country risk exposure through a comprehensive risk management framework that combines credit and market fundamentals and allows us to effectively identify, monitor and limit country risk. For a further discussion of our country risk exposure see, “Quantitative and Qualitative Disclosures about Risk—Country and Other Risks” in the ~~2019~~2020 Form 10-K.

Our sovereign exposures consist of financial contracts and obligations entered into with sovereign and local governments. Our non-sovereign exposures consist of financial contracts and obligations entered into primarily with corporations and financial institutions.

Index credit derivatives are included in the following country risk exposure table. Each reference entity within an index is allocated to that reference entity’s country of risk. Index exposures are allocated to the underlying reference entities in proportion to the notional weighting of each reference entity in the index, adjusted for any fair value receivable or



	35	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Risk Disclosures~~

payable for that reference entity. Where credit risk crosses multiple jurisdictions, for example, a CDS purchased from an issuer in a specific country that references bonds issued by an entity in a different country, the fair value of the CDS is reflected in the Net Counterparty Exposure row based on the country of the CDS issuer. Further, the notional amount of the CDS adjusted for the fair value of the receivable or payable is reflected in the Net Inventory row based on the country of the underlying reference entity.

Top 10 Non-U.S. Country Exposures at March 31, ~~2020~~2021


$ in millions	United Kingdom		Japan		France		Germany		Spain
Sovereign
Net inventory1	$	51	$	6,101	$	1,531	$	(3,354)	$	(563)
Net counterparty exposure2	16		66		24		73		15


Exposure before hedges	67		6,167		1,555		(3,281)		(548)
Hedges3	(310)		(91)		(6)		(287)		—
Net exposure	$	(243)	$	6,076	$	1,549	$	(3,568)	$	(548)

Non-sovereign
Net inventory1	$	894	$	508	$	(526)	$	(215)	$	(117)
Net counterparty exposure2	11,563		5,277		3,066		2,942		273
Loans	3,620		382		681		1,890		3,577
Lending commitments	5,452		181		4,368		4,355		922
Exposure before hedges	21,529		6,348		7,589		8,972		4,655
Hedges3	(1,653)		(173)		(752)		(1,055)		(151)
Net exposure	$	19,876	$	6,175	$	6,837	$	7,917	$	4,504
Total net exposure	$	19,633	$	12,251	$	8,386	$	4,349	$	3,956


$ in millions	Brazil		Canada		China		Australia		India
Sovereign
Net inventory1	$	2,962	$	(348)	$	87	$	445	$	1,734
Net counterparty exposure2	—		88		145		32		—


Exposure before hedges	2,962		(260)		232		477		1,734
Hedges3	(12)		—		(82)		—		—
Net exposure	$	2,950	$	(260)	$	150	$	477	$	1,734

Non-sovereign
Net inventory1	$	75	$	493	$	1,412	$	302	$	638
Net counterparty exposure2	429		2,079		740		720		754
Loans	208		164		636		405		214
Lending commitments	166		1,366		821		1,617		—
Exposure before hedges	878		4,102		3,609		3,044		1,606
Hedges3	(24)		(74)		(187)		(174)		—
Net exposure	$	854	$	4,028	$	3,422	$	2,870	$	1,606
Total net exposure	$	3,804	$	3,768	$	3,572	$	3,347	$	3,340

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).

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	��



~~Table of Contents~~
~~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.~~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.

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.

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 2020 Form 10-K.

Additional Information—Top 10 Non-U.S. Country Exposures

Collateral Held against Net Counterparty Exposure¹

$ in millions At
March 31,
2020
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.$ in millions			~~The benefit of collateral received is reflected in the Top 10 Non-U.S. Country Exposures at~~			At March 31, ~~2020.~~ 2021

Country of Risk	Collateral2
2.Germany	~~Collateral primarily consists of cash~~Spain and ~~government obligations.~~Italy	$	11,670
United Kingdom	U.K., U.S. and Italy	8,559
Other	Japan, U.S. and France	17,757

1.The benefit of collateral received is reflected in the Top 10 Non-U.S. Country Exposures at March 31, 2021.

2.Primarily consists of cash, as well as government obligations of the countries listed.

Country Risk Exposures Related to the U.K.

At March 31, ~~2020,~~2021, our country risk exposures in the U.K. included net exposures of ~~$22,283~~$19,633 million (as shown in the Top 10 Non-U.S. Country Exposures table) and overnight deposits of ~~$5,163~~$6,599 million. The ~~$22,744~~$19,876 million of exposures to non-sovereigns were diversified across both names and sectors and include ~~$7,253~~$7,144 million to U.K.-focused counterparties that generate more than one-third of their revenues in the U.K., ~~$5,845~~$4,321 million to geographically diversified counterparties, and ~~$8,361~~$7,573 million to exchanges and clearinghouses.


			30			March 2021 Form 10-Q


Table of Contents
Risk Disclosures

Operational Risk

Operational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors or from external events (e.g., fraud, theft, legal and compliance risks, cyber attacks or damage to physical assets). We may incur operational risk across the full scope of our business activities, including revenue-generating activities (~~e.g~~e.g.., sales and trading) and support and control groups (e.g., information technology and trade processing). For a further discussion about our operational risk, see “Quantitative

and Qualitative Disclosures about Risk—Operational Risk” in the ~~2019~~2020 Form 10-K. In addition, for further information on market and economic conditions and their effects on risk in general, see ~~"Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary—Coronavirus Disease (COVID-19) ~~Pandemic"~~Pandemic” herein and “Risk Factors” ~~herein.~~in the 2020 Form 10-K.

Model Risk

Model risk refers to the potential for adverse consequences from decisions based on incorrect or misused model outputs. Model risk can lead to financial loss, poor business and strategic decision making or damage to our reputation. The risk inherent in a model is a function of the materiality, complexity and uncertainty around inputs and assumptions. Model risk is generated from the use of models impacting financial statements, regulatory filings, capital adequacy assessments and the formulation of strategy. For a further discussion about our model risk, see “Quantitative and Qualitative Disclosures about Risk—Model Risk” in the ~~2019~~2020 Form 10-K.

Liquidity Risk

Liquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern. For a further discussion about our liquidity risk, see “Quantitative and Qualitative Disclosures about Risk—Liquidity Risk” in the ~~2019~~2020 Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” herein. In addition, for further information on market and economic conditions and their effects on risk in general, see ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary—Coronavirus Disease (COVID-19) Pandemic” and~~ “Risk Factors” ~~herein.~~in the 2020 Form 10-K.

Legal and Compliance Risk

Legal and compliance risk includes the risk of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, or loss to reputation that we may suffer as a result of failure to comply

with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with AML, terrorist financing, and anti-corruption rules and regulations. For a further discussion about our legal and compliance risk, see “Quantitative and Qualitative Disclosures about Risk—Legal and Compliance Risk” in the ~~2019~~2020 Form 10-K.



37	March ~~2020~~2021 Form 10-Q	31



Table of Contents

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors ~~and Shareholders~~ of Morgan Stanley:

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Morgan Stanley and subsidiaries (the “Firm”) as of March 31, ~~2020,~~2021, and the related condensed consolidated income statements, comprehensive income statements, cash flow statements and statements of changes in total equity for the three-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Firm as of December 31, ~~2019,~~2020, and the related consolidated income statement, comprehensive income statement, cash flow statement and statement of changes in total equity for the year then ended (not presented herein) included in the Firm’s Annual Report on Form 10-K; and in our report dated February ~~27, 2020,~~26, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2019~~2020 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Firm’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Firm in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



/s/ Deloitte & Touche LLP
New York, New York
May ~~5, 2020~~3, 2021



32	March ~~2020~~2021 Form 10-Q	38



Table of Contents
Consolidated Income Statements (Unaudited)


	Three Months Ended March 31,
in millions, except per share data		2021		2020
Revenues
Investment banking		$	2,840	$	1,271
Trading		4,225		2,801
Investments		318		38
Commissions and fees		1,626		1,360
Asset management		4,398		3,417
Other		284		(464)
Total non-interest revenues		13,691		8,423
Interest income		2,437		3,503
Interest expense		409		2,147
Net interest		2,028		1,356
Net revenues		15,719		9,779
Provision for credit losses		(98)		407
Non-interest expenses
Compensation and benefits		6,798		4,283
Brokerage, clearing and exchange fees		910		740
Information processing and communications		733		563
Professional services		624		449
Occupancy and equipment		405		365
Marketing and business development		146		132
Other		857		694
Total non-interest expenses		10,473		7,226
Income before provision for income taxes		5,344		2,146
Provision for income taxes		1,176		366


Net income		$	4,168	$	1,780
Net income applicable to noncontrolling interests		48		82
Net income applicable to Morgan Stanley		$	4,120	$	1,698
Preferred stock dividends		138		108
Earnings applicable to Morgan Stanley common shareholders		$	3,982	$	1,590
Earnings per common share
Basic		$	2.22	$	1.02
Diluted		$	2.19	$	1.01
Average common shares outstanding
Basic		1,795		1,555
Diluted		1,818		1,573

Consolidated Comprehensive Income Statements

(Unaudited)


	Three Months Ended March 31,
$ in millions		2021		2020
Net income		$	4,168	$	1,780
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(219)		(132)
Change in net unrealized gains (losses) on available-for-sale securities		(776)		1,325
Pension and other		5		25
Change in net debt valuation adjustment		137		3,803
Total other comprehensive income (loss)		$	(853)	$	5,021
Comprehensive income		$	3,315	$	6,801
Net income applicable to noncontrolling interests		48		82
Other comprehensive income (loss) applicable to noncontrolling interests		(61)		138
Comprehensive income applicable to Morgan Stanley		$	3,328	$	6,581

Three Months Ended
March 31,
in millions, except per share data 2020 2019
Revenues
Investment banking $ 1,271
$ 1,242
Trading 3,056
3,441
Investments 38
273
Commissions and fees 1,360
966
Asset management 3,417
3,049
Other (1,011 ) 301
Total non-interest revenues 8,131
9,272
Interest income 3,503
4,290
Interest expense 2,147
3,276
Net interest 1,356
1,014
Net revenues 9,487
10,286
Non-interest expenses
Compensation and benefits 4,283
4,651
Brokerage, clearing and exchange fees 740
593
Information processing and communications 563
532
Professional services 449
514
Occupancy and equipment 365
347
Marketing and business development 132
141
Other 809
553
Total non-interest expenses 7,341
7,331
Income before provision for income taxes 2,146
2,955
Provision for income taxes 366
487
Net income $ 1,780
$ 2,468
Net income applicable to noncontrolling interests 82
39
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
Earnings per common share
Basic $ 1.02
$ 1.41
Diluted $ 1.01
$ 1.39
Average common shares outstanding
Basic 1,555
1,658
Diluted 1,573
1,677



See Notes to Consolidated Financial Statements	3933	March ~~2020~~2021 Form 10-Q



Table of Contents
Consolidated ~~Comprehensive Income Statements~~ ~~(Unaudited)~~ Balance Sheets


$ in millions, except share data	(Unaudited) At March 31, 2021		At December 31, 2020
Assets
Cash and cash equivalents	$	118,118	$	105,654
Trading assets at fair value ($111,342 and $132,578 were pledged to various parties)	313,158		312,738
Investment securities (includes $105,288 and $110,383 at fair value)	189,206		182,154
Securities purchased under agreements to resell (includes $9 and $15 at fair value)	114,721		116,234
Securities borrowed	102,149		112,391
Customer and other receivables	115,043		97,737
Loans:
Held for investment (net of allowance of $762 and $835)	143,635		137,784
Held for sale	15,488		12,813
Goodwill	16,836		11,635
Intangible assets (net of accumulated amortization of $3,358 and $3,265)	8,846		4,980
Other assets	21,572		21,742
Total assets	$	1,158,772	$	1,115,862
Liabilities
Deposits (includes $3,069 and $3,521 at fair value)	$	323,138	$	310,782
Trading liabilities at fair value	185,667		157,631
Securities sold under agreements to repurchase (includes $1,089 and $1,115 at fair value)	54,624		50,587
Securities loaned	8,426		7,731
Other secured financings (includes $5,001 and $11,701 at fair value)	9,413		15,863
Customer and other payables	230,121		227,437
Other liabilities and accrued expenses	23,969		25,603
Borrowings (includes $74,022 and $73,701 at fair value)	215,826		217,079
Total liabilities	1,051,184		1,012,713
Commitments and contingent liabilities (see Note 14)			0
0Equity
Morgan Stanley shareholders’ equity:
Preferred stock	7,750		9,250
Common stock, $0.01 par value:
Shares authorized: 3,500,000,000; Shares issued: 2,038,893,979; Shares outstanding: 1,868,925,320 and 1,809,624,144	20		20
Additional paid-in capital	27,406		25,546
Retained earnings	82,034		78,694
Employee stock trusts	3,861		3,043
Accumulated other comprehensive income (loss)	(2,754)		(1,962)
Common stock held in treasury at cost, $0.01 par value (169,968,659 and 229,269,835 shares)	(8,197)		(9,767)
Common stock issued to employee stock trusts	(3,861)		(3,043)
Total Morgan Stanley shareholders’ equity	106,259		101,781
Noncontrolling interests	1,329		1,368
Total equity	107,588		103,149
Total liabilities and equity	$	1,158,772	$	1,115,862

Three Months Ended
March 31,
$ in millions 2020 2019
Net income $ 1,780
$ 2,468
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (132 ) (22 )
Change in net unrealized gains (losses) on available-for-sale securities 1,325
429
Pension, postretirement and other 25
1
Change in net debt valuation adjustment 3,803
(620 )
Total other comprehensive income (loss) $ 5,021
$ (212 )
Comprehensive income $ 6,801
$ 2,256
Net income applicable to noncontrolling interests 82
39
Other comprehensive income (loss) applicable to noncontrolling interests 138
(31 )
Comprehensive income applicable to Morgan Stanley $ 6,581
$ 2,248



March ~~2020~~2021 Form 10-Q	4034	See Notes to Consolidated Financial Statements



~~Table of Contents~~
~~Consolidated Balance Sheets~~

$ in millions, except share data (Unaudited) At
March 31, 2020 At
December 31, 2019
Assets
Cash and cash equivalents $ 131,509
$ 82,171
Trading assets at fair value ($103,637 and $128,386 were pledged to various parties)
270,916
297,110
Investment securities (includes $68,871 and $62,223 at fair value)
116,157
105,725
Securities purchased under agreements to resell (includes $5 and $4 at fair value)
104,800
88,224
Securities borrowed 72,300
106,549
Customer and other receivables 74,424
55,646
Loans:
Held for investment (net of allowance of $617 and $349)
131,335
118,060
Held for sale 17,362
12,577
Goodwill 7,125
7,143
Intangible assets (net of accumulated amortization of $3,281 and $3,204)
2,021
2,107
Other assets 19,846
20,117
Total assets $ 947,795
$ 895,429
Liabilities
Deposits (includes $4,052 and $2,099 at fair value)
$ 235,239
$ 190,356
Trading liabilities at fair value 142,076
133,356
Securities sold under agreements to repurchase (includes $775 and $733 at fair value)
45,816
54,200
Securities loaned 11,631
8,506
Other secured financings (includes $6,897 and $7,809 at fair value)
13,058
14,698
Customer and other payables 198,074
197,834
Other liabilities and accrued expenses 19,817
21,155
Borrowings (includes $57,162 and $64,461 at fair value)
194,856
192,627
Total liabilities 860,567
812,732
Commitments and contingent liabilities (see Note 13)

Equity
Morgan Stanley shareholders’ equity:
Preferred stock 8,520
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
20
20
Additional paid-in capital 23,428
23,935
Retained earnings 71,518
70,589
Employee stock trusts 3,088
2,918
Accumulated other comprehensive income (loss) 2,095
(2,788 )
Common stock held in treasury at cost, $0.01 par value (463,393,472 and 444,920,299 shares)
(19,721 ) (18,727 )
Common stock issued to employee stock trusts (3,088 ) (2,918 )
Total Morgan Stanley shareholders’ equity 85,860
81,549
Noncontrolling interests 1,368
1,148
Total equity 87,228
82,697
Total liabilities and equity $ 947,795
$ 895,429



~~See Notes to Consolidated Financial Statements~~	41	~~March 2020 Form 10-Q~~

Table of Contents



~~Table of Contents~~
Consolidated Statements of Changes in Total Equity (Unaudited)


	Three Months Ended March 31,
$ in millions		2021		2020
Preferred Stock
Beginning balance		$	9,250	$	8,520
Redemption of Series J preferred stock		(1,500)		0
Ending balance		7,750		8,520
Common Stock
Beginning and ending balance		20		20
Additional Paid-in Capital
Beginning balance		25,546		23,935
Share-based award activity		(332)		(507)
Issuance of common stock for the acquisition of Eaton Vance		2,185		0

Other net increases (decreases)		7		0
Ending balance		27,406		23,428
Retained Earnings
Beginning balance		78,694		70,589
Cumulative adjustment related to the adoption of financial instruments-credit losses accounting update1		—		(100)
Net income applicable to Morgan Stanley		4,120		1,698
Preferred stock dividends2		(138)		(108)
Common stock dividends2		(635)		(561)

Other net increases (decreases)		(7)		0
Ending balance		82,034		71,518
Employee Stock Trusts
Beginning balance		3,043		2,918
Share-based award activity		818		170
Ending balance		3,861		3,088
Accumulated Other Comprehensive Income (Loss)
Beginning balance		(1,962)		(2,788)
Net change in Accumulated other comprehensive income (loss)		(792)		4,883
Ending balance		(2,754)		2,095
Common Stock Held in Treasury at Cost
Beginning balance		(9,767)		(18,727)
Share-based award activity		1,020		788
Repurchases of common stock and employee tax withholdings		(2,582)		(1,782)
Issuance of common stock for the acquisition of Eaton Vance		3,132		0
Ending balance		(8,197)		(19,721)
Common Stock Issued to Employee Stock Trusts
Beginning balance		(3,043)		(2,918)
Share-based award activity		(818)		(170)
Ending balance		(3,861)		(3,088)
Noncontrolling Interests
Beginning balance		1,368		1,148
Net income applicable to noncontrolling interests		48		82
Net change in Accumulated other comprehensive income (loss) applicable to noncontrolling interests		(61)		138
Other net increases (decreases)		(26)		0
Ending balance		1,329		1,368
Total Equity		$	107,588	$	87,228

1.See Notes 2 and 18 in the 2020 Form 10-K for further information regarding cumulative adjustments for accounting changes.

Three Months Ended
March 31,

$ in millions 2020 2019
Preferred Stock
Beginning and ending balance $ 8,520
$ 8,520
Common Stock
Beginning and ending balance 20
20
Additional Paid-in Capital
Beginning balance 23,935
23,794
Share-based award activity (507 ) (618 )
Other net increases —
2
Ending balance 23,428
23,178
Retained Earnings
Beginning balance 70,589
64,175
Cumulative adjustments for accounting changes¹
(100 ) 63
Net income applicable to Morgan Stanley 1,698
2,429
Preferred stock dividends²
(108 ) (93 )
Common stock dividends²
(561 ) (513 )
Ending balance 71,518
66,061
Employee Stock Trusts
Beginning balance 2,918
2,836
Share-based award activity 170
164
Ending balance 3,088
3,000
Accumulated Other Comprehensive Income (Loss)
Beginning balance (2,788 ) (2,292 )
Net change in Accumulated other comprehensive income (loss) 4,883
(181 )
Ending balance 2,095
(2,473 )
Common Stock Held In Treasury at Cost
Beginning balance (18,727 ) (13,971 )
Share-based award activity 788
1,034
Repurchases of common stock and employee tax withholdings (1,782 ) (1,645 )
Ending balance (19,721 ) (14,582 )
Common Stock Issued to Employee Stock Trusts
Beginning balance (2,918 ) (2,836 )
Share-based award activity (170 ) (164 )
Ending balance (3,088 ) (3,000 )
Non-Controlling Interests
Beginning balance 1,148
1,160
Net income applicable to non-controlling interests 82
39
Net change in Accumulated other comprehensive income (loss) 138
(31 )
Ending balance 1,368
1,168
Total Equity $ 87,228
$ 81,892


1.	~~See Notes 2 and 16 for further information regarding cumulative adjustments for accounting changes.~~


2.	~~See Note 16~~2.See Note 17 for information regarding dividends per share for each class of stock.



~~See Notes to Consolidated Financial Statements~~	42	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Consolidated Cash Flow Statements~~ ~~(Unaudited)~~

Three Months Ended
March 31,
$ in millions 2020 2019
Cash flows from operating activities
Net income $ 1,780
$ 2,468
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Stock-based compensation expense 154
293
Depreciation and amortization 824
658
Provision for (Release of) credit losses on lending activities 407
36
Other operating adjustments 1,044
(92 )
Changes in assets and liabilities:
Trading assets, net of Trading liabilities 35,079
23,977
Securities borrowed 34,249
(22,578 )
Securities loaned 3,125
600
Customer and other receivables and other assets (23,619 ) 1,567
Customer and other payables and other liabilities (4,247 ) 9,971
Securities purchased under agreements to resell (16,576 ) 1,952
Securities sold under agreements to repurchase (8,384 ) (1,811 )
Net cash provided by (used for) operating activities 23,836
17,041
Cash flows from investing activities
Proceeds from (payments for):
Other assets—Premises, equipment and software, net (354 ) (529 )
Changes in loans, net (13,243 ) (1,329 )
Investment securities:
Purchases (12,924 ) (15,895 )
Proceeds from sales 3,128
7,875
Proceeds from paydowns and maturities 2,378
2,663
Other investing activities (93 ) (12 )
Net cash provided by (used for) investing activities (21,108 ) (7,227 )
Cash flows from financing activities
Net proceeds from (payments for):
Other secured financings 259
(1,575 )
Deposits 44,694
(8,089 )
Proceeds from issuance of Borrowings 20,601
8,091
Payments for:
Borrowings (14,967 ) (11,927 )
Repurchases of common stock and employee tax withholdings (1,782 ) (1,645 )
Cash dividends (688 ) (663 )
Other financing activities (163 ) (56 )
Net cash provided by (used for) financing activities 47,954
(15,864 )
Effect of exchange rate changes on cash and cash equivalents (1,344 ) (464 )
Net increase (decrease) in cash and cash equivalents 49,338
(6,514 )
Cash and cash equivalents, at beginning of period 82,171
87,196
Cash and cash equivalents, at end of period $ 131,509
$ 80,682
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest $ 2,123
$ 2,896
Income taxes, net of refunds 342
245



~~See Notes to Consolidated Financial Statements~~	43	~~March 2020 Form 10-Q~~



~~Table of Contents~~
See Notes to Consolidated Financial Statements	35	March 2021 Form 10-Q


Table of Contents
Consolidated Cash Flow Statements (Unaudited)


	Three Months Ended March 31,
$ in millions	2021		2020
Cash flows from operating activities
Net income	$	4,168	$	1,780
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Stock-based compensation expense	518		154
Depreciation and amortization	887		824
Provision for credit losses	(98)		407
Other operating adjustments	(95)		1,044
Changes in assets and liabilities:
Trading assets, net of Trading liabilities	20,463		35,079
Securities borrowed	10,242		34,249
Securities loaned	695		3,125
Customer and other receivables and other assets	(18,721)		(23,619)
Customer and other payables and other liabilities	3,270		(4,247)
Securities purchased under agreements to resell	1,513		(16,576)
Securities sold under agreements to repurchase	4,037		(8,384)
Net cash provided by (used for) operating activities	26,879		23,836
Cash flows from investing activities
Proceeds from (payments for):
Other assets—Premises, equipment and software, net	(525)		(354)
Changes in loans, net	(6,474)		(13,243)
Investment securities:
Purchases	(32,333)		(12,924)
Proceeds from sales	6,825		3,128
Proceeds from paydowns and maturities	12,638		2,378
Cash paid as part of the Eaton Vance acquisition, net of cash acquired	(2,648)		0
Other investing activities	(44)		(93)
Net cash provided by (used for) investing activities	(22,561)		(21,108)
Cash flows from financing activities
Net proceeds from (payments for):
Other secured financings	(3,798)		259
Deposits	12,391		44,694
Proceeds from issuance of Borrowings	24,112		20,601
Payments for:
Borrowings	(19,774)		(14,967)
Repurchases of common stock and employee tax withholdings	(2,582)		(1,782)
Cash dividends	(755)		(688)
Other financing activities	(30)		(163)
Net cash provided by (used for) financing activities	9,564		47,954
Effect of exchange rate changes on cash and cash equivalents	(1,418)		(1,344)
Net increase (decrease) in cash and cash equivalents	12,464		49,338
Cash and cash equivalents, at beginning of period	105,654		82,171
Cash and cash equivalents, at end of period	$	118,118	$	131,509
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	586	$	2,123
Income taxes, net of refunds	339		342


March 2021 Form 10-Q			36			See Notes to Consolidated Financial Statements


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

1. Introduction and Basis of Presentation

The Firm

Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley” or the “Firm” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.

A description of the clients and principal products and services of each of the Firm’s business segments is as follows:

endowments, government entities, sovereign wealth funds,

insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.

Basis of Financial Information

The financial statements are prepared in accordance with U.S. GAAP, which requires the Firm to make estimates and assumptions regarding the valuations of certain financial instruments, the valuations of goodwill and intangible assets, the outcome of legal and tax matters, deferred tax assets, ~~allowance for credit losses,~~ACL, and other matters that affect its financial statements and related disclosures. The Firm believes that the estimates utilized in the preparation of its financial statements are prudent and reasonable. Actual results could differ materially from these estimates.

~~Certain~~The financial statements reflect the effects of the following reclassifications ~~have been made~~ to prior ~~periods to conform to~~period amounts. The Provision for credit losses for loans and lending commitments is now presented as a separate line in the ~~current presentation.~~ income statements. Previously, the provision for credit losses for loans was included in Other revenues, and the provision for credit losses for lending commitments was included in Other expenses. In addition, economic hedges of certain held-for-sale and held-for-investment loans, which were previously reported in Trading revenues, are now reported in Other revenues.

The Notes are an integral part of the Firm's financial statements. The Firm has evaluated subsequent events for adjustment to or disclosure in these financial statements through the date of this report and has not identified any recordable or disclosable events not otherwise reported in these financial statements or the notes thereto.

The accompanying financial statements should be read in conjunction with the Firm’s financial statements and notes thereto included in the ~~2019~~2020 Form 10-K. Certain footnote disclosures included in the ~~2019~~2020 Form 10-K have been condensed or omitted from these financial statements as they are not required for interim reporting under U.S. GAAP. The financial statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for the fair presentation of the results for the interim period. The results of operations for interim periods are not necessarily indicative of results for the entire year.

Consolidation

The financial statements include the accounts of the Firm, its wholly owned subsidiaries and other entities in which the Firm has a controlling financial interest, including certain VIEs (see Note ~~14)~~15). Intercompany balances and transactions have been eliminated. For consolidated subsidiaries that are not wholly owned, the third-party holdings of equity interests are referred to as ~~noncontrolling~~Noncontrolling interests. The net income attributable to ~~noncontrolling~~Noncontrolling interests for such subsidiaries is


			37			March 2021 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

presented as Net income applicable to noncontrolling interests in the income statements. The portion of shareholders’ equity that is attributable to noncontrolling interests for such subsidiaries is presented as noncontrolling interests, a component of Total equity, in the balance sheets.

For a discussion of the Firm’s significant regulated U.S. and international subsidiaries and its involvement with VIEs, see Note 1 to the financial statements in the ~~2019~~2020 Form 10-K.



~~March 2020 Form 10-Q~~	44



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

2. Significant Accounting Policies

For a detailed discussion about the Firm’s significant accounting policies and for further information on accounting updates adopted in the prior year, see Note 2 to the financial statements in the ~~2019~~2020 Form 10-K.

During the three months ended March 31, ~~2020~~2021 (“current quarter”), there were no significant ~~revisions~~updates to the Firm’s significant accounting policies, other than ~~for the accounting updates adopted.~~

~~Accounting Updates Adopted~~as described below and in ~~2020~~

~~See~~ Note ~~16 for a summary of the Retained earnings impact of this adoption.~~

~~Financial Instruments — Credit Losses~~

~~The Firm adopted the~~ ~~Financial Instruments - Credit Losses~~ ~~accounting update on January~~ 1 ~~2020.~~

~~This accounting update impacted the impairment model for certain financial assets measured at amortized cost by requiring a CECL methodology~~ to ~~estimate expected credit losses over the entire life of~~ the financial asset, recorded at inception or purchase. CECL replaced the loss model currently applicable to loans held for investment, HTM securities and other receivables carried at amortized cost, such as employee loans.

statements.

The ~~update also eliminated the concept~~Firm’s acquisition of ~~other-than-temporary impairment for AFS securities and instead requires impairments~~Eaton Vance Corp. (“Eaton Vance”) on AFS securities to be recognized in earnings through an allowance when the fair value is less than amortized cost and a credit loss exists, and through a permanent reduction of the amortized cost basis when the securities are expected to be sold before recovery of amortized cost.

~~For certain portfolios, we determined that there are~~ ~~de minimus~~ or zero expected credit losses; for example, for lending and financing transactions, such as Securities borrowed, Securities purchased under agreements to resell and certain other portfolios where collateral arrangements are being followed. Also, we have zero expected credit losses for certain financialMarch 1, 2021 added indefinite lived intangible assets ~~based on the credit quality of the borrower or issuer, such as U.S. government and agency securities.~~

At transition on January 1, 2020, the adoption of this accounting standard resulted in an increase in the allowance for credit losses of $131 million with a corresponding reduction in Retained earnings of $100 million, net of tax. The adoption impact was primarily attributable to a $124 million increase in the allowance for credit losses on employee loans.

~~The following discussion highlights changes~~ to the Firm’s ~~accounting policies as~~balance sheet. Indefinite lived intangibles are not amortized but are tested for impairment on an annual basis and on an interim basis when certain events or circumstances exist. For both the annual and interim tests, the Firm has the option to either (i) perform a ~~result~~quantitative impairment test or (ii) first perform a qualitative assessment to determine whether it is more likely than not that the asset is impaired, in which case if it is the quantitative test would be performed.

3. Acquisitions

Acquisition of ~~this adoption.~~

Eaton Vance

~~Instruments Measured at Amortized Cost~~On March 1, 2021, the Firm completed the acquisition of 100% of Eaton Vance in a stock and ~~Certain Off-Balance Sheet Credit Exposures~~

~~Allowance for Credit Losses (“ACL”)~~

~~The ACL for financial instruments measured at amortized cost~~cash transaction, which increases the scale and ~~certain off-balance sheet exposures (e.g.,~~ ~~HFI loans and lending commitments, HTM securities, customer and other receivables and certain guarantees) represents an estimate of expected credit losses over the entire life~~breadth of the ~~financial instrument.~~

~~Factors considered by management when determining~~Investment Management business segment. Total consideration for the ~~ACL include payment status,~~transaction was approximately $8.7 billion, which consists of the $5.3 billion fair value of ~~collateral, expected payments~~69 million common shares issued from Common stock held in treasury and cash of ~~principal~~approximately $3.4 billion.

Upon acquisition, the assets and ~~interest,~~liabilities of Eaton Vance were adjusted to their respective fair values as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts. The Firm’s forecasts include assumptions about certain macroeconomic variables including, but not limited to, U.S. gross domestic product, equity market indices, unemployment rates, as well as commercial real estate and home price indices. At the conclusion of the ~~Firm’s reasonable and supportable forecast period of three years, there is a gradual reversion back to historical averages.~~

The ACL is measured on a collective basis when similar risk characteristics exist for multiple instruments considering all available information relevant to assessing the collectability of cash flows. Generally, the Firm applies a probability of default (“PD”)/loss given default (“LGD”) model (“PD/LGD model”) for instruments that are collectively assessed, under which the ACL is calculated as the product of PD, LGD and exposure at default (“EAD”). These parameters are forecast for each collective group of loans using a scenario-based statistical model and at the conclusionclosing date of the ~~Firm’s reasonable and supportable forecast period,~~transaction, including the ~~parameters gradually revert back to historical averages.~~

Ifidentifiable intangible assets acquired. In addition, the ~~instrument does not share similar risk characteristics with other instruments, including when it is probable that~~excess of the Firm will be unable to collect the full payment of principal and interest on the instrument when due, the ACL is measured on an individual basis. The Firm typically applies a discounted cash flow (“DCF”) method for instruments that are individually assessed.

~~The Firm may also elect to use an approach that considers~~purchase price over the fair value of the ~~collateral when measuring~~net assets acquired has been recorded as goodwill. The fair value estimates used in valuing certain acquired assets and liabilities are based, in part, on inputs that are unobservable. For intangible assets, these include, but are not limited to forecasted future cash flows, revenue growth rates, attrition rates and discount rates.

Preliminary Eaton Vance Purchase Price Allocation1


$ in millions	At March 1, 2021
Assets
Cash and cash equivalents	$	691
Trading assets at fair value:
Loans and lending commitments	445
Investments	299
Corporate and other debt	52
Customer and other receivables	331
Goodwill	5,270
Intangible assets	3,956
Other assets	836
Total assets	$	11,880
Liabilities
Other secured financings	$	399
Other liabilities and accrued expenses	2,147
Borrowings	678
Total liabilities	$	3,224

1.Due to the ~~ACL if~~limited time since the ~~loan is collateral dependent (i.e.,repayment~~date of the ~~loan is expected~~acquisition, the purchase price allocation remains preliminary.

Acquired Intangible Assets


$ in millions	Weighted average life (years)	At March 1, 2021
Non-amortizable
Management contracts	indefinite	$	2,120
Amortizable
Customer relationships	16	1,455
Tradenames	23	221
Management contracts	16	160
Total acquired Intangible assets		$	3,956

Eaton Vance Net revenues of approximately $174 million and Net income of approximately $31 million are included in the Firm’s consolidated results for the period from March 1, 2021 to ~~be provided substantially~~March 31, 2021.

Morgan Stanley and Eaton Vance Proforma Combined Financial Information


	Three Months Ended March 31,
$ in millions	2021		2020
Net revenues	$	16,015	$	10,165
Net income	4,268		1,409

The proforma financial information presented in the previous table was computed by combining the ~~sale or operation~~historical financial information of the ~~underlying collateral~~Firm and Eaton Vance along with the ~~borrower is experiencing financial difficulty).~~effects of the acquisition method of accounting for business combinations as though the companies were combined on January 1, 2020.

~~Additionally,~~The proforma information does not reflect the ~~Firm can elect~~potential benefits of cost and funding synergies, opportunities to ~~use an approach to measure~~earn additional revenues, or other factors, and therefore does not represent what the ~~ACL using~~actual Net revenues and Net income would have been had the ~~fair value~~companies actually been combined as of collateral where the borrower is required to, and reasonably expected to, continually adjust and replenish the amount of collateral securing the instrument to reflect changes in the fair value of such collateral. The Firm hasthis date.



45	March ~~2020~~2021 Form 10-Q	38



Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

~~elected to use this approach for certain securities-based loans, customer receivables representing margin loans, Securities purchased under agreements to resell and Securities borrowed.~~

~~Credit quality indicators considered in developing the ACL include:~~

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.

~~Consumer loans primarily comprise securities-based loans and therefore the Firm generally measures the ACL on such loans based on the fair value of collateral.~~

Qualitative and environmental factors such as economic and business conditions, the nature and volume of the portfolio, and lending terms and the volume and severity of past due loans are also considered in the ACL calculations.

~~Recognition. The Firm recognizes its ACL and provision for credit losses in its balance sheets and income statements, respectively, for on– and off–balance sheet instruments as follows.~~



	~~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~~

~~Troubled Debt Restructurings (“TDRs”)~~

~~The Firm may modify the terms of certain loans for economic or legal reasons related to a borrower’s financial difficulties by granting one or more concessions that the Firm would not~~

otherwise consider. Such modifications are accounted for and reported as a TDR, except for certain modifications related to the Coronavirus Disease (“COVID-19”) as noted in “Modifications and Nonaccrual Status for Borrowers Impacted by COVID-19” herein. A loan that has been modified in a TDR is generally considered to be impaired and is evaluated individually. TDRs are also generally classified as nonaccrual and may be returned to accrual status only after the Firm expects repayment of the remaining contractual principal and interest and there is sustained repayment performance for a reasonable period.

~~Nonaccrual~~

The Firm places financial instruments on nonaccrual status if principal or interest is past due for a period of 90 days or more or payment of principal or interest is in doubt unless the obligation is well-secured and in the process of collection, or in certain cases when related to the Coronavirus Disease (“COVID-19”) as noted in “Modifications and Nonaccrual Status for Borrowers Impacted by COVID-19” herein. For any instrument placed on nonaccrual status, the Firm reverses any unpaid interest accrued with an offsetting reduction to Interest income. Principal and interest payments received on nonaccrual instruments are applied to principal if there is doubt regarding the ultimate collectability of principal. If collection of the principal is not in doubt, interest income is realized on a cash basis. If neither principal nor interest collection is in doubt and the instruments are brought current, instruments are generally placed on accrual status and interest income is recognized using the effective interest method.

~~Modifications and Nonaccrual Status for Borrowers Impacted by COVID-19~~

In the first quarter of 2020, the Firm elected to apply the guidance issued by Congress in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) as well as by the U.S. banking agencies stating that certain concessions granted to borrowers that are current on existing loans, either individually or as part of a program for creditworthy borrowers who are experiencing short-term financial or operational problems as a result of the coronavirus pandemic, generally would not be considered TDRs or nonaccrual.

~~ACL Write-offs~~

The Firm writes-off a financial instrument in the period that it is deemed uncollectible and records a reduction in the ACL and the balance of the financial instrument in the balance sheet. However, for accrued interest receivable balances that are separately recorded from the related financial instruments, the Firm's nonaccrual policy requires that accrued interest receivable be written off against Interest income when the related financial instrument is placed in nonaccrual status. Accordingly, the Firm elected not to measure an ACL for accrued interest receivables.



~~March 2020 Form 10-Q~~	46



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

~~Available-for-Sale (“AFS”) Investment Securities~~

~~Unrealized Losses on AFS Securities~~

AFS securities are analyzed as part of the Firm's periodic assessment of credit losses at the individual security level. When considering if a credit loss exists, the Firm considers relevant information as discussed in Note 2 of the 2019 Form 10-K. Upon the adoption of ~~Financial Instruments—Credit Losses, the Firm no longer considers the length of time the fair value has been less than the amortized cost basis in determining whether a credit loss exists.~~

~~Recognition. The Firm recognizes its ACL and provision for credit losses for AFS securities in its balance sheets and income statements, respectively, as follows.~~



	~~ACL~~	~~Provision for credit losses~~
~~AFS securities~~	~~Contra asset~~	~~Other revenue~~

~~The Firm recognizes the non-credit loss component of the unrealized loss as an adjustment to the security’s asset balance with an offsetting entry to AOCI in the balance sheets.~~

For AFS securities in an unrealized loss position as of the balance sheet date that the Firm either has the intent to sell or that the Firm is likely to be required to sell before recovery of its amortized cost basis, any allowance for credit losses previously established is written off and the amortized cost basis is written down to the security’s fair value with any incremental unrealized losses reported in Other revenues.

~~Nonaccrual & ACL Write-Offs on AFS Securities~~

~~AFS securities follow the same nonaccrual and write-off guidance as discussed in “Instruments Measured at Amortized Cost and Certain Off-Balance Sheet Credit Exposures” herein.~~

3.4. Cash and Cash Equivalents

Cash and cash equivalents consist of Cash and due from banks and Interest bearing deposits with banks. Cash equivalents are highly liquid investments with remaining maturities of three months or less from the acquisition date that are readily convertible to cash and are not held for trading purposes.

$ in millions At
March 31,
2020 At
December 31,
2019
Cash and due from banks $ 11,570
$ 6,763
Interest bearing deposits with banks 119,939
75,408
Total Cash and cash equivalents $ 131,509
$ 82,171
Restricted cash $ 56,064
$ 32,512


$ in millions	At March 31, 2021		At December 31, 2020
Cash and due from banks	$	11,163	$	9,792
Interest bearing deposits with banks	106,955		95,862
Total Cash and cash equivalents	$	118,118	$	105,654
Restricted cash	$	42,920	$	38,202

Cash and cash equivalents also include Restricted cash such as cash ~~in banks subject to withdrawal restrictions, restricted deposits held as compensating balances and cash~~ segregated in

compliance with federal or other regulations, including ~~the~~ minimum reserve ~~requirement~~requirements set by the Federal Reserve Bank and other central ~~banks.~~banks, and the Firm’s initial margin deposited with clearing organizations.

4. 5. Fair Values

Recurring Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis


	At March 31, 2021
$ in millions	Level 1		Level 2		Level 3		Netting1		Total
Assets at fair value
Trading assets:
U.S. Treasury and agency securities	$	53,200	$	22,956	$	12	$	—	$	76,168
Other sovereign government obligations	32,927		5,929		17		—		38,873
State and municipal securities	0		1,366		0		—		1,366
MABS	0		1,164		374		—		1,538
Loans and lending commitments2	0		7,644		5,045		—		12,689
Corporate and other debt	0		25,672		3,319		—		28,991
Corporate equities3	104,223		327		114		—		104,664
Derivative and other contracts:
Interest rate	7,453		182,012		1,242		—		190,707
Credit	0		8,853		601		—		9,454
Foreign exchange	7		82,822		191		—		83,020
Equity	999		65,637		1,279		—		67,915
Commodity and other	2,130		11,438		3,035		—		16,603
Netting1	(7,947)		(265,732)		(1,136)		(52,034)		(326,849)
Total derivative and other contracts	2,642		85,030		5,212		(52,034)		40,850
Investments4	729		416		924		—		2,069
Physical commodities	0		2,133		0		—		2,133
Total trading assets4	193,721		152,637		15,017		(52,034)		309,341
Investment securities—AFS	50,392		54,769		127		—		105,288
Securities purchased under agreements to resell	0		9		0		—		9
Total assets at fair value	$	244,113	$	207,415	$	15,144	$	(52,034)	$	414,638


	At March 31, 2021
$ in millions	Level 1		Level 2		Level 3		Netting1		Total
Liabilities at fair value
Deposits	$	0	$	2,892	$	177	$	—	$	3,069
Trading liabilities:
U.S. Treasury and agency securities	13,357		5		0		—		13,362
Other sovereign government obligations	27,322		1,758		0		—		29,080
Corporate and other debt	0		11,377		13		—		11,390
Corporate equities3	91,623		377		49		—		92,049
Derivative and other contracts:
Interest rate	7,527		168,151		551		—		176,229
Credit	0		9,441		683		—		10,124
Foreign exchange	13		78,749		301		—		79,063
Equity	1,038		80,269		3,396		—		84,703
Commodity and other	1,989		11,118		1,091		—		14,198
Netting1	(7,947)		(265,732)		(1,136)		(49,716)		(324,531)
Total derivative and other contracts	2,620		81,996		4,886		(49,716)		39,786
Total trading liabilities	134,922		95,513		4,948		(49,716)		185,667
Securities sold under agreements to repurchase	0		648		441		—		1,089
Other secured financings	0		4,446		555		—		5,001
Borrowings	13		69,747		4,262		—		74,022
Total liabilities at fair value	$	134,935	$	173,246	$	10,383	$	(49,716)	$	268,848


	At December 31, 2020
$ in millions	Level 1		Level 2		Level 3		Netting1		Total
Assets at fair value
Trading assets:
U.S. Treasury and agency securities	$	43,084	$	31,524	$	9	$	—	$	74,617
Other sovereign government obligations	26,174		5,048		268		—		31,490
State and municipal securities	0		1,135		0		—		1,135
MABS	0		1,070		322		—		1,392
Loans and lending commitments2	0		5,389		5,759		—		11,148
Corporate and other debt	0		30,093		3,435		—		33,528
Corporate equities3	111,575		1,142		86		—		112,803
Derivative and other contracts:
Interest rate	4,458		227,818		1,210		—		233,486
Credit	0		6,840		701		—		7,541
Foreign exchange	29		93,770		260		—		94,059
Equity	1,132		65,943		1,369		—		68,444
Commodity and other	1,818		10,108		2,723		—		14,649
Netting1	(5,488)		(310,534)		(1,351)		(62,956)		(380,329)
Total derivative and other contracts	1,949		93,945		4,912		(62,956)		37,850
Investments4	624		234		828		—		1,686
Physical commodities	0		3,260		0		—		3,260
Total trading assets4	183,406		172,840		15,619		(62,956)		308,909
Investment securities—AFS	46,354		61,225		2,804		—		110,383
Securities purchased under agreements to resell	0		12		3		—		15
Total assets at fair value	$	229,760	$	234,077	$	18,426	$	(62,956)	$	419,307

At March 31, 2020
$ in millions Level 1 Level 2 Level 3
Netting¹
Total
Assets at fair value
Trading assets:
U.S. Treasury and agency securities $ 42,231
$ 29,105
$ 99
$ —
$ 71,435
Other sovereign government obligations 29,493
5,017
17
—
34,527
State and municipal securities —
2,226
1
—
2,227
MABS —
838
483
—
1,321
Loans and lending commitments²
—
4,082
5,980
—
10,062
Corporate and other debt —
23,448
1,708
—
25,156
Corporate equities³
66,409
582
146
—
67,137
Derivative and other contracts:
Interest rate 14,025
253,646
1,367
—
269,038
Credit —
12,605
753
—
13,358
Foreign exchange 26
112,711
76
—
112,813
Equity 1,041
93,175
1,560
—
95,776
Commodity and other 1,070
17,813
3,384
—
22,267
Netting¹
(12,720 ) (376,568 ) (1,301 ) (69,653 ) (460,242 )
Total derivative and other contracts 3,442
113,382
5,839
(69,653 ) 53,010
Investments⁴
562
204
725
—
1,491
Physical commodities —
960
—
—
960
Total trading assets⁴
142,137
179,844
14,998
(69,653 ) 267,326
Investment securities—AFS 35,899
32,972
—
—
68,871
Securities purchased under agreements to resell —
5
—
—
5
Total assets at fair value $ 178,036
$ 212,821
$ 14,998
$ (69,653 ) $ 336,202



			4739			March ~~2020~~2021 Form 10-Q



Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	At December 31, 2020
$ in millions	Level 1		Level 2		Level 3		Netting1		Total
Liabilities at fair value
Deposits	$	0	$	3,395	$	126	$	—	$	3,521
Trading liabilities:
U.S. Treasury and agency securities	10,204		1		0		—		10,205
Other sovereign government obligations	24,209		1,738		16		—		25,963
Corporate and other debt	0		8,468		0		—		8,468
Corporate equities3	67,822		172		63		—		68,057
Derivative and other contracts:
Interest rate	4,789		213,321		528		—		218,638
Credit	0		7,500		652		—		8,152
Foreign exchange	11		94,698		199		—		94,908
Equity	1,245		81,683		3,600		—		86,528
Commodity and other	1,758		9,418		1,014		—		12,190
Netting1	(5,488)		(310,534)		(1,351)		(58,105)		(375,478)
Total derivative and other contracts	2,315		96,086		4,642		(58,105)		44,938
Total trading liabilities	104,550		106,465		4,721		(58,105)		157,631
Securities sold under agreements to repurchase	0		671		444		—		1,115
Other secured financings	0		11,185		516		—		11,701
Borrowings	0		69,327		4,374		—		73,701
Total liabilities at fair value	$	104,550	$	191,043	$	10,181	$	(58,105)	$	247,669

At March 31, 2020
$ in millions Level 1 Level 2 Level 3
Netting¹
Total
Liabilities at fair value
Deposits $ —
$ 3,935
$ 117
$ —
$ 4,052
Trading liabilities:
U.S. Treasury and agency securities 13,273
201
16
—
13,490
Other sovereign government obligations 20,273
836
2
—
21,111
Corporate and other debt —
9,341
6
—
9,347
Corporate equities³
57,134
85
40
—
57,259
Derivative and other contracts:
Interest rate 14,655
242,840
494
—
257,989
Credit —
12,631
555
—
13,186
Foreign exchange 20
112,552
226
—
112,798
Equity 1,090
89,344
2,936
—
93,370
Commodity and other 1,438
15,280
1,535
—
18,253
Netting¹
(12,720 ) (376,568 ) (1,301 ) (64,138 ) (454,727 )
Total derivative and other contracts 4,483
96,079
4,445
(64,138 ) 40,869
Total trading liabilities 95,163
106,542
4,509
(64,138 ) 142,076
Securities sold under agreements to repurchase —
775
—
—
775
Other secured financings —
6,508
389
—
6,897
Borrowings —
53,164
3,998
—
57,162
Total liabilities at fair value $ 95,163
$ 170,924
$ 9,013
$ (64,138 ) $ 210,962

At December 31, 2019
$ in millions Level 1 Level 2 Level 3
Netting¹
Total
Assets at fair value
Trading assets:
U.S. Treasury and agency securities $ 36,866
$ 28,992
$ 22
$ —
$ 65,880
Other sovereign government obligations 23,402
4,347
5
—
27,754
State and municipal securities —
2,790
1
—
2,791
MABS —
1,690
438
—
2,128
Loans and lending commitments²
—
6,253
5,073
—
11,326
Corporate and other debt —
22,124
1,396
—
23,520
Corporate equities³
123,942
652
97
—
124,691
Derivative and other contracts:
Interest rate 1,265
182,977
1,239
—
185,481
Credit —
6,658
654
—
7,312
Foreign exchange 15
64,260
145
—
64,420
Equity 1,219
48,927
922
—
51,068
Commodity and other 1,079
7,255
2,924
—
11,258
Netting¹
(2,794 ) (235,947 ) (993 ) (47,804 ) (287,538 )
Total derivative and other contracts 784
74,130
4,891
(47,804 ) 32,001
Investments⁴
481
252
858
—
1,591
Physical commodities —
1,907
—
—
1,907
Total trading assets⁴
185,475
143,137
12,781
(47,804 ) 293,589
Investment securities—AFS 32,902
29,321
—
—
62,223
Securities purchased under agreements to resell —
4
—
—
4
Total assets at fair value $ 218,377
$ 172,462
$ 12,781
$ (47,804 ) $ 355,816

At December 31, 2019
$ in millions Level 1 Level 2 Level 3
Netting¹
Total
Liabilities at fair value
Deposits $ —
$ 1,920
$ 179
$ —
$ 2,099
Trading liabilities:
U.S. Treasury and agency securities 11,191
34
—
—
11,225
Other sovereign government obligations 21,837
1,332
1
—
23,170
Corporate and other debt —
7,410
—
—
7,410
Corporate equities³
63,002
79
36
—
63,117
Derivative and other contracts:
Interest rate 1,144
171,025
462
—
172,631
Credit —
7,391
530
—
7,921
Foreign exchange 6
67,473
176
—
67,655
Equity 1,200
49,062
2,606
—
52,868
Commodity and other 1,194
7,118
1,312
—
9,624
Netting¹
(2,794 ) (235,947 ) (993 ) (42,531 ) (282,265 )
Total derivative and other contracts 750
66,122
4,093
(42,531 ) 28,434
Total trading liabilities 96,780
74,977
4,130
(42,531 ) 133,356
Securities sold under agreements to repurchase —
733
—
—
733
Other secured financings —
7,700
109
—
7,809
Borrowings —
60,373
4,088
—
64,461
Total liabilities at fair value $ 96,780
$ 145,703
$ 8,506
$ (42,531 ) $ 208,458

~~MABS~~—MABS—Mortgage- and asset-backed securities

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 7.


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.	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.

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.

$ in millions At
March 31,
2020 At
December 31, 2019
Corporate $ 7,711
$ 8,036
Residential real estate 1,154
1,192
Commercial real estate 1,197
2,098
Total $ 10,062
$ 11,326
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.

Detail of Loans and Lending Commitments at Fair Value


$ in millions	At March 31, 2021		At December 31, 2020
Corporate	$	14	$	13
Secured lending facilities	914		648
Commercial Real Estate	347		916
Residential Real Estate	2,551		2,145
Securities-based lending and Other loans	8,863		7,426
Total	$	12,689	$	11,148

Unsettled Fair Value of Futures Contracts¹


$ in millions	At March 31, 2021		At December 31, 2020
Customer and other receivables, net	$	689	$	434

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.

$ in millions At
March 31,
2020 At
December 31, 2019
Customer and other receivables, net $ 935
$ 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.~~

For a description of the valuation techniques applied to the Firm’s major categories of assets and liabilities measured at fair value on a recurring basis, see Note 35 to the financial statements in the ~~2019~~2020 Form 10-K. During the current quarter, there were no significant revisions made to the Firm’s valuation techniques.



~~March 2020 Form 10-Q~~	48



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

Three Months Ended
March 31,
$ in millions 2020 2019
U.S. Treasury and agency securities
Beginning balance $ 22
$ 54
Realized and unrealized gains (losses) 5
—
Purchases 85
—
Sales (21 ) (50 )
Net transfers 8
3
Ending balance $ 99
$ 7
Unrealized gains (losses) $ 5
$ —
Other sovereign government obligations
Beginning balance $ 5
$ 17
Realized and unrealized gains (losses) 1
—
Purchases 10
2
Sales —
(2 )
Net transfers 1
(12 )
Ending balance $ 17
$ 5
Unrealized gains (losses) $ 1
$ —
State and municipal securities
Beginning balance $ 1
$ 148
Realized and unrealized gains (losses) —
1
Purchases —
10
Sales —
(44 )
Net transfers —
(103 )
Ending balance $ 1
$ 12
Unrealized gains (losses) $ —
$ 1
MABS
Beginning balance $ 438
$ 354
Realized and unrealized gains (losses) (89 ) (7 )
Purchases 158
19
Sales (140 ) (83 )
Settlements —
(3 )
Net transfers 116
21
Ending balance $ 483
$ 301
Unrealized gains (losses) $ (92 ) $ (14 )
Loans and lending commitments
Beginning balance $ 5,073
$ 6,870
Realized and unrealized gains (losses) (102 ) —
Purchases and originations 1,952
1,255
Sales (529 ) (108 )
Settlements (1,387 ) (820 )
Net transfers¹
973
(854 )
Ending balance $ 5,980
$ 6,343
Unrealized gains (losses) $ (101 ) $ (7 )


	Three Months Ended March 31,
$ in millions	2021		2020
U.S. Treasury and agency securities
Beginning balance	$	9	$	22
Realized and unrealized gains (losses)	0		5
Purchases	12		85
Sales	(9)		(21)

Net transfers	0		8
Ending balance	$	12	$	99
Unrealized gains (losses)	$	0	$	5
Other sovereign government obligations
Beginning balance	$	268	$	5
Realized and unrealized gains (losses)	0		1
Purchases	15		10
Sales	(256)		0

Net transfers	(10)		1
Ending balance	$	17	$	17
Unrealized gains (losses)	$	0	$	1
State and municipal securities
Beginning balance	$	0	$	1





Ending balance	$	0	$	1
Unrealized gains (losses)	$	0	$	0
MABS
Beginning balance	$	322	$	438
Realized and unrealized gains (losses)	51		(89)
Purchases	144		158
Sales	(103)		(140)

Net transfers	(40)		116
Ending balance	$	374��	$	483
Unrealized gains (losses)	$	(2)	$	(92)
Loans and lending commitments
Beginning balance	$	5,759	$	5,073
Realized and unrealized gains (losses)	(26)		(102)
Purchases and originations	1,833		1,952
Sales	(2,060)		(529)
Settlements	(388)		(1,387)
Net transfers1	(73)		973
Ending balance	$	5,045	$	5,980
Unrealized gains (losses)	$	(32)	$	(101)

Three Months Ended
March 31,
$ in millions 2020 2019
Corporate and other debt
Beginning balance $ 1,396
$ 1,076
Realized and unrealized gains (losses) (92 ) 43
Purchases 585
204
Sales (177 ) (127 )
Settlements —
(3 )
Net transfers (4 ) (132 )
Ending balance $ 1,708
$ 1,061
Unrealized gains (losses) $ (90 ) $ 41
Corporate equities
Beginning balance $ 97
$ 95
Realized and unrealized gains (losses) (60 ) 6
Purchases 22
51
Sales (40 ) (9 )
Net transfers 127
9
Ending balance $ 146
$ 152
Unrealized gains (losses) $ (54 ) $ 7
Investments
Beginning balance $ 858
$ 757
Realized and unrealized gains (losses) (63 ) 10
Purchases 15
10
Sales (8 ) (4 )
Net transfers (77 ) 201
Ending balance $ 725
$ 974
Unrealized gains (losses) $ (64 ) $ 14
Net derivatives: Interest rate
Beginning balance $ 777
$ 618
Realized and unrealized gains (losses) 156
(48 )
Purchases 61
24
Issuances (7 ) (19 )
Settlements (42 ) (12 )
Net transfers (72 ) (12 )
Ending balance $ 873
$ 551
Unrealized gains (losses) $ 111
$ (43 )
Net derivatives: Credit
Beginning balance $ 124
$ 40
Realized and unrealized gains (losses) 131
162
Purchases 26
26
Issuances (21 ) (442 )
Settlements (24 ) (33 )
Net transfers (38 ) (14 )
Ending balance $ 198
$ (261 )
Unrealized gains (losses) $ 123
$ 167



49	March ~~2020~~2021 Form 10-Q	40


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Three Months Ended March 31,
$ in millions	2021		2020
Corporate and other debt
Beginning balance	$	3,435	$	1,396
Realized and unrealized gains (losses)	(51)		(92)
Purchases and originations	867		585
Sales	(749)		(177)
Settlements	(255)		0
Net transfers	72		(4)
Ending balance	$	3,319	$	1,708
Unrealized gains (losses)	$	2	$	(90)
Corporate equities
Beginning balance	$	86	$	97
Realized and unrealized gains (losses)	16		(60)
Purchases	25		22
Sales	(46)		(40)

Net transfers	33		127
Ending balance	$	114	$	146
Unrealized gains (losses)	$	18	$	(54)
Investments
Beginning balance	$	828	$	858
Realized and unrealized gains (losses)	6		(63)
Purchases	64		15
Sales	(15)		(8)

Net transfers	41		(77)
Ending balance	$	924	$	725
Unrealized gains (losses)	$	(6)	$	(64)
Investment securities —AFS
Beginning balance	$	2,804	$	0
Realized and unrealized gains (losses)	(4)		0

Sales	(192)		0

Net transfers2	(2,481)		0
Ending balance	$	127	$	0
Unrealized gains (losses)	$	(5)	$	0
Securities purchased under agreements to resell
Beginning balance	$	3	$	0




Net transfers	(3)		0
Ending balance	$	0	$	0
Unrealized gains (losses)	$	0	$	0
Net derivatives: Interest rate
Beginning balance	$	682	$	777
Realized and unrealized gains (losses)	(413)		156
Purchases	31		61
Issuances	(17)		(7)
Settlements	83		(42)
Net transfers	325		(72)
Ending balance	$	691	$	873
Unrealized gains (losses)	$	(403)	$	111
Net derivatives: Credit
Beginning balance	$	49	$	124
Realized and unrealized gains (losses)	(4)		131
Purchases	19		26
Issuances	(8)		(21)
Settlements	(72)		(24)
Net transfers	(66)		(38)
Ending balance	$	(82)	$	198
Unrealized gains (losses)	$	(13)	$	123


	Three Months Ended March 31,
$ in millions	2021		2020
Net derivatives: Foreign exchange
Beginning balance	$	61	$	(31)
Realized and unrealized gains (losses)	(236)		(62)
Purchases	2		3
Issuances	(4)		(8)
Settlements	26		(8)
Net transfers	41		(44)
Ending balance	$	(110)	$	(150)
Unrealized gains (losses)	$	(206)	$	(164)
Net derivatives: Equity
Beginning balance	$	(2,231)	$	(1,684)
Realized and unrealized gains (losses)	63		635
Purchases	77		97
Issuances	(297)		(144)
Settlements	65		(167)
Net transfers	206		(113)
Ending balance	$	(2,117)	$	(1,376)
Unrealized gains (losses)	$	12	$	566
Net derivatives: Commodity and other
Beginning balance	$	1,709	$	1,612
Realized and unrealized gains (losses)	331		75
Purchases	7		3
Issuances	(1)		(3)
Settlements	(131)		157
Net transfers	29		5
Ending balance	$	1,944	$	1,849
Unrealized gains (losses)	$	215	$	22
Deposits
Beginning balance	$	126	$	179
Realized and unrealized losses (gains)	(4)		(6)

Issuances	11		12
Settlements	(2)		(5)
Net transfers	46		(63)
Ending balance	$	177	$	117
Unrealized losses (gains)	$	(4)	$	(6)
Nonderivative trading liabilities
Beginning balance	$	79	$	37
Realized and unrealized losses (gains)	(9)		(43)
Purchases	(20)		(82)
Sales	13		52

Net transfers	(1)		100
Ending balance	$	62	$	64
Unrealized losses (gains)	$	(9)	$	(43)
Securities sold under agreements to repurchase
Beginning balance	$	444	$	0
Realized and unrealized losses (gains)	(2)		0




Net transfers	(1)		0
Ending balance	$	441	$	0
Unrealized losses (gains)	$	(2)	$	0
Other secured financings
Beginning balance	$	516	$	109
Realized and unrealized losses (gains)	(5)		(12)

Issuances	370		2
Settlements	(322)		(115)
Net transfers	(4)		405
Ending balance	$	555	$	389
Unrealized losses (gains)	$	(5)	$	(12)


			41			March 2021 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Three Months Ended March 31,
$ in millions	2021		2020
Borrowings
Beginning balance	$	4,374	$	4,088
Realized and unrealized losses (gains)	(118)		(897)

Issuances	231		701
Settlements	(316)		(234)
Net transfers	91		340
Ending balance	$	4,262	$	3,998
Unrealized losses (gains)	$	(116)	$	(895)
Portion of Unrealized losses (gains) recorded in OCI—Change in net DVA	(29)		(398)

Three Months Ended
March 31,
$ in millions 2020 2019
Net derivatives: Foreign exchange
Beginning balance $ (31 ) $ 75
Realized and unrealized gains (losses) (62 ) (113 )
Purchases 3
1
Issuances (8 ) —
Settlements (8 ) 8
Net transfers (44 ) 34
Ending balance $ (150 ) $ 5
Unrealized gains (losses) $ (164 ) $ 3
Net derivatives: Equity
Beginning balance $ (1,684 ) $ (1,485 )
Realized and unrealized gains (losses) 635
(191 )
Purchases 97
34
Issuances (144 ) (193 )
Settlements (167 ) 139
Net transfers (113 ) (64 )
Ending balance $ (1,376 ) $ (1,760 )
Unrealized gains (losses) $ 566
$ (203 )
Net derivatives: Commodity and other
Beginning balance $ 1,612
$ 2,052
Realized and unrealized gains (losses) 75
43
Purchases 3
5
Issuances (3 ) (1 )
Settlements 157
(81 )
Net transfers 5
88
Ending balance $ 1,849
$ 2,106
Unrealized gains (losses) $ 22
$ (25 )
Deposits
Beginning balance $ 179
$ 27
Realized and unrealized losses (gains) (6 ) 6
Issuances 12
24
Settlements (5 ) (1 )
Net transfers (63 ) 43
Ending balance $ 117
$ 99
Unrealized losses (gains) $ (6 ) $ 6
Nonderivative trading liabilities
Beginning balance $ 37
$ 16
Realized and unrealized losses (gains) (43 ) (1 )
Purchases (82 ) (6 )
Sales 52
23
Net transfers 100
11
Ending balance $ 64
$ 43
Unrealized losses (gains) $ (43 ) $ (1 )
Other secured financings
Beginning balance $ 109
$ 208
Realized and unrealized losses (gains) (12 ) 4
Issuances 2
—
Settlements (115 ) (7 )
Net transfers 405
(52 )
Ending balance $ 389
$ 153
Unrealized losses (gains) $ (12 ) $ 4

1.Net transfers in the prior year quarter included the transfer of $857 million of equity margin loans from Level 2 to Level 3 as the significance of the margin loan rate input increased as a result of reduced liquidity.

2.Net transfers in the current quarter reflect the transfer of certain AFS securities from Level 3 to Level 2 due to increased trading activity and observability of pricing inputs.

Three Months Ended
March 31,
$ in millions 2020 2019
Borrowings
Beginning balance $ 4,088
$ 3,806
Realized and unrealized losses (gains) (897 ) 287
Issuances 701
264
Settlements (234 ) (115 )
Net transfers 340
(467 )
Ending balance $ 3,998
$ 3,775
Unrealized losses (gains) $ (895 ) $ 276
Portion of Unrealized losses (gains) recorded in OCI—Change in net DVA (398 ) 59


1.	~~Net transfers in the current quarter include the transfer of $857 million of equity margin loans from Level 2 to Level 3 as the unobservable input became significant.~~

Level 3 instruments may be hedged with instruments classified in Level 1 and Level 2. The realized and unrealized gains ~~(losses)~~or losses for assets and liabilities within the Level 3 category presented in the previous tables do not reflect the related realized and unrealized gains ~~(losses)~~or losses on hedging instruments that have been classified by the Firm within the Level 1 and/or Level 2 categories.

The unrealized gains (losses) during the period for assets and liabilities within the Level 3 category may include changes in fair value during the period that were attributable to both observable and unobservable inputs. Total realized and unrealized gains (losses) are primarily included in Trading revenues in the income statements.

Additionally, in the previous tables, consolidations of VIEs are included in Purchases, and deconsolidations of VIEs are included in Settlements.



~~March 2020 Form 10-Q~~	50



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

Significant Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements

Valuation Techniques and Unobservable Inputs

Balance / Range (Average)¹
$ in millions, except inputs At March 31, 2020 At December 31, 2019
Assets Measured at Fair Value on a Recurring Basis
U.S. Treasury and agency securities $ 99
$ 22
Comparable pricing:
Bond price 18 to 117 points (86 points)
N/M
MABS $ 483
$ 438
Comparable pricing:
Bond price 0 to 87 points (43 points)
0 to 96 points (47 points)
Loans and lending commitments $ 5,980
$ 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 $ 1,708
$ 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%)
35 %
Option model:
At the money volatility 21 % 21 %
Corporate equities $ 146
$ 97
Comparable pricing:
Equity price 100 % 100 %
Investments $ 725
$ 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 $ 873
$ 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 % 1 %


	Balance / Range (Average1)
$ in millions, except inputs	At March 31, 2021		At December 31, 2020
Assets at Fair Value on a Recurring Basis



Other sovereign government obligations	$	17	$	268
Comparable pricing:
Bond price	N/M		106 points



MABS	$	374	$	322
Comparable pricing:
Bond price	0 to 80 points (51 points)		0 to 80 points (50 points)
Loans and lending commitments	$	5,045	$	5,759
Margin loan model:



Margin loan rate	1% to 5% (3%)		1% to 5% (3%)
Comparable pricing:
Loan price	75 to 102 points (98 points)		75 to 102 points (93 points)

Balance / Range (Average)¹

Balance / Range (Average1)

$ in millions, except inputs

At March 31, 2020

At December 31, 2019

$ in millions, except inputs

At March 31, 2021

At December 31, 2020

Corporate and
other debt

3,319

3,435

Comparable pricing:

Bond price

13 to 133 points (100 points)

10 to 133 points (101 points)

Discounted cash flow:

Recovery rate

40% to 62% (46% / 40%)

Option model:

Equity volatility

18% to 21% (18%)

18% to 21% (19%)

Corporate equities

114

Comparable pricing:

Equity price

100%

Investments

924

828

Discounted cash flow:

WACC

8% to 17% (15%)

8% to 18% (15%)

Exit multiple

8 to 17 times (12 times)

7 to 17 times (12 times)

Market approach:

EBITDA multiple

8 to 38 times (11 times)

8 to 32 times (11 times)

Comparable pricing:

Equity price

45% to 100% (99%)

Investment securities —AFS

127

2,804

Comparable pricing:

Bond price

102 to 107 points

(104 points)

97 to 107 points

(101 points)

Net derivative and other contracts:

Interest rate

691

682

Option model:

IR volatility skew

23% to 111% (61% / 60%)

0% to 349% (62% / 59%)

IR curve correlation

74% to 98% (84% / 85%)

54% to 99% (87% / 89%)

Bond volatility

3% to 24% (12% / 8%)

6% to 24% (13% / 13%)

Inflation volatility

25% to 66% (45% / 43%)

IR curve

Credit

198

124

Credit

(82)

Credit default swap model:

Cash-synthetic basis

6 points

Cash-synthetic basis

7 points

Bond price

0 to 98 points (52 points)

0 to 104 points (45 points)

Bond price

0 to 85 points (45 points)

0 to 85 points (47 points)

Credit spread

20 to 488 bps (114 bps)

9 to 469 bps (81 bps)

Credit spread

14 to 439 bps (68 bps)

20 to 435 bps (74 bps)

Funding spread

204 to 278 bps (267 bps)

47 to 117 bps (84 bps)

Funding spread

21 to 134 bps (61 bps)

65 to 118 bps (86 bps)

Correlation model:

Credit correlation

40% to 78% (50%)

29% to 62% (36%)

Credit correlation

29% to 47% (35%)

27% to 44% (32%)

Foreign exchange²

(150

)

(31

)

Foreign exchange2

(110)

Option model:

IR - FX correlation

21% to 58% (38% / 38%)

32% to 56% (46% / 46%)

IR - FX correlation

54% to 58% (55% 55%)

55% to 59% (56% / 56%)

IR volatility skew

2% to 183% (68% / 70%)

24% to 156% (63% / 59%)

IR volatility skew

23% to 111% (61% / 60%)

0% to 349% (62% / 59%)

IR curve

10% to 11% (10% / 10%)

IR curve

5% to 7% (6% / 7%)

6% to 8% (7% / 8%)

Foreign exchange volatility skew

-7% to -3% (-5% / -5%)

-22% to 28% (3% / 1%)

Contingency probability

85% to 95% (94% / 95%)

Contingency probability

90% to 95% (94% / 95%)

50% to 95% (83% / 93%)

Equity²

(1,376

)

(1,684

)

Equity2

(2,117)

(2,231)

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 volatility

15% to 93% (39%)

16% to 97% (43%)

Equity volatility skew

-3% to 0% (-1%)

Equity correlation

5% to 96% (76%)

5% to 98% (70%)

Equity correlation

35% to 92% (65%)

24% to 96% (74%)

FX correlation

-79% to 55% (-39%)

-79% to 60% (-37%)

FX correlation

-79% to 60% (-22%)

-79% to 60% (-16%)

IR correlation

-7% to 44% (19% / 18%)

-11% to 44% (18% / 16%)

IR correlation

18% to 40% (20%)

-13% to 47% (21% / 20%)

Commodity and other

1,849

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

117

179

Option Model:

At the money volatility

7% to 24% (7%)

16% to 37% (20%)

Other secured financings

389

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

3,998

4,088

Option model:

At the money volatility

5% to 55% (31%)

5% to 44% (21%)

Volatility skew

-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~~2021 Form 10-Q	42



Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Balance / Range (Average1)
$ in millions, except inputs	At March 31, 2021		At December 31, 2020
Commodity and other	$	1,944	$	1,709
Option model:
Forward power price	$-2 to $226 ($29) per MWh		$-1 to $157 ($28) per MWh
Commodity volatility	8% to 76% (18%)		8% to 183% (19%)
Cross-commodity correlation	43% to 99% (93%)		43% to 99% (92%)
Liabilities Measured at Fair Value on a Recurring Basis
Deposits	$	177	$	126
Option model:
Equity volatility	7% to 23% (8%)		7% to 22% (8%)
Credit spreads	496 to 521 bps (508)		N/A
Nonderivative trading liabilities —Corporate equities	$	49	$	63
Comparable pricing:
Equity price	100%		100%
Securities sold under agreements to repurchase	$	441	$	444
Discounted cash flow:
Funding spread	114 to 133 bps (129 bps)		107 to 127 bps (115 bps)
Other secured financings	$	555	$	516
Discounted cash flow:
Funding spread	98 bps (98 bps)		111 bps (111 bps)
Comparable pricing:
Loan price	30 to 101 points (83 points)		30 to 101 points (56 points)



Borrowings	$	4,262	$	4,374
Option model:
Equity volatility	7% to 53% (22%)		6% to 66% (23%)
Equity volatility skew	-5% to 0% (0%)		-2% to 0% (0%)
Equity correlation	40% to 98% (80%)		37% to 95% (78%)
Equity - FX correlation	-72% to 5% (-36%)		-72% to 13% (-24%)

IR FX Correlation	-28% to 7% (-5% / -5%)		-28% to 6% (-6% / -6%)
Nonrecurring Fair Value Measurement
Loans	$	1,149	$	3,134
Corporate loan model:
Credit spread	114 to 433 bps (257 bps)		36 to 636 bps (336 bps)
Comparable pricing:
Loan price	47 to 88 bps (66 bps)		N/M
Warehouse model:
Credit spread	163 to 336 bps (288 bps)		200 to 413 bps (368 bps)
Comparable pricing:
Bond Price	N/A		88 to 99 bps (94 bps)

Balance / Range (Average)¹
$ in millions, except inputs At March 31, 2020 At December 31, 2019
Nonrecurring Fair Value Measurement
Loans $ 3,901
$ 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)

Points—Percentage of par

IR—Interest rate

FX—Foreign exchange

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.

~~IR—Interest rate~~2.Includes derivative contracts with multiple risks (i.e., hybrid products).

~~FX—Foreign exchange~~


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.	~~Includes derivative contracts with multiple risks (i.e., hybrid products).~~

The previous tables provide information on the valuation techniques, significant unobservable inputs, and the ranges and averages for each major category of assets and liabilities measured at fair value on a recurring and nonrecurring basis with a significant Level 3 balance. The level of aggregation and breadth of products cause the range of inputs to be wide and not evenly distributed across the inventory of financial instruments. Further, the range of unobservable inputs may

differ across firms in the financial services industry because of diversity in the types of products included in each firm’s inventory. ~~There~~Generally, there are no predictable relationships between multiple significant unobservable inputs attributable to a given valuation technique.

For a description of the Firm’s significant unobservable inputs and qualitative information about the effect of hypothetical changes in the values of those inputs, see Note 35 to the financial statements in the ~~2019~~2020 Form 10-K. During the current quarter, there were no significant revisions made to the descriptions of the Firm’s significant unobservable inputs.

Net Asset Value Measurements

Fund Interests


	At March 31, 2021				At December 31, 2020
$ in millions	Carrying Value		Commitment		Carrying Value		Commitment
Private equity	$	2,286	$	630	$	2,367	$	644
Real estate	1,467		212		1,403		136
Hedge1	64		0		59		0
Total	$	3,817	$	842	$	3,829	$	780

~~Fund Interests~~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.

At March 31, 2020 At December 31, 2019
$ in millions
Carrying
Value
Commitment
Carrying
Value
Commitment
Private equity $ 2,219
$ 557
$ 2,078
$ 450
Real estate 1,280
147
1,349
150
Hedge¹
91
—
94
4
Total $ 3,590
$ 704
$ 3,521
$ 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.

Amounts in the previous table represent the Firm’s carrying value of general and limited partnership interests in fund investments, as well as any related performance-based fees in the form of carried interest. The carrying amounts are measured based on the NAV of the fund taking into account the distribution terms applicable to the interest held. This same measurement applies whether the fund investments are accounted for under the equity method or fair value.

For a description of the Firm’s investments in private equity funds, real estate funds and hedge funds, which are measured based on NAV, see Note 35 to the financial statements in the ~~2019~~2020 Form 10-K.

See Note 1314 for information regarding general partner guarantees, which include potential obligations to return performance fee distributions previously received. See Note 1920 for information regarding unrealized carried interest at risk of reversal.

Nonredeemable Funds by Contractual Maturity

Carrying Value at March 31, 2020
$ in millions Private Equity Real Estate
Less than 5 years $ 1,409
$ 431
5-10 years 759
173
Over 10 years 51
676
Total $ 2,219
$ 1,280

~~Nonrecurring Fair Value Measurements~~

~~Carrying and Fair Values~~


	Carrying Value at March 31, 2021
$ in millions	Private Equity		Real Estate
Less than 5 years	$	1,340	$	413
5-10 years	795		395
Over 10 years	151		659
Total	$	2,286	$	1,467

At March 31, 2020
Fair Value
$ in millions Level 2 Level 31 Total
Assets
Loans $ 5,823
$ 3,901
$ 9,724
Liabilities
Other liabilities and accrued expenses—Lending commitments $ 321
$ 247
$ 568

At December 31, 2019
Fair Value
$ in millions Level 2
Level 3¹
Total
Assets
Loans $ 1,543
$ 1,500
$ 3,043
Other assets—Other investments $ —
$ 113
$ 113
Total $ 1,543
$ 1,613
$ 3,156
Liabilities
Other liabilities and accrued expenses—Lending commitments $ 132
$ 69
$ 201
Total $ 132
$ 69
$ 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.



43	March ~~2020~~2021 Form 10-Q	52



Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Nonrecurring Fair Value Measurements

Carrying and Fair Values


	At March 31, 2021
	Fair Value
$ in millions	Level 2		Level 31		Total
Assets
Loans	$	3,765	$	1,149	$	4,914

Intangibles	0		36		36
Other assets—Other investments	0		82		82

Total	$	3,765	$	1,267	$	5,032
Liabilities
Other liabilities and accrued expenses—Lending commitments	$	150	$	66	$	216
Total	$	150	$	66	$	216


	At December 31, 2020
	Fair Value
$ in millions	Level 2		Level 31		Total
Assets
Loans	$	2,566	$	3,134	$	5,700
Other assets—Other investments	$	0	$	16	$	16
Other assets—ROU assets	21		0		21
Total	$	2,587	$	3,150	$	5,737
Liabilities
Other liabilities and accrued expenses—Lending commitments	$	193	$	72	$	265
Total	$	193	$	72	$	265

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.

Gains (Losses) from Fair Value Remeasurements¹


	Three Months Ended March 31,
$ in millions	2021		2020
Assets
Loans2	$	(13)	$	(713)
Goodwill	(8)		0
Intangibles	(2)		0
Other assets—Other investments3	(51)		0
Other assets—Premises, equipment and software4	(2)		(3)
Total	$	(76)	$	(716)
Liabilities
Other liabilities and accrued expenses—Lending commitments2	$	4	$	(316)
Total	$	4	$	(316)

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 impairments as well as write-offs related to the disposal of certain assets.

Three Months Ended
March 31,
$ in millions 2020 2019
Assets
Loans²
$ (713 ) $ 36
Other assets—Other investments³
—
(5 )
Other assets—Premises, equipment and software⁴
(3 ) (2 )
Total $ (716 ) $ 29
Liabilities

Other liabilities and accrued expenses—Lending commitments²
$ (316 ) $ 67
Total $ (316 ) $ 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.

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.~~

Financial Instruments Not Measured at Fair Value


	At March 31, 2021
	Carrying Value		Fair Value
$ in millions			Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	118,118	$	118,118	$	0	$	0	$	118,118
Investment securities—HTM	83,918		30,799		52,381		919		84,099
Securities purchased under agreements to resell	114,712		0		113,033		1,693		114,726
Securities borrowed	102,149		0		102,149		0		102,149
Customer and other receivables1	108,440		0		105,315		3,033		108,348
Loans2	159,123		0		26,419		133,977		160,396
Other assets	486		0		486		0		486
Financial liabilities
Deposits	$	320,069	$	0	$	320,419	$	0	$	320,419
Securities sold under agreements to repurchase	53,535		0		53,577		0		53,577
Securities loaned	8,426		0		8,428		0		8,428
Other secured financings	4,412		0		4,413		0		4,413
Customer and other payables1	227,239		0		227,239		0		227,239
Borrowings	141,804		0		147,824		5		147,829
	Commitment Amount
Lending commitments3	$	129,629	$	0	$	683	$	340	$	1,023


	At December 31, 2020
	Carrying Value		Fair Value
$ in millions			Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	105,654	$	105,654	$	0	$	0	$	105,654
Investment securities—HTM	71,771		31,239		42,281		900		74,420
Securities purchased under agreements to resell	116,219		0		114,046		2,173		116,219
Securities borrowed	112,391		0		112,392		0		112,392
Customer and other receivables1	92,907		0		89,832		3,041		92,873
Loans2	150,597		0		16,635		135,277		151,912
Other assets	485		0		485		0		485
Financial liabilities
Deposits	$	307,261	$	0	$	307,807	$	0	$	307,807
Securities sold under agreements to repurchase	49,472		0		49,315		195		49,510
Securities loaned	7,731		0		7,731		0		7,731
Other secured financings	4,162		0		4,162		0		4,162
Customer and other payables1	224,951		0		224,951		0		224,951
Borrowings	143,378		0		150,824		5		150,829
	Commitment Amount
Lending commitments3	$	125,498	$	0	$	709	$	395	$	1,104

1.Accrued interest and dividend receivables and payables have been excluded. Carrying value approximates fair value for these receivables and payables.

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 14.

At March 31, 2020

Carrying
Value
Fair Value
$ in millions Level 1 Level 2 Level 3 Total
Financial assets
Cash and cash equivalents $ 131,509
$ 131,509
$ —
$ —
$ 131,509
Investment securities—HTM 47,286
32,207
17,149
777
50,133
Securities purchased under agreements to resell 104,795
—
103,451
1,426
104,877
Securities borrowed 72,300
—
72,303
—
72,303
Customer and other receivables¹
69,923
—
67,086
2,852
69,938
Loans²
148,697
—
32,529
114,841
147,370
Other assets 461
—
461
—
461
Financial liabilities
Deposits $ 231,187
$ —
$ 231,555
$ —
$ 231,555
Securities sold under agreements to repurchase 45,041
—
45,077
—
45,077
Securities loaned 11,631
—
11,633
—
11,633
Other secured financings 6,161
—
6,167
—
6,167
Customer and other payables¹
195,211
—
195,211
—
195,211
Borrowings 137,694
—
135,148
10
135,158
Commitment
Amount
Lending commitments³
$ 105,466
$ —
$ 1,668
$ 1,089
$ 2,757

At December 31, 2019

Carrying
Value
Fair Value
$ in millions Level 1 Level 2 Level 3 Total
Financial assets
Cash and cash equivalents $ 82,171
$ 82,171
$ —
$ —
$ 82,171
Investment securities—HTM 43,502
30,661
12,683
789
44,133
Securities purchased under agreements to resell 88,220
—
86,794
1,442
88,236
Securities borrowed 106,549
—
106,551
—
106,551
Customer and other receivables¹
51,134
—
48,215
2,872
51,087
Loans²
130,637
—
22,293
108,059
130,352
Other assets 495
—
495
—
495
Financial liabilities
Deposits $ 188,257
$ —
$ 188,639
$ —
$ 188,639
Securities sold under agreements to repurchase 53,467
—
53,486
—
53,486
Securities loaned 8,506
—
8,506
—
8,506
Other secured financings 6,889
—
6,800
92
6,892
Customer and other payables¹
195,035
—
195,035
—
195,035
Borrowings 128,166
—
133,563
10
133,573
Commitment
Amount
Lending commitments³
$ 119,004
$ —
$ 748
$ 338
$ 1,086


1.March 2021 Form 10-Q			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 $2.4 billion and $1.7 billion, respectively.44


2.			~~Amounts include loans measured at fair value on a nonrecurring basis.~~Table of Contents


3.Notes to Consolidated Financial Statements (Unaudited)			~~Represents Lending commitments accounted for as Held for Investment and Held for Sale. For a further discussion on lending commitments, see Note 13.~~

The previous tables exclude certain financial instruments such as equity method investments and all non-financial assets and liabilities such as the value of the long-term relationships with the Firm’s deposit customers.



	53	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

5.6. Fair Value Option

The Firm has elected the fair value option for certain eligible instruments that are risk managed on a fair value basis to mitigate income statement volatility caused by measurement basis differences between the elected instruments and their associated risk management transactions or to eliminate complexities of applying certain accounting models.

Borrowings Measured at Fair Value on a Recurring Basis

$ in millions At
March 31,
2020 At
December 31,
2019
Business Unit Responsible for Risk Management
Equity $ 25,089
$ 30,214
Interest rates 25,195
27,298
Commodities 4,681
4,501
Credit 1,179
1,246
Foreign exchange 1,018
1,202
Total $ 57,162
$ 64,461


$ in millions	At March 31, 2021		At December 31, 2020
Business Unit Responsible for Risk Management
Equity	$	36,687	$	33,952
Interest rates	28,719		31,222
Commodities	4,948		5,078
Credit	1,235		1,344
Foreign exchange	2,433		2,105
Total	$	74,022	$	73,701

Net Revenues from Borrowings under the Fair Value Option


	Three Months Ended March 31,
$ in millions	2021		2020
Trading revenues	$	2,485	$	3,447
Interest expense	73		83
Net revenues1	$	2,412	$	3,364

Three Months Ended
March 31,
$ in millions 2020 2019
Trading revenues $ 3,447
$ (2,903 )
Interest expense 83
93
Net revenues¹
$ 3,364
$ (2,996 )
1.Amounts do not reflect any gains or losses from related economic hedges.


1.	~~Amounts do not reflect any gains or losses from related economic hedges.~~

Gains (losses) from changes in fair value are recorded in Trading revenues and are mainly attributable to movements in the reference price or index, interest rates or foreign exchange rates.

Gains (Losses) Due to Changes in Instrument-Specific Credit Risk


	Three Months Ended March 31,
	2021				2020
$ in millions	Trading Revenues		OCI		Trading Revenues		OCI
Loans and other debt1	$	158	$	0	$	(281)	$	0
Lending commitments	0		0		2		0
Deposits	0		(1)		0		72
Borrowings	(17)		185		(5)		4,948

Three Months Ended March 31,
2020 2019
$ in millions
Trading
Revenues
OCI
Trading
Revenues
OCI
Borrowings $ (5 ) $ 4,948
$ (4 ) $ (816 )
Loans and other debt¹
(281 ) —
93
—
Lending commitments 2
—
(1 ) —
Deposits —
72
—
(4 )

$ in millions At
March 31,
2020 At
December 31,
2019
Cumulative pre-tax DVA gain (loss) recognized in AOCI $ 3,022
$ (1,998 )

~~Loans and other debt instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses.~~


$ in millions	At March 31, 2021		At December 31, 2020
Cumulative pre-tax DVA gain (loss) recognized in AOCI	$	(3,173)	$	(3,357)

1.Loans and other debt instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses.

Difference Between Contractual Principal and Fair Value¹


$ in millions	At March 31, 2021		At December 31, 2020
Loans and other debt2	$	13,124	$	14,042
Nonaccrual loans2	10,890		11,551
Borrowings3	(1,853)		(3,773)

$ in millions At
March 31,
2020 At
December 31,
2019
Loans and other debt²
$ 13,654
$ 13,037
Nonaccrual loans²
11,014
10,849
Borrowings³
798
(1,665 )

~~Amounts indicate contractual principal greater than or (less than) fair value.~~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.


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.~~

The previous tables exclude non-recourse debt from consolidated VIEs, liabilities related to transfers of financial assets treated as collateralized financings, pledged commodities and other liabilities that have specified assets attributable to them.

Fair Value Loans on Nonaccrual Status

$ in millions At
March 31,
2020 At
December 31,
2019
Nonaccrual loans $ 1,150
$ 1,100
Nonaccrual loans 90 or more days past due $ 262
$ 330


$ in millions	At March 31, 2021		At December 31, 2020
Nonaccrual loans	$	1,158	$	1,407
Nonaccrual loans 90 or more days past due	$	192	$	239



~~March 2020 Form 10-Q~~	54



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

6. 7. Derivative Instruments and Hedging Activities

Fair Values of Derivative Contracts

~~At March 31, 2020~~


	Assets at March 31, 2021
$ in millions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	449	$	24	$	0	$	473
Foreign exchange	314		10		0		324
Total	763		34		0		797
Not designated as accounting hedges
Economic loan hedges
Credit	1		25		0		26
Other derivatives
Interest rate	180,315		9,460		459		190,234
Credit	5,572		3,856		0		9,428
Foreign exchange	81,019		1,615		62		82,696
Equity	32,417		0		35,498		67,915
Commodity and other	12,902		0		3,701		16,603
Total	312,226		14,956		39,720		366,902
Total gross derivatives	$	312,989	$	14,990	$	39,720	$	367,699
Amounts offset
Counterparty netting	(230,463)		(13,140)		(36,466)		(280,069)
Cash collateral netting	(45,005)		(1,774)		(1)		(46,780)
Total in Trading assets	$	37,521	$	76	$	3,253	$	40,850
Amounts not offset1
Financial instruments collateral	(14,142)		0		0		(14,142)
Other cash collateral	(413)		0		0		(413)
Net amounts	$	22,966	$	76	$	3,253	$	26,295
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable							$	5,039

Assets
$ in millions
Bilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate $ 1,295
$ 7
$ —
$ 1,302
Foreign exchange 152
83
—
235
Total 1,447
90
—
1,537
Not designated as accounting hedges
Interest rate 252,956
13,730
1,050
267,736
Credit 10,204
3,154
—
13,358
Foreign exchange 109,212
3,191
175
112,578
Equity 44,289
—
51,487
95,776
Commodity and other 17,778
—
4,489
22,267
Total 434,439
20,075
57,201
511,715
Total gross derivatives $ 435,886
$ 20,165
$ 57,201
$ 513,252
Amounts offset
Counterparty netting (328,104 ) (16,673 ) (54,079 ) (398,856 )
Cash collateral netting (59,531 ) (1,855 ) —
(61,386 )
Total in Trading assets $ 48,251
$ 1,637
$ 3,122
$ 53,010
Amounts not offset¹

Financial instruments collateral (23,868 ) —
—
(23,868 )
Other cash collateral (83 ) —
—
(83 )
Net amounts $ 24,300
$ 1,637
$ 3,122
$ 29,059
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable $ 3,984

Liabilities
$ in millions
Bilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate $ —
$ —
$ —
$ —
Foreign exchange 54
2
—
56
Total 54
2
—
56
Not designated as accounting hedges
Interest rate 245,978
10,698
1,313
257,989
Credit 9,556
3,630
—
13,186
Foreign exchange 109,225
3,336
181
112,742
Equity 39,606
—
53,764
93,370
Commodity and other 13,661
—
4,592
18,253
Total 418,026
17,664
59,850
495,540
Total gross derivatives $ 418,080
$ 17,666
$ 59,850
$ 495,596
Amounts offset
Counterparty netting (328,104 ) (16,673 ) (54,079 ) (398,856 )
Cash collateral netting (55,307 ) (564 ) —
(55,871 )
Total in Trading liabilities $ 34,669
$ 429
$ 5,771
$ 40,869
Amounts not offset¹

Financial instruments collateral (8,357 ) —
(3,825 ) (12,182 )
Other cash collateral (34 ) (37 ) —
(71 )
Net amounts $ 26,278
$ 392
$ 1,946
$ 28,616
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable 5,601

~~At December 31, 2019~~

Assets
$ in millions
Bilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate $ 673
$ —
$ —
$ 673
Foreign exchange 41
1
—
42
Total 714
1
—
715
Not designated as accounting hedges
Interest rate 179,450
4,839
519
184,808
Credit 4,895
2,417
—
7,312
Foreign exchange 62,957
1,399
22
64,378
Equity 27,621
—
23,447
51,068
Commodity and other 9,306
—
1,952
11,258
Total 284,229
8,655
25,940
318,824
Total gross derivatives $ 284,943
$ 8,656
$ 25,940
$ 319,539
Amounts offset
Counterparty netting (213,710 ) (7,294 ) (24,037 ) (245,041 )
Cash collateral netting (41,222 ) (1,275 ) —
(42,497 )
Total in Trading assets $ 30,011
$ 87
$ 1,903
$ 32,001
Amounts not offset¹

Financial instruments collateral (15,596 ) —
—
(15,596 )
Other cash collateral (46 ) —
—
(46 )
Net amounts $ 14,369
$ 87
$ 1,903
$ 16,359
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable $ 1,900

Liabilities
$ in millions
Bilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate $ 1
$ —
$ —
$ 1
Foreign exchange 121
38
—
159
Total 122
38
—
160
Not designated as accounting hedges
Interest rate 168,597
3,597
436
172,630
Credit 4,798
3,123
—
7,921
Foreign exchange 65,965
1,492
39
67,496
Equity 30,135
—
22,733
52,868
Commodity and other 7,713
—
1,911
9,624
Total 277,208
8,212
25,119
310,539
Total gross derivatives $ 277,330
$ 8,250
$ 25,119
$ 310,699
Amounts offset
Counterparty netting (213,710 ) (7,294 ) (24,037 ) (245,041 )
Cash collateral netting (36,392 ) (832 ) —
(37,224 )
Total in Trading liabilities $ 27,228
$ 124
$ 1,082
$ 28,434
Amounts not offset¹

Financial instruments collateral (7,747 ) —
(287 ) (8,034 )
Other cash collateral (14 ) —
—
(14 )
Net amounts $ 19,467
$ 124
$ 795
$ 20,386
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable $ 3,680


1.			45			March 2021 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)			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.


	Liabilities at March 31, 2021
$ in millions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	0	$	6	$	0	$	6
Foreign exchange	3		40		0		43
Total	3		46		0		49
Not designated as accounting hedges
Economic loan hedges
Credit	20		242		0		262
Other derivatives
Interest rate	166,601		8,935		687		176,223
Credit	5,553		4,309		0		9,862
Foreign exchange	77,495		1,483		42		79,020
Equity	47,147		0		37,556		84,703
Commodity and other	10,563		0		3,635		14,198
Total	307,379		14,969		41,920		364,268
Total gross derivatives	$	307,382	$	15,015	$	41,920	$	364,317
Amounts offset
Counterparty netting	(230,463)		(13,140)		(36,466)		(280,069)
Cash collateral netting	(43,611)		(851)		0		(44,462)
Total in Trading liabilities	$	33,308	$	1,024	$	5,454	$	39,786
Amounts not offset1
Financial instruments collateral	(6,818)		0		(2,113)		(8,931)
Other cash collateral	(25)		(5)		0		(30)
Net amounts	$	26,465	$	1,019	$	3,341	$	30,825
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable							7,637


	Assets at December 31, 2020
$ in millions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	946	$	2	$	0	$	948
Foreign exchange	5		2		0		7
Total	951		4		0		955
Not designated as accounting hedges
Economic loan hedges
Credit1	2		51		0		53
Other derivatives
Interest rate	221,895		10,343		300		232,538
Credit1	5,341		2,147		0		7,488
Foreign exchange	92,334		1,639		79		94,052
Equity	34,278		0		34,166		68,444
Commodity and other	11,095		0		3,554		14,649
Total	364,945		14,180		38,099		417,224
Total gross derivatives	$	365,896	$	14,184	$	38,099	$	418,179
Amounts offset
Counterparty netting	(276,682)		(11,601)		(35,260)		(323,543)
Cash collateral netting	(54,921)		(1,865)		0		(56,786)
Total in Trading assets	$	34,293	$	718	$	2,839	$	37,850
Amounts not offset2
Financial instruments collateral	(13,319)		0		0		(13,319)
Other cash collateral	(391)		0		0		(391)
Net amounts	$	20,583	$	718	$	2,839	$	24,140
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable							$	3,743


	Liabilities at December 31, 2020
$ in millions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	0	$	19	$	0	$	19
Foreign exchange	291		99		0		390
Total	291		118		0		409
Not designated as accounting hedges
Economic loan hedges
Credit1	18		177		0		195
Other derivatives
Interest rate	210,015		7,965		639		218,619
Credit1	5,275		2,682		0		7,957
Foreign exchange	92,975		1,500		43		94,518
Equity	49,943		0		36,585		86,528
Commodity and other	8,831		0		3,359		12,190
Total	367,057		12,324		40,626		420,007
Total gross derivatives	$	367,348	$	12,442	$	40,626	$	420,416
Amounts offset
Counterparty netting	(276,682)		(11,601)		(35,260)		(323,543)
Cash collateral netting	(51,112)		(823)		0		(51,935)
Total in Trading liabilities	$	39,554	$	18	$	5,366	$	44,938
Amounts not offset2
Financial instruments collateral	(10,598)		0		(1,520)		(12,118)
Other cash collateral	(62)		(3)		0		(65)
Net amounts	$	28,894	$	15	$	3,846	$	32,755
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable							$	6,746

1.Certain prior period amounts have been reclassified to conform to the current presentation.

2.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.

See Note 45 for information related to the unsettled fair value of futures contracts not designated as accounting hedges, which are excluded from the previous tables.

Notionals of Derivative Contracts


	Assets at March 31, 2021
$ in billions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	4	$	117	$	0	$	121
Foreign exchange	12		1		0		13
Total	16		118		0		134
Not designated as accounting hedges
Economic loan hedges
Credit	0		0		0		0
Other derivatives
Interest rate	4,292		7,562		606		12,460
Credit	198		134		0		332
Foreign exchange	3,479		101		7		3,587
Equity	453		0		402		855
Commodity and other	119		0		74		193
Total	8,541		7,797		1,089		17,427
Total gross derivatives	$	8,557	$	7,915	$	1,089	$	17,561



55	March ~~2020~~2021 Form 10-Q	46



Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Liabilities at March 31, 2021
$ in billions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	0	$	86	$	0	$	86
Foreign exchange	1		2		0		3
Total	1		88		0		89
Not designated as accounting hedges
Economic loan hedges
Credit	1		7		0		8
Other derivatives
Interest rate	4,361		7,366		625		12,352
Credit	200		136		0		336
Foreign exchange	3,544		98		10		3,652
Equity	527		0		664		1,191
Commodity and other	102		0		78		180
Total	8,735		7,607		1,377		17,719
Total gross derivatives	$	8,736	$	7,695	$	1,377	$	17,808


	Assets at December 31, 2020
$ in billions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	6	$	123	$	0	$	129
Foreign exchange	2		0		0		2
Total	8		123		0		131
Not designated as accounting hedges
Economic loan hedges
Credit1	0		1		0		1
Other derivatives
Interest rate	3,847		6,946		409		11,202
Credit1	140		87		0		227
Foreign exchange	3,046		103		10		3,159
Equity	444		0		367		811
Commodity and other	107		0		68		175
Total	7,584		7,137		854		15,575
Total gross derivatives	$	7,592	$	7,260	$	854	$	15,706

~~Notionals of Derivative Contracts~~


	Liabilities at December 31, 2020
$ in billions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	0	$	80	$	0	$	80
Foreign exchange	11		3		0		14
Total	11		83		0		94
Not designated as accounting hedges
Economic loan hedges
Credit1	1		5		0		6
Other derivatives
Interest rate	4,000		6,915		511		11,426
Credit1	142		93		0		235
Foreign exchange	3,180		102		11		3,293
Equity	474		0		591		1,065
Commodity and other	93		0		68		161
Total	7,890		7,115		1,181		16,186
Total gross derivatives	$	7,901	$	7,198	$	1,181	$	16,280

~~At March 31, 2020~~1.Certain prior period amounts have been reclassified to conform to the current presentation.

Assets
$ in billions
Bilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate $ 10
$ 144
$ —
$ 154
Foreign exchange 5
2
—
7
Total 15
146
—
161
Not designated as accounting hedges
Interest rate 4,261
8,028
615
12,904
Credit 173
111
—
284
Foreign exchange 3,054
104
10
3,168
Equity 426
—
453
879
Commodity and other 111
—
72
183
Total 8,025
8,243
1,150
17,418
Total gross derivatives $ 8,040
$ 8,389
$ 1,150
$ 17,579

Liabilities
$ in billions
Bilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate $ —
$ 43
$ —
$ 43
Foreign exchange 6
—
—
6
Total 6
43
—
49
Not designated as accounting hedges
Interest rate 5,085
8,023
545
13,653
Credit 164
124
—
288
Foreign exchange 2,981
104
9
3,094
Equity 352
—
541
893
Commodity and other 89
—
69
158
Total 8,671
8,251
1,164
18,086
Total gross derivatives $ 8,677
$ 8,294
$ 1,164
$ 18,135

~~At December 31, 2019~~

Assets
$ in billions
Bilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate $ 14
$ 94
$ —
$ 108
Foreign exchange 2
—
—
2
Total 16
94
—
110
Not designated as accounting hedges
Interest rate 4,230
7,398
732
12,360
Credit 136
79
—
215
Foreign exchange 2,667
91
10
2,768
Equity 429
—
419
848
Commodity and other 99
—
61
160
Total 7,561
7,568
1,222
16,351
Total gross derivatives $ 7,577
$ 7,662
$ 1,222
$ 16,461

Liabilities
$ in billions
Bilateral
OTC
Cleared
OTC
Exchange-
Traded
Total
Designated as accounting hedges
Interest rate $ —
$ 71
$ —
$ 71
Foreign exchange 9
2
—
11
Total 9
73
—
82
Not designated as accounting hedges
Interest rate 4,185
6,866
666
11,717
Credit 153
84
—
237
Foreign exchange 2,841
91
14
2,946
Equity 455
—
515
970
Commodity and other 85
—
61
146
Total 7,719
7,041
1,256
16,016
Total gross derivatives $ 7,728
$ 7,114
$ 1,256
$ 16,098

The ~~Firm believes that the~~ notional amounts of derivative contracts generally overstate ~~its~~the Firm’s exposure. In most circumstances, notional amounts are used only as a reference point from which to calculate amounts owed between the parties to the

contract. Furthermore, notional amounts do not reflect the benefit of legally enforceable netting arrangements or risk mitigating transactions.

For a discussion of the ~~Firm's~~Firm’s derivative instruments and hedging activities, see Note 57 to the financial statements in the ~~2019~~2020 Form 10-K.



~~March 2020 Form 10-Q~~	56



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

Gains (Losses) on Accounting Hedges

Three Months Ended
March 31,
$ in millions 2020 2019
Fair value hedges—Recognized in Interest income
Interest rate contracts $ (64 ) $ (5 )
Investment Securities—AFS 65
5
Fair value hedges—Recognized in Interest expense
Interest rate contracts $ 6,667
$ 1,577
Deposits¹
(261 ) —
Borrowings (6,432 ) (1,621 )
Net investment hedges—Foreign exchange contracts
Recognized in OCI $ 410
$ 64
Forward points excluded from hedge effectiveness testing—Recognized in Interest income 33
35


	Three Months Ended
	March 31,
$ in millions		2021		2020
Fair value hedges—Recognized in Interest income
Interest rate contracts		$	831	$	(64)
Investment Securities—AFS		(772)		65
Fair value hedges—Recognized in Interest expense
Interest rate contracts		$	(4,108)	$	6,667
Deposits		36		(261)
Borrowings		4,021		(6,432)
Net investment hedges—Foreign exchange contracts
Recognized in OCI		$	405	$	410
Forward points excluded from hedge effectiveness testing—Recognized in Interest income		1		33

Fair Value Hedges—Hedged Items


$ in millions	At March 31, 2021		At December 31, 2020
Investment Securities—AFS
Amortized cost basis currently or previously hedged	$	20,960	$	16,288
Basis adjustments included in amortized cost1	$	(767)	$	(39)
Deposits
Carrying amount currently or previously hedged	$	8,808	$	15,059
Basis adjustments included in carrying amount1	$	57	$	93
Borrowings
Carrying amount currently or previously hedged	$	109,974	$	114,349
Basis adjustments included in carrying amount—Outstanding hedges	$	2,523	$	6,575
Basis adjustments included in carrying amount—Terminated hedges	$	(764)	$	(756)

$ in millions At
March 31,
2020 At
December 31,
2019
Investment Securities—AFS
Carrying amount² currently or previously hedged
$ 1,969
$ 917
Basis adjustments included in carrying amount³
$ 77
$ 14
Deposits¹

Carrying amountcurrently or previously hedged
18,335
5,435
Basis adjustments included in carrying amount³
254
(7 )
Borrowings
Carrying amount currently or previously hedged $ 109,810
$ 102,456
Basis adjustments included in carrying amount³
$ 9,007
$ 2,593
1.Hedge accounting basis adjustments are primarily related to outstanding hedges.

Economic Loan Hedges


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.~~


	Three Months Ended
	March 31,
$ in millions		2021		2020
Recognized in Other Revenues
Credit contracts1		$	(105)	$	255

1.Amounts related to hedges of certain held-for-investment and held-for-sale loans,

Net Derivative Liabilities and Collateral Posted


$ in millions	At March 31, 2021		At December 31, 2020
Net derivative liabilities with credit risk-related contingent features	$	26,188	$	30,421
Collateral posted	13,954		23,842

$ in millions At
March 31,
2020 At
December 31,
2019
Net derivative liabilities with credit risk-related contingent features $ 33,064
$ 21,620
Collateral posted 28,502
17,392


			47			March 2021 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

The previous table presents the aggregate fair value of certain derivative contracts that contain credit risk-related contingent features that are in a net liability position for which the Firm has posted collateral in the normal course of business.

Incremental Collateral and Termination Payments upon Potential Future Ratings Downgrade

$ in millions At
March 31,
2020
One-notch downgrade $ 325
Two-notch downgrade 377
Bilateral downgrade agreements included in the amounts above¹
$ 614


1.$ in millions	At March 31, 2021
One-notch downgrade	$	231
Two-notch downgrade	242
~~Amount represents arrangements between~~Bilateral downgrade agreements included in 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.amounts above1	$	336

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.

The additional collateral or termination payments that may be called in the event of a future credit rating downgrade vary by contract and can be based on ratings by either or both of Moody’s Investors Service, Inc. ~~(“Moody’s”)~~ and S&P Global Ratings. The previous table shows the future potential collateral amounts and termination payments that could be called or required by counterparties or exchange and clearing organizations in the event of one-notch or two-notch downgrade scenarios based on the relevant contractual downgrade triggers.

Maximum Potential Payout/Notional of Credit Protection Sold¹


	Years to Maturity at March 31, 2021
$ in billions	< 1		1-3		3-5		Over 5		Total
Single-name CDS
Investment grade	$	10	$	20	$	32	$	14	$	76
Non-investment grade	7		10		17		6		40
Total	$	17	$	30	$	49	$	20	$	116
Index and basket CDS
Investment grade	$	2	$	6	$	86	$	45	$	139
Non-investment grade	6		7		38		21		72
Total	$	8	$	13	$	124	$	66	$	211
Total CDS sold	$	25	$	43	$	173	$	86	$	327
Other credit contracts	0		0		0		0		0
Total credit protection sold	$	25	$	43	$	173	$	86	$	327
CDS protection sold with identical protection purchased									$	282


	Years to Maturity at December 31, 2020
$ in billions	< 1		1-3		3-5		Over 5		Total
Single-name CDS
Investment grade	$	9	$	19	$	32	$	9	$	69
Non-investment grade	7		10		17		2		36
Total	$	16	$	29	$	49	$	11	$	105
Index and basket CDS
Investment grade	$	2	$	5	$	39	$	14	$	60
Non-investment grade	6		9		29		14		58
Total	$	8	$	14	$	68	$	28	$	118
Total CDS sold	$	24	$	43	$	117	$	39	$	223
Other credit contracts	0		0		0		0		0
Total credit protection sold	$	24	$	43	$	117	$	39	$	223
CDS protection sold with identical protection purchased									$	196

Years to Maturity at March 31, 2020
$ in billions < 1 1-3 3-5 Over 5 Total
Single-name CDS
Investment grade $ 13
$ 17
$ 34
$ 13
$ 77
Non-investment grade 9
9
16
5
39
Total $ 22
$ 26
$ 50
$ 18
$ 116
Index and basket CDS
Investment grade $ 5
$ 8
$ 65
$ 34
$ 112
Non-investment grade 7
5
21
17
50
Total $ 12
$ 13
$ 86
$ 51
$ 162
Total CDS sold $ 34
$ 39
$ 136
$ 69
$ 278
Other credit contracts —
—
—
—
—
Total credit protection sold $ 34
$ 39
$ 136
$ 69
$ 278
CDS protection sold with identical protection purchased $ 242

Years to Maturity at December 31, 2019
$ in billions < 1 1-3 3-5 Over 5 Total
Single-name CDS
Investment grade $ 16
$ 17
$ 33
$ 9
$ 75
Non-investment grade 9
9
16
1
35
Total $ 25
$ 26
$ 49
$ 10
$ 110
Index and basket CDS
Investment grade $ 4
$ 7
$ 46
$ 11
$ 68
Non-investment grade 7
4
17
10
38
Total $ 11
$ 11
$ 63
$ 21
$ 106
Total CDS sold $ 36
$ 37
$ 112
$ 31
$ 216
Other credit contracts —
—
—
—
—
Total credit protection sold $ 36
$ 37
$ 112
$ 31
$ 216
CDS protection sold with identical protection purchased $ 187



	57	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

Fair Value Asset (Liability) of Credit Protection Sold¹


$ in millions	At March 31, 2021		At December 31, 2020
Single-name CDS
Investment grade	$	1,447	$	1,230
Non-investment grade	(319)		(22)
Total	$	1,128	$	1,208
Index and basket CDS
Investment grade	$	1,617	$	843
Non-investment grade	(407)		(824)
Total	$	1,210	$	19
Total CDS sold	$	2,338	$	1,227
Other credit contracts	(3)		(4)
Total credit protection sold	$	2,335	$	1,223

$ in millions At
March 31,
2020 At
December 31,
2019
Single-name CDS
Investment grade $ (963 ) $ 1,057
Non-investment grade (3,350 ) (540 )
Total $ (4,313 ) $ 517
Index and basket CDS
Investment grade $ (693 ) $ 1,052
Non-investment grade (4,849 ) 134
Total $ (5,542 ) $ 1,186
Total CDS sold $ (9,855 ) $ 1,703
Other credit contracts (4 ) (17 )
Total credit protection sold $ (9,859 ) $ 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.

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.

Protection Purchased with CDS


	Notional
$ in billions	At March 31, 2021		At December 31, 2020
Single name	$	126	$	116
Index and basket	208		116
Tranched index and basket	15		14
Total	$	349	$	246


						Fair Value Asset (Liability)
	Notional
$ in billions	At March 31, 2020		At December 31, 2019
$ in millions					$ in millions	At March 31, 2021		At December 31, 2020
Single name	$	123	$	118	Single name	$	(1,460)	$	(1,452)
Index and basket	153		103		Index and basket	(1,187)		(57)
Tranched index and basket	18		15		Tranched index and basket	(361)		(329)
Total	$	294	$	236	Total	$	(3,008)	$	(1,838)

Fair Value Asset (Liability)
$ in millions At
March 31,
2020 At
December 31,
2019
Single name $ 4,152
$ (723 )
Index and basket 5,176
(1,139 )
Tranched index and basket 699
(450 )
Total $ 10,027
$ (2,312 )

The Firm enters into credit derivatives, principally CDS, under which it receives or provides protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. A majority of the Firm’s counterparties for these derivatives are banks, broker-dealers, and insurance and other financial institutions.

The fair value amounts as shown in the previous tables are prior to cash collateral or counterparty netting. For further information on credit derivatives and other contracts, see Note 57 to the financial statements in the ~~2019~~2020 Form 10-K.



March ~~2020~~2021 Form 10-Q			5848



Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

7.8. Investment Securities

AFS and HTM Securities


	At March 31, 2021
$ in millions	Amortized Cost1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS securities

U.S. Treasury securities	$	49,661	$	751	$	40	$	50,372
U.S. agency securities2	32,563		473		210		32,826


Agency CMBS	17,621		370		92		17,899

Corporate bonds	1,651		33		1		1,683
State and municipal securities	178		33		0		211
FFELP student loan ABS3	1,966		12		11		1,967
Other ABS	330		0		0		330

Total AFS securities	103,970		1,672		354		105,288
HTM securities

U.S. Treasury securities	29,687		1,181		69		30,799
U.S. agency securities2	50,798		322		1,237		49,883


Agency CMBS	2,540		0		42		2,498
Non-agency CMBS	893		31		5		919
Total HTM securities	83,918		1,534		1,353		84,099
Total investment securities	$	187,888	$	3,206	$	1,707	$	189,387


	At December 31, 2020
$ in millions	Amortized Cost1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS securities

U.S. Treasury securities	$	45,345	$	1,010	$	0	$	46,355
U.S. agency securities2	37,389		762		25		38,126


Agency CMBS	19,982		465		9		20,438

Corporate bonds	1,694		42		0		1,736
State and municipal securities	1,461		103		1		1,563
FFELP student loan ABS3	1,735		7		26		1,716
Other ABS	449		0		0		449

Total AFS securities	108,055		2,389		61		110,383
HTM securities

U.S. Treasury securities	29,346		1,893		0		31,239
U.S. agency securities2	38,951		704		8		39,647


Agency CMBS	2,632		4		2		2,634
Non-agency CMBS	842		58		0		900

Total HTM securities	71,771		2,659		10		74,420
Total investment securities	$	179,826	$	5,048	$	71	$	184,803

1.Amounts are net of any ACL.

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 95% of the principal balance and interest outstanding.

At March 31, 2020
$ in millions
Amortized
Cost¹
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
AFS securities
U.S. government and agency securities:
U.S. Treasury securities $ 34,600
$ 1,298
$ —
$ 35,898
U.S. agency securities²
22,687
717
82
23,322
Total U.S. government and agency securities 57,287
2,015
82
59,220
Corporate and other debt:
Agency CMBS 4,765
244
8
5,001
Corporate bonds 1,828
16
35
1,809
State and municipal securities 1,453
48
48
1,453
FFELP student loan ABS³
1,535
—
147
1,388
Total corporate and other debt 9,581
308
238
9,651
Total AFS securities 66,868
2,323
320
68,871
HTM securities
U.S. government and agency securities:
U.S. Treasury securities 29,951
2,256
—
32,207
U.S. agency securities²
16,542
607
—
17,149
Total U.S. government and agency securities 46,493
2,863
—
49,356
Corporate and other debt:
Non-agency CMBS 793
4
20
777
Total HTM securities 47,286
2,867
20
50,133
Total investment securities $ 114,154
$ 5,190
$ 340
$ 119,004

At December 31, 2019
$ in millions
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
AFS securities
U.S. government and agency securities:
U.S. Treasury securities $ 32,465
$ 224
$ 111
$ 32,578
U.S. agency securities²
20,725
249
100
20,874
Total U.S. government and agency securities 53,190
473
211
53,452
Corporate and other debt:
Agency CMBS 4,810
55
57
4,808
Corporate bonds 1,891
17
1
1,907
State and municipal securities 481
22
—
503
FFELP student loan ABS³
1,580
1
28
1,553
Total corporate and other debt 8,762
95
86
8,771
Total AFS securities 61,952
568
297
62,223
HTM securities
U.S. government and agency securities:
U.S. Treasury securities 30,145
568
52
30,661
U.S. agency securities²
12,589
151
57
12,683
Total U.S. government and agency securities 42,734
719
109
43,344
Corporate and other debt:
Non-agency CMBS 768
22
1
789
Total HTM securities 43,502
741
110
44,133
Total investment securities $ 105,454
$ 1,309
$ 407
$ 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 95% of the principal balance and interest outstanding.~~

In the current quarter, the Firm transferred certain municipal securities from Trading assets into AFS securities as a result of a change in intent due to the severe deterioration in liquidity for these instruments. At March 31, 2020, these securities had a fair value of $441 million.



	59	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

I~~nvestment~~Investment Securities in an Unrealized Loss Position


	At March 31, 2021				At December 31, 2020
$ in millions	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

U.S. Treasury securities
Less than 12 months	$	12,312	$	40	$	151	$	0

Total	12,312		40		151		0
U.S. agency securities
Less than 12 months	10,657		208		5,808		22
12 months or longer	994		2		1,168		3
Total	11,651		210		6,976		25





Agency CMBS
Less than 12 months	3,924		92		2,779		9
12 months or longer	45		0		46		0
Total	3,969		92		2,825		9




Corporate bonds
Less than 12 months	52		1		0		0
12 months or longer	10		0		31		0
Total	62		1		31		0
State and municipal securities
Less than 12 months	14		0		86		0
12 months or longer	0		0		36		1
Total	14		0		122		1
FFELP student loan ABS
Less than 12 months	243		0		0		0
12 months or longer	889		11		1,077		26
Total	1,132		11		1,077		26








Total AFS securities in an unrealized loss position
Less than 12 months	27,202		341		8,824		31
12 months or longer	1,938		13		2,358		30
Total	$	29,140	$	354	$	11,182	$	61

At March 31, 2020
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 $ 931
$ 7
$ 3,892
$ 75
$ 4,823
$ 82
Corporate and other debt:
Agency CMBS 30
—
670
8
700
8
Corporate bonds 747
24
58
11
805
35
State and municipal securities 678
48
—
—
678
48
FFELP student loan ABS 349
29
1,038
118
1,387
147
Total corporate and other debt 1,804
101
1,766
137
3,570
238
Total AFS securities $ 2,735
$ 108
$ 5,658
$ 212
$ 8,393
$ 320

At December 31, 2019
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 $ 4,793
$ 28
$ 7,904
$ 83
$ 12,697
$ 111
U.S. agency securities 2,641
20
7,697
80
10,338
100
Total U.S. government and agency securities 7,434
48
15,601
163
23,035
211
Corporate and other debt:
Agency CMBS 2,294
26
681
31
2,975
57
Corporate bonds 194
1
44
—
238
1
FFELP student loan ABS 91
—
1,165
28
1,256
28
Total corporate and other debt 2,579
27
1,890
59
4,469
86
Total AFS securities 10,013
75
17,491
222
27,504
297
HTM securities
U.S. government and agency securities:
U.S. Treasury securities 6,042
52
651
—
6,693
52
U.S. agency securities 2,524
18
2,420
39
4,944
57
Total U.S. government and agency securities 8,566
70
3,071
39
11,637
109
Corporate and other debt:
Non-agency CMBS 167
1
65
—
232
1
Total HTM securities 8,733
71
3,136
39
11,869
110
Total investment securities $ 18,746
$ 146
$ 20,627
$ 261
$ 39,373
$ 407

For AFS securities, the Firm believes there are no securities in an unrealized loss position that have credit losses after performing the analysis described in Note 2.2 in the 2020 Form 10-K. Additionally, the Firm does not intend to sell the securities and is not likely to be required to sell the securities prior to recovery of the amortized cost basis. Furthermore, the securities have not experienced credit losses as they are predominantly ~~investment-grade~~investment grade and the Firm expects to recover the amortized cost basis.

~~As of March 31, 2020, the~~The HTM securities net carrying ~~amount reflects an amortized cost~~amounts at March 31, 2021 and December 31, 2020 reflect ACL of ~~$47,312~~$24 million ~~less an allowance for credit losses of~~and $26 million, respectively, related to Non-agency CMBS. See Note 2 in the 2020 Form 10-K for a description of the ACL methodology used beginning in 2020 following the ~~Firm's~~Firm’s adoption of CECL and see Note 2 to the financial statements in the 2019 Form 10-K for prior period credit loss considerations. There were no securities in an unrealized loss position as of December 31, 2019 that had credit losses.CECL. As of March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, Non-Agency CMBS HTM securities were ~~all~~predominantly on accrual status and ~~were predominantly investment-grade.~~investment grade.

See Note 1415 for additional information on securities issued by VIEs, including U.S. agency mortgage-backed securities, non-agency CMBS, ~~and~~ FFELP student loan ABS and other ABS.



49	March ~~2020~~2021 Form 10-Q	60



Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Investment Securities by Contractual Maturity


	At March 31, 2020							At March 31, 2021
$ in millions	Amortized Cost¹		Fair Value		Annualized Average Yield		$ in millions	Amortized Cost1		Fair Value		Annualized Average Yield
AFS securities							AFS securities
U.S. government and agency securities:

U.S. Treasury securities:							U.S. Treasury securities:
Due within 1 year	$	3,728	$	3,770	2.0	%	Due within 1 year	$	12,458	$	12,530	1.2	%
After 1 year through 5 years	27,748		28,791		1.7	%	After 1 year through 5 years	24,474		25,043		1.4	%
After 5 years through 10 years	3,124		3,337		1.6	%	After 5 years through 10 years	12,729		12,799		1.0	%

Total	34,600		35,898				Total	49,661		50,372
U.S. agency securities:							U.S. agency securities:
Due within 1 year	235		236		0.8	%	Due within 1 year	3		3		1.5	%
After 1 year through 5 years	78		78		1.4	%	After 1 year through 5 years	142		146		1.5	%
After 5 years through 10 years	1,293		1,322		1.8	%	After 5 years through 10 years	1,314		1,347		1.8	%
After 10 years	21,081		21,686		2.3	%	After 10 years	31,104		31,330		1.6	%
Total	22,687		23,322				Total	32,563		32,826
Total U.S. government and agency securities	57,287		59,220		1.9	%
Corporate and other debt:

Agency CMBS:							Agency CMBS:
Due within 1 year							Due within 1 year	65		65		2.0	%
After 1 year through 5 years	599		605		1.8	%	After 1 year through 5 years	948		964		1.3	%
After 5 years through 10 years	3,273		3,488		2.5	%	After 5 years through 10 years	12,812		13,123		1.5	%
After 10 years	893		908		2.0	%	After 10 years	3,796		3,747		1.2	%
Total	4,765		5,001				Total	17,621		17,899

Corporate bonds:							Corporate bonds:
Due within 1 year	44		44		2.3	%	Due within 1 year	397		400		2.4	%
After 1 year through 5 years	1,439		1,439		2.6	%	After 1 year through 5 years	1,147		1,174		2.7	%
After 5 years through 10 years	345		326		2.9	%	After 5 years through 10 years	97		99		2.2	%
After 10 years							After 10 years	10		10		1.6	%
Total	1,828		1,809				Total	1,651		1,683
State and municipal securities:							State and municipal securities:
Due within 1 year							Due within 1 year	3		3		1.8	%
After 1 year through 5 years	2		2		3.4	%	After 1 year through 5 years	16		17		2.2	%
After 5 years through 10 years	139		142		3.1	%	After 5 years through 10 years	24		33		2.4	%
After 10 Years	1,312		1,309		2.8	%	After 10 Years	135		158		4.4	%
Total	1,453		1,453				Total	178		211
FFELP student loan ABS:							FFELP student loan ABS:
Due within 1 year							Due within 1 year	33		32		0.8	%
After 1 year through 5 years	98		87		0.8	%	After 1 year through 5 years	73		72		0.8	%
After 5 years through 10 years	307		270		0.9	%	After 5 years through 10 years	216		212		0.8	%
After 10 years	1,130		1,031		1.2	%	After 10 years	1,644		1,651		1.1	%
Total	1,535		1,388				Total	1,966		1,967
Total corporate and other debt	9,581		9,651		2.3	%
Other ABS:							Other ABS:

After 1 year through 5 years							After 1 year through 5 years	330		330		0.4	%

Total							Total	330		330

Total AFS securities	66,868		68,871		2.0	%	Total AFS securities	103,970		105,288		1.4	%

HTM securities							HTM securities

U.S. Treasury securities:							U.S. Treasury securities:
Due within 1 year							Due within 1 year	3,148		3,184		2.0	%
After 1 year through 5 years							After 1 year through 5 years	18,837		19,494		1.7	%
After 5 years through 10 years							After 5 years through 10 years	6,322		6,740		2.3	%
After 10 years							After 10 years	1,380		1,381		2.2	%
Total							Total	29,687		30,799
U.S. agency securities:							U.S. agency securities:

After 5 years through 10 years							After 5 years through 10 years	601		620		2.0	%
After 10 years							After 10 years	50,197		49,263		1.7	%
Total							Total	50,798		49,883


	At March 31, 2021
$ in millions	Amortized Cost1		Fair Value		Annualized Average Yield
Agency CMBS:
Due within 1 year	21		21		2.4	%
After 1 year through 5 years	1,060		1,056		1.4	%
After 5 years through 10 years	1,216		1,191		1.2	%
After 10 years	243		230		1.5	%
Total	2,540		2,498
Non-agency CMBS:
Due within 1 year	153		153		4.5	%
After 1 year through 5 years	51		52		2.7	%
After 5 years through 10 years	633		656		3.7	%
After 10 years	56		58		4.0	%
Total	893		919

Total HTM securities	83,918		84,099		1.8	%
Total investment securities	$	187,888	$	189,387	1.6	%

At March 31, 2020
$ 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 3,282
3,332
2.6 %
After 1 year through 5 years 17,769
18,733
2.0 %
After 5 years through 10 years 7,818
8,777
2.2 %
After 10 years 1,082
1,365
2.5 %
Total 29,951
32,207

U.S. agency securities:
After 5 years through 10 years 50
51
1.8 %
After 10 years 16,492
17,098
2.4 %
Total 16,542
17,149

Total U.S. government and agency securities 46,493
49,356
2.2 %
Corporate and other debt:
Non-agency CMBS:
Due within 1 year 100
99
4.8 %
After 1 year through 5 years 107
104
3.7 %
After 5 years through 10 years 549
536
3.9 %
After 10 years 37
38
4.4 %
Total corporate and other debt 793
777
4.0 %
Total HTM securities 47,286
50,133
2.3 %
Total investment securities $ 114,154
$ 119,004
2.1 %
1.Amounts are net of any ACL.


1.	~~Amounts are net of any allowance for credit losses.~~

Gross Realized Gains (Losses) on Sales of AFS Securities


	Three Months Ended March 31,
$ in millions	2021		2020
Gross realized gains	$	145	$	49
Gross realized (losses)	(11)		(8)
Total1	$	134	$	41

1.Realized gains and losses are recognized in Other revenues in the income statements.

Three Months Ended
March 31,
$ in millions 2020 2019
Gross realized gains $ 49
$ 19
Gross realized (losses) (8 ) (9 )
Total¹
$ 41
$ 10


1.	~~Realized gains and losses are recognized in Other revenues in the income statements~~.



	61	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

8.9. Collateralized Transactions

Offsetting of Certain Collateralized Transactions


	At March 31, 2021
$ in millions	Gross Amounts		Amounts Offset		Balance Sheet Net Amounts		Amounts Not Offset1		Net Amounts
Assets
Securities purchased under agreements to resell	$	215,594	$	(100,873)	$	114,721	$	(111,166)	$	3,555
Securities borrowed	113,488		(11,339)		102,149		(98,254)		3,895
Liabilities
Securities sold under agreements to repurchase	$	155,497	$	(100,873)	$	54,624	$	(45,364)	$	9,260
Securities loaned	19,765		(11,339)		8,426		(8,187)		239
Net amounts for which master netting agreements are not in place or may not be legally enforceable
Securities purchased under agreements to resell									$	3,203
Securities borrowed									591
Securities sold under agreements to repurchase									8,198
Securities loaned									159

At March 31, 2020
$ in millions
Gross
Amounts
Amounts
Offset
Net
Amounts
Presented
Amounts
Not Offset¹
Net
Amounts
Assets
Securities purchased under agreements to resell $ 249,124
$ (144,324 ) $ 104,800
$ (98,800 ) $ 6,000
Securities borrowed 76,276
(3,976 ) 72,300
(67,384 ) 4,916
Liabilities
Securities sold under agreements to repurchase $ 189,937
$ (144,121 ) $ 45,816
$ (39,114 ) $ 6,702
Securities loaned 15,810
(4,179 ) 11,631
(11,241 ) 390
Net amounts for which master netting agreements are not in place or may not be legally enforceable
Securities purchased under agreements to resell $ 5,403
Securities borrowed 1,010
Securities sold under agreements to repurchase 5,325
Securities loaned 134

At December 31, 2019
$ in millions
Gross
Amounts
Amounts
Offset
Net
Amounts
Presented
Amounts
Not Offset¹
Net
Amounts
Assets
Securities purchased under agreements to resell $ 247,545
$ (159,321 ) $ 88,224
$ (85,200 ) $ 3,024
Securities borrowed 109,528
(2,979 ) 106,549
(101,850 ) 4,699
Liabilities
Securities sold under agreements to repurchase $ 213,519
$ (159,319 ) $ 54,200
$ (44,549 ) $ 9,651
Securities loaned 11,487
(2,981 ) 8,506
(8,324 ) 182
Net amounts for which master netting agreements are not in place or may not be legally enforceable
Securities purchased under agreements to resell $ 2,255
Securities borrowed 1,181
Securities sold under agreements to repurchase 8,033
Securities loaned 101


1.March 2021 Form 10-Q			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.50


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	At December 31, 2020
$ in millions	Gross Amounts		Amounts Offset		Balance Sheet Net Amounts		Amounts Not Offset1		Net Amounts
Assets
Securities purchased under agreements to resell	$	264,140	$	(147,906)	$	116,234	$	(114,108)	$	2,126
Securities borrowed	124,921		(12,530)		112,391		(107,434)		4,957
Liabilities
Securities sold under agreements to repurchase	$	198,493	$	(147,906)	$	50,587	$	(43,960)	$	6,627
Securities loaned	20,261		(12,530)		7,731		(7,430)		301
Net amounts for which master netting agreements are not in place or may not be legally enforceable
Securities purchased under agreements to resell									$	1,870
Securities borrowed									596
Securities sold under agreements to repurchase									6,282
Securities loaned									128

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.

For further discussion of the Firm’s collateralized transactions, see Note 72 and Note 9 to the financial statements in the ~~2019~~2020 Form 10-K. For information related to offsetting of derivatives, see Note 6.7.

Gross Secured Financing Balances by Remaining Contractual Maturity


	At March 31, 2021
$ in millions	Overnight and Open		Less than 30 Days		30-90 Days		Over 90 Days		Total
Securities sold under agreements to repurchase	$	52,398	$	49,603	$	14,078	$	39,418	$	155,497
Securities loaned	13,850		0		59		5,856		19,765
Total included in the offsetting disclosure	$	66,248	$	49,603	$	14,137	$	45,274	$	175,262
Trading liabilities— Obligation to return securities received as collateral	18,877		0		0		0		18,877
Total	$	85,125	$	49,603	$	14,137	$	45,274	$	194,139


	At December 31, 2020
$ in millions	Overnight and Open		Less than 30 Days		30-90 Days		Over 90 Days		Total
Securities sold under agreements to repurchase	$	84,349	$	60,853	$	26,221	$	27,070	$	198,493
Securities loaned	15,267		247		0		4,747		20,261
Total included in the offsetting disclosure	$	99,616	$	61,100	$	26,221	$	31,817	$	218,754
Trading liabilities— Obligation to return securities received as collateral	16,389		0		0		0		16,389
Total	$	116,005	$	61,100	$	26,221	$	31,817	$	235,143

At March 31, 2020
$ in millions
Overnight
and Open
Less than
30 Days
30-90
Days
Over
90 Days
Total
Securities sold under agreements to repurchase $ 65,591
$ 60,940
$ 25,746
$ 37,660
$ 189,937
Securities loaned 6,824
214
2,034
6,738
15,810
Total included in the offsetting disclosure $ 72,415
$ 61,154
$ 27,780
$ 44,398
$ 205,747
Trading liabilities—
Obligation to return securities received as collateral 15,270
—
—
—
15,270
Total $ 87,685
$ 61,154
$ 27,780
$ 44,398
$ 221,017

At December 31, 2019
$ in millions
Overnight
and Open
Less than
30 Days
30-90
Days
Over
90 Days
Total
Securities sold under agreements to repurchase $ 67,158
$ 81,300
$ 26,904
$ 38,157
$ 213,519
Securities loaned 2,378
3,286
516
5,307
11,487
Total included in the offsetting disclosure $ 69,536
$ 84,586
$ 27,420
$ 43,464
$ 225,006
Trading liabilities—
Obligation to return securities received as collateral 23,877
—
—
—
23,877
Total $ 93,413
$ 84,586
$ 27,420
$ 43,464
$ 248,883

Gross Secured Financing Balances by Class of Collateral Pledged


$ in millions	At March 31, 2020		At December 31, 2019		$ in millions	At March 31, 2021		At December 31, 2020
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase				Securities sold under agreements to repurchase
U.S. Treasury and agency securities	$	77,557	$	68,895	U.S. Treasury and agency securities	$	50,124	$	94,662
State and municipal securities	689		905
Other sovereign government obligations	88,871		109,414		Other sovereign government obligations	71,250		71,140
ABS	2,278		2,218
Corporate and other debt	7,369		6,066
Corporate equities	12,710		25,563		Corporate equities	22,618		24,692
Other	463		458		Other	11,505		7,999
Total	$	189,937	$	213,519	Total	$	155,497	$	198,493
Securities loaned					Securities loaned
Other sovereign government obligations	$	4,876	$	3,026	Other sovereign government obligations	$	2,642	$	3,430
Corporate equities	10,277		8,422		Corporate equities	17,027		16,536
Other	657		39		Other	96		295
Total	$	15,810	$	11,487	Total	$	19,765	$	20,261
Total included in the offsetting disclosure	$	205,747	$	225,006	Total included in the offsetting disclosure	$	175,262	$	218,754
Trading liabilities—Obligation to return securities received as collateral	Trading liabilities—Obligation to return securities received as collateral				Trading liabilities—Obligation to return securities received as collateral
Corporate equities	$	15,263	$	23,873	Corporate equities	$	18,859	$	16,365
Other	7		4		Other	18		24
Total	$	15,270	$	23,877	Total	$	18,877	$	16,389
Total	$	221,017	$	248,883	Total	$	194,139	$	235,143



~~March 2020 Form 10-Q~~	62



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

Carrying Value of Assets Loaned or Pledged without Counterparty Right to Sell or Repledge

$ in millions At
March 31,
2020 At
December 31,
2019
Trading assets $ 40,345
$ 41,201
Loans (before allowance for credit losses) 1,158
750
Total $ 41,503
$ 41,951


$ in millions	At March 31, 2021		At December 31, 2020
Trading assets	$	36,872	$	30,954

The Firm pledges certain of its trading assets ~~and loans~~ to collateralize securities sold under agreements to repurchase, securities loaned, other secured financings and derivatives and to cover customer short sales. Counterparties may or may not have the right to sell or repledge the collateral.

Pledged financial instruments that can be sold or repledged by the secured party are identified as Trading assets (pledged to various parties) in the balance sheets.

Fair Value of Collateral Received with Right to Sell or Repledge


$ in millions	At March 31, 2021		At December 31, 2020
Collateral received with right to sell or repledge	$	705,299	$	724,818
Collateral that was sold or repledged1	535,192		523,648

$ in millions At
March 31,
2020 At
December 31,
2019
Collateral received with right to sell
or repledge $ 604,450
$ 679,280
Collateral that was sold or repledged¹
483,708
539,412


1.	1.Does not include securities used to meet federal regulations for the Firm’s U.S. broker-dealers.

~~Segregated Securities~~

$ in millions At
March 31,
2020 At
December 31,
2019
Segregated securities¹
35,491
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.~~

The Firm receives collateral in the form of securities in connection with securities purchased under agreements to resell, securities borrowed, securities-for-securities transactions, derivative transactions, customer margin loans and securities-based lending. In many cases, the Firm is permitted to sell or repledge this collateral to secure securities sold under agreements to repurchase, to enter into securities lending and derivative transactions or for delivery to counterparties to cover short positions.


			51			March 2021 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Securities Segregated for Regulatory Purposes


$ in millions	At March 31, 2021		At December 31, 2020
Segregated securities1	$	31,143	$	34,106

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.

Customer Margin and Other Lending

$ in millions At
March 31,
2020 At
December 31,
2019
Customer receivables representing margin loans $ 26,181
$ 31,916


$ in millions	At March 31, 2021		At December 31, 2020
Margin and other lending	$	82,544	$	74,714

The Firm provides margin lending arrangements ~~which~~that allow customers to borrow against the value of qualifying securities. Receivables under margin lending arrangements are included

within Customer and other receivables in the balance sheets. Under these agreements and transactions, the Firm receives collateral, which includes U.S. government and agency securities, other sovereign government obligations, corporate and other debt, and corporate equities. ~~Customer receivables generated from margin lending activities~~Margin loans are collateralized by customer-owned securities held by the Firm. The Firm monitors required margin levels and established credit terms daily and, pursuant to such guidelines, requires customers to deposit additional collateral, or reduce positions, when necessary.

For a further discussion of the Firm’s margin lending activities, see Note 79 to the financial statements in the ~~2019~~2020 Form 10-K.

Also included in the amounts in the previous table is non-purpose securities-based lending on non-bank entities in the Wealth Management business segment.

Other Secured Financings

The Firm has additional secured liabilities. For a further discussion of other secured financings, see Note ~~12.~~13.

9.10. Loans, Lending Commitments and Related Allowance for Credit Losses

Loans by Type

At March 31, 2020
$ in millions
Loans Held
for Investment
Loans Held
for Sale
Total Loans
Corporate¹
$ 61,474
$ 15,525
$ 76,999
Consumer²
31,948
—
31,948
Residential real estate 31,100
14
31,114
Commercial real estate 7,430
1,823
9,253
Total loans, before allowance 131,952
17,362
149,314
Allowance for credit losses (617 ) —
(617 )
Total loans, net $ 131,335
$ 17,362
$ 148,697
Fixed rate loans, net $ 25,155
Floating or adjustable rate loans, net 123,542
Loans to non-U.S. borrowers, net 24,633


	At March 31, 2021
$ in millions	Loans Held for Investment		Loans Held for Sale		Total Loans
Corporate	$	5,185	$	11,824	$	17,009
Secured lending facilities	25,886		3,025		28,911
Commercial real estate	7,277		504		7,781
Residential real estate	36,843		51		36,894
Securities-based lending and Other loans	69,206		84		69,290
Total loans	144,397		15,488		159,885
ACL	(762)				(762)
Total loans, net	$	143,635	$	15,488	$	159,123
Fixed rate loans, net					$	35,153
Floating or adjustable rate loans, net					123,970
Loans to non-U.S. borrowers, net					22,518


	At December 31, 2020
$ in millions	Loans Held for Investment		Loans Held for Sale		Total Loans
Corporate	$	6,046	$	8,580	$	14,626
Secured lending facilities	25,727		3,296		29,023
Commercial real estate	7,346		822		8,168
Residential real estate	35,268		48		35,316
Securities-based lending and Other loans	64,232		67		64,299
Total loans	138,619		12,813		151,432
ACL	(835)				(835)
Total loans, net	$	137,784	$	12,813	$	150,597
Fixed rate loans, net					$	32,796
Floating or adjustable rate loans, net					117,801
Loans to non-U.S. borrowers, net					21,081



	63	~~March 2020 Form 10-Q~~

For additional information on the Firm’s held-for-investment and held-for-sale loan portfolios, see Note 10 to the financial statements in the 2020 Form 10-K.



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

At December 31, 2019
$ in millions
Loans Held
for Investment
Loans Held
for Sale
Total Loans
Corporate¹
$ 48,756
$ 10,515
$ 59,271
Consumer²
31,610
—
31,610
Residential real estate 30,184
13
30,197
Commercial real estate 7,859
2,049
9,908
Total loans, before allowance 118,409
12,577
130,986
Allowance for credit losses (349 ) —
(349 )
Total loans, net $ 118,060
$ 12,577
$ 130,637
Fixed rate loans, net $ 22,716
Floating or adjustable rate loans, net 107,921
Loans to non-U.S. borrowers, net 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.~~

Note 5 for further information regarding Loans and lending commitments held at fair value. See Note 14 for details of current commitments to lend in the future.

Loans Held for Investment before Allowance by Origination Year

At March 31, 2020
Corporate
$ in millions AA-A BBB BB Other NIG Total
Revolving Loans $ 3,418
$ 16,474
$ 19,772
$ 8,193
$ 47,857
2020 YTD 122
671
456
23
1,272
2019 631
1,234
1,940
444
4,249
2018 37
2,083
1,096
493
3,709
2017 358
639
500
82
1,579
2016 74
547
505
60
1,186
Prior 641
311
595
75
1,622
Total $ 5,281
$ 21,959
$ 24,864
$ 9,370
$ 61,474

At March 31, 2020
$ in millions
Consumer¹
Revolving Loans $ 31,362
2020 YTD 62
2019 382
2018 —
2017 16
2016 57
Prior 69
Total $ 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.


	At March 31, 2021						At December 31, 2020
	Corporate
$ in millions	IG		NIG		Total		IG		NIG		Total
Revolving	$	1,432	$	2,721	$	4,153	$	1,138	$	3,231	$	4,369
2021	0		21		21
2020	184		25		209		585		80		665
2019	11		191		202		204		202		406
2018	195		0		195		195		0		195
2017	0		63		63		0		64		64
Prior	242		100		342		247		100		347
Total	$	2,064	$	3,121	$	5,185	$	2,369	$	3,677	$	6,046


	At March 31, 2021						At December 31, 2020
	Secured lending facilities
$ in millions	IG		NIG		Total		IG		NIG		Total
Revolving	$	5,356	$	14,141	$	19,497	$	4,711	$	14,510	$	19,221
2021	0		366		366
2020	123		216		339		162		253		415
2019	258		1,762		2,020		260		1,904		2,164
2018	587		1,335		1,922		614		1,432		2,046
2017	245		461		706		245		581		826
Prior	0		1,036		1,036		0		1,055		1,055
Total	$	6,569	$	19,317	$	25,886	$	5,992	$	19,735	$	25,727


	At March 31, 2021						At December 31, 2020
	Commercial real estate
$ in millions	IG		NIG		Total		IG		NIG		Total

2021	$	0	$	198	$	198
2020	135		969		1,104		$	95	$	943	$	1,038
2019	1,151		1,629		2,780		1,074		1,848		2,922
2018	704		780		1,484		746		774		1,520
2017	366		354		720		412		387		799
Prior	100		891		991		100		967		1,067
Total	$	2,456	$	4,821	$	7,277	$	2,427	$	4,919	$	7,346

At March 31, 2020
Residential Real Estate
by FICO Scores by LTV Ratio Total
$ in millions ≥ 740 680-739 ≤ 679 ≤ 80% > 80%
Revolving Loans $ 103
$ 40
$ 6
$ 149
$ —
$ 149
2020 YTD 1,865
369
35
2,143
126
2,269
2019 6,239
1,397
179
7,290
525
7,815
2018 2,699
770
90
3,277
282
3,559
2017 3,248
817
116
3,882
299
4,181
2016 3,924
1,074
152
4,804
346
5,150
Prior 5,659
1,963
355
7,101
876
7,977
Total $ 23,737
$ 6,430
$ 933
$ 28,646
$ 2,454
$ 31,100


March 2021 Form 10-Q			52

At March 31, 2020
Commercial Real Estate
$ in millions AA-A BBB BB Other NIG Total
Revolving Loans $ 5
$ —
$ —
$ —
$ 5
2020 YTD —
—
167
23
190
2019 —
539
2,056
360
2,955
2018 10
723
764
421
1,918
2017 —
217
577
344
1,138
2016 134
100
352
172
758
Prior 10
—
285
171
466
Total $ 159
$ 1,579
$ 4,201
$ 1,491
$ 7,430


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

~~YTD–Year~~


	At March 31, 2021
	Residential real estate
	by FICO Scores						by LTV Ratio				Total
$ in millions	≥ 740		680-739		≤ 679		≤ 80%		> 80%
Revolving	$	73	$	32	$	5	$	110	$	0	$	110
2021	2,544		487		42		2,879		194		3,073
2020	8,790		1,806		145		10,170		571		10,741
2019	5,385		1,218		161		6,344		420		6,764
2018	2,208		573		73		2,624		230		2,854
2017	2,596		656		83		3,101		234		3,335
Prior	7,244		2,343		379		9,046		920		9,966
Total	$	28,840	$	7,115	$	888	$	34,274	$	2,569	$	36,843


	At December 31, 2020
	Residential real estate
	by FICO Scores						by LTV Ratio				Total
$ in millions	≥ 740		680-739		≤ 679		≤ 80%		> 80%
Revolving	$	85	$	32	$	5	$	122	$	0	$	122
2020	8,948		1,824		149		10,338		583		10,921
2019	5,592		1,265		168		6,584		441		7,025
2018	2,320		604		75		2,756		243		2,999
2017	2,721		690		89		3,251		249		3,500
2016	3,324		884		118		4,035		291		4,326
Prior	4,465		1,626		284		5,684		691		6,375
Total	$	27,455	$	6,925	$	888	$	32,770	$	2,498	$	35,268


	At March 31, 2021
	Securities-based lending1		Other2
$ in millions			Investment Grade		Non-Investment Grade		Total
Revolving	$	56,025	$	5,609	$	601	$	62,235
2021	0		53		19		72
2020	38		794		547		1,379
2019	17		1,141		637		1,795
2018	232		364		439		1,035
2017	0		645		135		780
Prior	16		1,570		324		1,910
Total	$	56,328	$	10,176	$	2,702	$	69,206


	December 31, 2020
	Securities-based lending1		Other2
$ in millions			Investment Grade		Non-Investment Grade		Total
Revolving	$	51,667	$	4,816	$	555	$	57,038
2020	0		1,073		590		1,663
2019	18		1,156		623		1,797
2018	232		407		403		1,042
2017	0		654		122		776
2016	0		566		111		677
Prior	16		1,066		157		1,239
Total	$	51,933	$	9,738	$	2,561	$	64,232

1. Securities-based loans are subject to ~~date~~collateral maintenance provisions, and at March 31, 2021 and December 31, 2020, these loans are predominantly over-collateralized. For more information on the ACL methodology related to securities-based loans, see Note 2 to the financial statements in the 2020 Form 10-K.

2. Other loans primarily include certain loans originated in the tailored lending business within the Wealth Management business segment.

Past Due ~~Status~~Loans Held for Investment before Allowance1



$ in millions	At March 31, 2021		At December 31, 2020



Residential real estate	$	240	$	332
Securities-based lending and Other loans	0		31
Total	$	240	$	363

1.The majority of the amounts are past due for a period of less than 90 days as of March 31, 2021 and December 31, 2020.

Nonaccrual Loans Held for Investment before Allowance


$ in millions	At March 31, 2021		At December 31, 2020
Corporate	$	149	$	164

Commercial real estate	84		152
Residential real estate	108		97
Securities-based lending and Other loans	164		178
Total1	$	505	$	591
Nonaccrual loans without an ACL	$	99	$	90

At March 31, 2020
$ in millions Corporate Consumer Residential Real Estate Commercial Real Estate
Current $ 61,466
$ 31,948
$ 30,883
$ 7,430
Past due¹
8
—
217
—
Total $ 61,474
$ 31,948
$ 31,100
$ 7,430


1.	~~The majority of the amounts are less than 60 days past due as of March 31, 2020.~~

1.Includes all HFI loans that are 90 days or more past due as of March 31, 2021 and December 31, 2020.

See Note 2 to the financial statements in the 2020 Form 10-K for a description of the ACL calculated under the CECL methodology, including credit quality indicators, used for HFI ~~loans beginning in 2020.~~

~~Loans Held for Investment before Allowance~~¹

At December 31, 2019
$ in millions Corporate Consumer
Residential
Real Estate
Commercial
Real Estate
Total
Pass $ 47,681
$ 31,605
$ 30,060
$ 7,664
$ 117,010
Special mention 464
—
28
3
495
Substandard 605
5
96
192
898
Doubtful 6
—
—
—
6
Total $ 48,756
$ 31,610
$ 30,184
$ 7,859
$ 118,409


1.	~~There were 0 loans held for investment considered Loss as of December 31, 2019.~~



~~March 2020 Form 10-Q~~	64



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

~~Impaired Loans and Lending Commitments before Allowance~~

At December 31, 2019
$ in millions Corporate Consumer Residential
Real Estate Commercial Real Estate Total
Loans
With allowance $ 268
$ —
$ —
$ 85
$ 353
Without allowance¹
32
5
87
—
124
Total impaired loans $ 300
$ 5
$ 87
$ 85
$ 477
UPB 309
5
90
85
489
Lending commitments
With allowance $ 4
$ —
$ —
$ 14
$ 18
Without allowance¹
32
—
—
—
32
Total impaired lending commitments $ 36
$ —
$ —
$ 14
$ 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.~~

~~Loans and lending commitments in the previous table were evaluated for a specific allowance. All remaining loans and lending commitments were assessed under the inherent allowance methodology.~~

~~Impaired Loans before Allowance and Total Allowance by Region~~

At December 31, 2019
$ in millions Americas
EMEA
Asia
Total
Impaired loans $ 392
$ 85
$ —
$ 477
Total Allowance for credit losses 270
76
3
349
loans.

Troubled Debt Restructurings


$ in millions	At March 31, 2020		At December 31, 2019		$ in millions	At March 31, 2021		At December 31, 2020
Loans, before allowance	$	132	$	92
Loans, before ACL					Loans, before ACL	$	72	$	167
Lending commitments	33		32		Lending commitments	0		27
Allowance for credit losses on Loans and Lending commitments	26		16
ACL on Loans and Lending commitments					ACL on Loans and Lending commitments	20		36

Troubled debt restructurings typically include modifications of interest rates, collateral requirements, other loan covenants and payment extensions. ~~As of December 31, 2019, impaired loans and lending commitments classified as held for investment within corporate loans include TDRs.~~ See Note 2 to the financial statements in the 2020 Form 10-K for further information on TDR guidance issued by Congress in the CARES Act as well as by the U.S. banking agencies.

For a discussion of the Firm’s ACL methodology under the prior incurred loss model, including credit quality indicators, used for HFI loans as of December 31, 2019, and a further discussion of the Firm's loans, including loan types and categories, see Notes 2 and 8 in the 2019 Form 10-K.

Allowance for Credit Losses Rollforward—Loans


$ in millions	Corporate		Secured lending facilities		CRE		Residential real estate		SBL and Other		Total
December 31, 2020	$	309	$	198	$	211	$	59	$	58	$	835
Gross charge-offs	(1)		0		(9)		0		0		(10)


Provision for credit losses	(56)		(3)		5		(5)		1		(58)
Other	(2)		(2)		(1)		0		0		(5)
March 31, 2021	$	250	$	193	$	206	$	54	$	59	$	762


$ in millions	Corporate		Secured lending facilities		CRE		Residential real estate		SBL and Other		Total
December 31, 2019	$	115	$	101	$	75	$	25	$	33	$	349
Effect of CECL adoption	(2)		(42)		34		21		(2)		9
Gross charge-offs	(32)		0		0		0		0		(32)


Provision for credit losses	177		29		66		1		19		292
Other	0		0		(1)		0		0		(1)
March 31, 2020	$	258	$	88	$	174	$	47	$	50	$	617

$ in millions Corporate Consumer
Residential
Real Estate
Commercial
Real Estate
Total
December 31, 2019 $ 241
$ 8
$ 25
$ 75
$ 349
Effect of CECL adoption (31 ) (6 ) 21
25
9
Gross charge-offs (32 ) —
—
—
(32 )
Provision (release) 215
1
1
75
292
Other —
—
—
(1 ) (1 )
March 31, 2020 $ 393
$ 3
$ 47
$ 174
$ 617


			53			March 2021 Form 10-Q

$ in millions Corporate Consumer
Residential
Real Estate
Commercial
Real Estate
Total
December 31, 2018 $ 144
$ 7
$ 20
$ 67
$ 238
Provision (release) 26
(1 ) 2
—
27
Other (6 ) —
—
—
(6 )
March 31, 2019 $ 164
$ 6
$ 22
$ 67
$ 259
Inherent $ 150
$ 6
$ 22
$ 67
$ 245
Specific 14
—
—
—
14


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Allowance for Credit Losses Rollforward—Lending Commitments


$ in millions	Corporate		Secured lending facilities		CRE		Residential real estate		SBL and Other		Total
December 31, 2020	$	323	$	38	$	11	$	1	$	23	$	396
Provision for credit losses	(33)		(4)		(2)		0		(1)		(40)
Other	(1)		1		(1)		0		(1)		(2)
March 31, 2021	$	289	$	35	$	8	$	1	$	21	$	354


$ in millions	Corporate			Consumer			Residential Real Estate		Commercial Real Estate			Total			$ in millions	Corporate		Secured lending facilities		CRE		Residential real estate		SBL and Other		Total
December 31, 2019	$	232		$	2		$	—	$	7		$	241		December 31, 2019	$	201	$	27	$	7	$	0	$	6	$	241
Effect of CECL adoption	(53		)	(1		)	3		1			(50		)	Effect of CECL adoption	(41)		(11)		1		2		(1)		(50)
Provision (release)	110			—			—		5			115
Provision for credit losses															Provision for credit losses	91		16		5		0		3		115
Other	(1		)	—			—		(1		)	(2		)	Other	(2)		0		0		0		0		(2)
March 31, 2020	$	288		$	1		$	3	$	12		$	304		March 31, 2020	$	249	$	32	$	13	$	2	$	8	$	304

CRE—Commercial real estate

$ in millions Corporate Consumer
Residential
Real Estate
Commercial
Real Estate
Total
December 31, 2018 $ 198
$ 2
$ —
$ 3
$ 203
Provision (release) 8
—
—
1
9
Other —
(1 ) —
—
(1 )
March 31, 2019 $ 206
$ 1
$ —
$ 4
$ 211
Inherent $ 202
$ 1
$ —
$ 4
$ 207
Specific 4
—
—
—
4

SBL—Securities-based lending

The aggregate allowance for loans and lending commitments ~~increased~~decreased in the current quarter, ~~principally~~primarily reflecting a ~~provision~~release in the allowance for credit losses within the Institutional Securities business ~~segment resulting from~~segment. The allowance release was primarily a result of improvements in the ~~economic~~outlook for macroeconomic conditions and the impact of ~~COVID-19. This provision~~paydowns on Corporate loans, including by lower-rated borrowers.The base scenario used in our ACL models as of March 31, 2021 was ~~primarily~~generated using a combination of industry consensus economic forecasts, forward rates, and internally developed and validated models. Given the ~~result~~nature of ~~higher actual~~our lending portfolio, the most sensitive model input is U.S. gross domestic product. The base scenario, among other things, assumes a continued recovery over the forecast period with U.S. GDP reaching pre-COVID-19 levels by the third quarter of 2021, supported by fiscal stimulus and expected future downgrades, an increase in funded balances, principally in Corporate relationship and event-driven loans, as well as revisions to our forecasts in light of current and expected future market and macroeconomic conditions.accommodative monetary policy. For a further discussion of the Firm’s loans ~~including loan types and categories,~~ as well as the Firm’s allowance methodology, ~~prior to the adoption of CECL,~~ refer to Notes 2 and 810 to the financial statements in the ~~2019~~2020 Form 10-K. ~~See Note 4~~

Employee Loans


$ in millions	At March 31, 2021		At December 31, 2020
Currently employed by the Firm1	$	3,152	$	3,100
No longer employed by the Firm2	142		$	140
Employee loans	$	3,294	$	3,240
ACL3	(168)		(165)
Employee loans, net of ACL	$	3,126	$	3,075
Remaining repayment term, weighted average in years	5.4		5.3

1.These loans were predominantly current as of March 31, 2021 and December 31, 2020.

2.These loans were predominantly past due for ~~further~~

a period of 90 days or more as of March 31, 2021 and December 31, 2020.



	65	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

~~information regarding Loans and lending commitments held at fair value. See Note 13 for details of current commitments to lend in the future.~~

~~Employee Loans~~

$ in millions At
March 31,
2020 At
December 31,
2019
Currently employed by the Firm¹
$ 2,867
N/A
No longer employed by the Firm²
150
N/A
Balance $ 3,017
$ 2,980
Allowance for credit losses³
(180 ) (61 )
Balance, net $ 2,837
$ 2,919
Remaining repayment term, weighted average in years 5.0
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 $124 million increase due to the adoption of CECL in the first quarter of 2020.~~

Employee loans are granted in conjunction with a program established primarily to recruit certain Wealth Management representatives, are full recourse and generally require periodic repayments, and are due in full upon termination of

employment with the Firm. These loans are recorded in Customer and other receivables in the balance sheets. The ~~allowance for credit losses~~ACL as of March 31, 2021 and December 31, 2020 was calculated under the CECL ~~methodology, while the allowance for credit losses at December 31, 2019 was calculated under the prior incurred loss model.~~methodology. The related provision is recorded in Compensation and benefits expense in the income statements. See Note 2 to the financial statements in the 2020 Form 10-K for a description of the CECL allowance methodology, including credit quality indicators, for employee loans.



~~March 2020 Form 10-Q~~	66



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

~~10.~~11. Other Assets—Equity Method Investments

Equity Method Investments


$ in millions	At March 31, 2021		At December 31, 2020
Investments	$	2,264	$	2,410


						Three Months Ended March 31,
$ in millions	At March 31, 2020		At December 31, 2019		$ in millions		2021		2020
Investments	$	2,413	$	2,363
Income (loss)					Income (loss)		$	(24)	$	29

Three Months Ended
March 31,
$ in millions 2020 2019
Income (loss) $ 29
$ (10 )

Equity method investments, other than investments in certain fund interests, are summarized above and are included in Other assets in the balance sheets with related income or loss included in Other revenues in the income statements. See “Net Asset Value Measurements—Fund Interests” in Note 45 for the carrying value of certain of the Firm’s fund interests, which are comprised of general and limited partnership interests, as well as any related carried interest.

Japanese Securities Joint Venture

Three Months Ended
March 31,
$ in millions 2020 2019
Income (loss) from investment in MUMSS $ 32
$ 3


	Three Months Ended March 31,
$ in millions		2021		2020
Income from investment in MUMSS		$	32	$	32

The Firm and Mitsubishi UFJ Financial Group, Inc. (“MUFG”) formed a joint venture in Japan comprising their respective investment banking and securities businesses by forming two joint venture companies,For more information on Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“MUMSS”) and ~~Morgan Stanley MUFG Securities Co.~~other relationships with Mitsubishi UFJ Financial Group, Inc., ~~Ltd. (“MSMS”) (the “Joint Venture”). The Firm owns a 40% economic interest~~see Note 12 to the financial statements in the ~~Joint Venture and MUFG owns the other 60%.~~2020 Form 10-K.

The Firm’s 40% voting interest in MUMSS is accounted for under the equity method within the Institutional Securities business segment, and is included in the equity method investment balances above. The Firm consolidates MSMS into the Institutional Securities business segment, based on its 51% voting interest.

The Firm engages in transactions in the ordinary course of business with MUFG and its affiliates, for example investment banking, financial advisory, sales and trading, derivatives, investment management, lending, securitization and other financial services transactions. Such transactions are on substantially the same terms as those that would be available to unrelated third parties for comparable transactions.

~~11.~~12. Deposits

Deposits


$ in millions	At March 31, 2021		At December 31, 2020
Savings and demand deposits	$	298,987	$	279,221
Time deposits	24,151		31,561
Total	$	323,138	$	310,782
Deposits subject to FDIC insurance	$	243,214	$	234,211
Time deposits that equal or exceed the FDIC insurance limit	$	16	$	16

$ in millions At
March 31,
2020 At
December 31,
2019
Savings and demand deposits $ 188,504
$ 149,465
Time deposits 46,735
40,891
Total $ 235,239
$ 190,356
Deposits subject to FDIC insurance $ 176,034
$ 149,966
Time deposits that equal or exceed the FDIC insurance limit $ 12
$ 12


March 2021 Form 10-Q			54


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Time Deposit Maturities

$ in millions At
March 31,
2020
2020 $ 16,656
2021 16,836
2022 4,883
2023 4,070
2024 2,788
Thereafter 1,502
Total $ 46,735


$ in millions	At March 31, 2021
2021	$	10,697
2022	5,263
2023	4,088
2024	2,813
2025	770
Thereafter	520
Total	$	24,151

~~12.~~ 13. Borrowings and Other Secured Financings

Borrowings


$ in millions	At March 31, 2021		At December 31, 2020
Original maturities of one year or less	$	7,559	$	3,691
Original maturities greater than one year
Senior	$	197,474	$	202,305
Subordinated	10,793		11,083
Total	$	208,267	$	213,388
Total borrowings	$	215,826	$	217,079
Weighted average stated maturity, in years1	7.4		7.3

$ in millions At
March 31,
2020 At
December 31,
2019
Original maturities of one year or less $ 2,211
$ 2,567
Original maturities greater than one year
Senior $ 181,477
$ 179,519
Subordinated 11,168
10,541
Total $ 192,645
$ 190,060
Total borrowings $ 194,856
$ 192,627
Weighted average stated maturity, in years¹
7.6
6.9
1.Only includes borrowings with original maturities greater than one year.


1.	~~Only includes borrowings with original maturities greater than one year.~~



	67	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

Other Secured Financings

$ in millions At
March 31,
2020 At
December 31,
2019
Original maturities:
One year or less $ 7,304
$ 7,103
Greater than one year 4,682
6,480
Transfers of assets accounted for as secured financings 1,072
1,115
Total $ 13,058
$ 14,698


$ in millions	At March 31, 2021		At December 31, 2020
Original maturities:
One year or less	$	4,613	$	10,453
Greater than one year	4,800		5,410
Total	$	9,413	$	15,863
Transfers of assets accounted for as secured financings	$	1,398	$	1,529

Other secured financings include the liabilities related to certain ELNs, transfers of financial assets that are accounted for as financings rather than sales, pledged commodities, consolidated VIEs where the Firm is deemed to be the primary beneficiary and other secured borrowings. These liabilities are generally payable from the cash flows of the related assets accounted for as Trading assets. See Note 1415 for further information on other secured financings related to VIEs and securitization activities.

For transfers of assets that fail to meet accounting criteria for a sale, the Firm continues to record the assets and recognizes the associated liabilities in the balance sheets.

~~13.~~

14. Commitments, Guarantees and Contingencies

Commitments

Years to Maturity at March 31, 2020
$ in millions Less than 1 1-3 3-5 Over 5 Total
Lending:
Corporate $ 23,055
$ 28,998
$ 41,269
$ 3,174
$ 96,496
Consumer 8,112
23
3
—
8,138
Residential and commercial
real estate 163
1,179
49
252
1,643
Forward-starting secured financing receivables 80,666
219
—
—
80,885
Central counterparty¹
300
—
—
12,344
12,644
Underwriting 206
—
—
—
206
Investment activities 992
226
58
265
1,541
Letters of credit and other financial guarantees 174
2
—
2
178
Total $ 113,668
$ 30,647
$ 41,379
$ 16,037
$ 201,731
Corporate lending commitments participated to third parties $ 7,226
Forward-starting secured financing receivables settled within three business days $ 71,096

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, 2021
$ in millions	Less than 1		1-3		3-5		Over 5		Total
Lending:
Corporate	$	16,895	$	38,987	$	40,975	$	6,091	$	102,948
Secured lending facilities	5,806		5,967		1,552		269		13,594
Commercial and Residential real estate	435		129		19		247		830
Securities-based lending and Other	11,348		3,229		259		509		15,345
Forward-starting secured financing receivables	73,016		0		0		0		73,016
Central counterparty	300		0		0		6,404		6,704
Underwriting	234		0		0		0		234
Investment activities	811		267		62		337		1,477
Letters of credit and other financial guarantees	30		0		0		3		33
Total	$	108,875	$	48,579	$	42,867	$	13,860	$	214,181
Lending commitments participated to third parties									$	8,703
Forward-starting secured financing receivables settled within three business days									$	61,198

Since commitments associated with these instruments may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.

For a further description of these commitments, refer to Note 1315 to the financial statements in the ~~2019~~2020 Form 10-K.

~~Guarantees~~

~~Maximum Potential Payout/Notional of Obligations under Guarantee Arrangements~~

Years to Maturity at March 31, 2020
$ in millions Less than 1 1-3 3-5 Over 5 Total
Credit derivatives $ 33,900
$ 38,934
$ 136,167
$ 68,581
$ 277,582
Other credit contracts —
—
—
107
107
Non-credit derivatives 1,571,566
1,474,498
902,550
769,204
4,717,818
Standby letters of credit and other financial guarantees issued¹
1,200
1,006
1,301
3,840
7,347
Market value guarantees 102
35
—
—
137
Liquidity facilities 4,047
—
—
—
4,047
Whole loan sales guarantees —
—
2
23,193
23,195
Securitization representations and warranties —
—
—
68,881
68,881
General partner guarantees 59
137
12
92
300
Client clearing guarantees 17
—
—
—
17

$ in millions Carrying Amount Asset (Liability)
Credit derivatives²
$ (9,855 )
Other credit contracts (4 )
Non-credit derivatives²
(146,854 )
Standby letters of credit and other financial guarantees issued¹
111
Market value guarantees —
Liquidity facilities 6
Whole loan sales guarantees —
Securitization representations and warranties³
(42 )
General partner guarantees (62 )
Client clearing guarantees —

These amounts include certain issued standby letters of credit participated to third parties, totaling $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 $57 million.



2.			~~The carrying amounts of derivative contracts that meet the accounting definition of a guarantee are shown on a gross basis. For further information on derivatives contracts, see Note 6.~~

Guarantees


	At March 31, 2021
	Maximum Potential Payout/Notional of Obligations by Years to Maturity								Carrying Amount Asset (Liability)
$ in millions	Less than 1		1-3		3-5		Over 5


Non-credit derivatives1	$	1,455,210	$	934,991	$	361,616	$	796,992	$	(54,255)
Standby letters of credit and other financial guarantees issued2	1,368		1,189		681		3,648		70
Market value guarantees	82		23		0		0		0
Liquidity facilities	4,116		0		0		0		5
Whole loan sales guarantees	0		0		52		23,125		0
Securitization representations and warranties3	0		0		0		68,451		(42)
General partner guarantees	231		136		32		124		(59)
Client clearing guarantees	51		0		0		0		0

1.The carrying amounts of derivative contracts that meet the accounting definition of a guarantee are shown on a gross basis. For further information on derivatives contracts, see Note 7

2.These amounts include certain issued standby letters of credit participated to third parties, totaling $0.5 billion of notional and collateral/recourse, due to the nature of the Firm’s obligations under these arrangements. As of March 31, 2021, the carrying amount of standby letters of credit and other financial guarantees issued includes an allowance for credit losses of $73 million.

3.Primarily related to residential mortgage securitizations.


			55			March 2021 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)			~~Primarily related to residential mortgage securitizations.~~

The Firm has obligations under certain guarantee arrangements, including contracts and indemnification agreements, that contingently require the Firm to make payments to the guaranteed party based on changes in an underlying measure (such as an interest or foreign exchange rate, security or commodity price, an index, or the occurrence or non-occurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. Also included as guarantees are



~~March 2020 Form 10-Q~~	68



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

contracts that contingently require the Firm to make payments to the guaranteed party based on another entity’s failure to perform under an agreement, as well as indirect guarantees of the indebtedness of others.

~~Client Clearing Guarantees.~~ In the first quarter of 2020, FICC’s sponsored clearing model was updated such that the Firm could be responsible for liquidation of a sponsored member’s account and guarantees any resulting loss to the FICC in the event the sponsored member fails to fully pay any net liquidation amount due from the sponsored member to the FICC. Accordingly, the Firm’s maximum potential payout amount as of March 31, 2020 reflects the total of the estimated net liquidation amounts for sponsored member accounts.

For more information on the nature of the obligations and related business activities for our guarantees, see Note 1315 to the financial statements in the ~~2019~~2020 Form 10-K.

Other Guarantees and Indemnities

In the normal course of business, the Firm provides guarantees and indemnifications in a variety of transactions. These provisions generally are standard contractual terms. Certain of these guarantees and indemnifications related to indemnities, exchange and clearinghouse member guarantees and merger and acquisition guarantees are described in Note 1315 to the financial statements in the ~~2019~~2020 Form 10-K.

In addition, in the ordinary course of business, the Firm guarantees the debt and/or certain trading obligations (including obligations associated with derivatives, foreign exchange contracts and the settlement of physical commodities) of certain subsidiaries. These guarantees generally are entity or product specific and are required by investors or trading counterparties. The activities of the Firm’s subsidiaries covered by these guarantees (including any related debt or trading obligations) are included in the financial statements.

Finance Subsidiary

The Parent Company fully and unconditionally guarantees the securities issued by Morgan Stanley Finance LLC, a wholly owned finance subsidiary.

No other subsidiary of the Parent Company guarantees these securities.

Contingencies

Legal

In addition to the matters described in the following paragraphs, in the normal course of business, the Firm has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of

damages. In some cases, the entities that would otherwise be the primary defendants in such cases

are bankrupt or are in financial distress. These actions have included, but are not limited to, residential mortgage and credit crisis-related matters.

While the Firm has identified below any individual proceedings where the Firm believes a material loss to be reasonably possible and reasonably estimable, there can be no assurance that material losses will not be incurred from claims that have not yet been asserted or ~~are~~those where potential losses have not yet been determined to be probable or possible, and reasonably ~~estimable losses.~~estimable.

The Firm contests liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and the Firm can reasonably estimate the amount of that loss, the Firm accrues the estimated loss by a charge to income.

In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of ~~loss.~~

~~For certain legal proceedings and investigations, the Firm cannot reasonably estimate such losses,~~loss, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved before a loss or additional loss, or range of loss or additional range of loss, can be reasonably estimated for a proceeding or investigation, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and by addressing novel or unsettled legal questions relevant to the proceedings or investigations in ~~question, before a loss or additional loss or range of loss or additional range of loss can be reasonably estimated for a proceeding or investigation.~~question.

For certain other legal proceedings and investigations, the Firm can estimate reasonably possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amounts accrued but does not believe, based on current knowledge and after consultation with counsel, that such losses ~~will~~could have a material adverse effect on the Firm’s financial statements as a whole, other than the matters referred to in the following paragraphs.

~~On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Firm, styled~~ ~~ChinaDevelopment Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New York, New York County (“Supreme Court of~~



	69	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

NY”). The complaint relates to a $275 million CDS referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Firm misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Firm knew that the assets backing the CDO were of poor quality when it entered into the CDS with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the CDS, rescission of CDIB’s obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied the Firm’s motion to dismiss the complaint. On December 21, 2018, the court denied the Firm’s motion for summary judgment and granted in part the Firm’s motion for sanctions relating to spoliation of evidence. On January 24, 2019, CDIB filed a notice of appeal from the court’s December 21, 2018 order, and on January 25, 2019, the Firm filed a notice of appeal from the same order. On March 7, 2019, the court denied the relief that CDIB sought in a motion to clarify and resettle the portion of the court’s December 21, 2018 order granting spoliation sanctions. On December 5, 2019, the Appellate Division, First Department (“First Department”) heard the parties’ cross appeals. Based on currently available information, the Firm believes it could incur a loss in this action of up to approximately $240 million plus pre- and post-judgment interest, fees and costs.

~~On July 8, 2013, U.S. Bank National Association, in its capacity as trustee, filed a complaint against the Firm styled~~ ~~U.S. Bank National Association, solely in its capacity asTrustee of the Morgan Stanley Mortgage Loan Trust 2007-2AX (MSM 2007-2AX) v. Morgan Stanley Mortgage Capital Holdings LLC, Successor-by-Merger to MorganStanley MortgageCapital Inc. and GreenPoint Mortgage Funding, Inc.~~, pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $650 million, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages and interest. On November 24, 2014, the court granted in part and denied in part the Firm’s motion to dismiss the complaint. On April 4, 2019, the court denied the Firm’s motion to renew its motion to dismiss. Based on currently available information, the Firm believes that it could incur a loss in this action of up to approximately $240 million, the total original unpaid balance of the mortgage loans for which the Firm received repurchase demands that it did not repurchase, plus pre- and post-judgment interest, fees and costs, but plaintiff is seeking to expand the number of loans at issue and the possible range of loss could increase.

On September 23, 2014, Financial Guaranty Insurance Company (“FGIC”) filed a complaint against the Firm in the Supreme Court of NYthe State of New York County (“Supreme Court of NY”) styled Financial Guaranty Insurance

Company v. Morgan Stanley ABS Capital I Inc. et ~~al.~~ al. relating to the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4. The complaint asserts claims for breach of contract and fraudulent inducement and alleges, among other things, that the loans in the trust breached various representations and


March 2021 Form 10-Q			56


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

warranties and defendants made untrue statements and material omissions to induce FGIC to issue a financial guaranty policy on certain classes of certificates that had an original balance of approximately $876 million. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential and punitive damages, attorneys’ fees, interest and ~~interest.~~costs. On January 23, 2017, the court denied the Firm’s motion to dismiss the complaint. On September 13, 2018, the Appellate Division, First Department (“First Department”) affirmed in part and reversed in part the lower court’s order denying the Firm’s motion to ~~dismiss.~~dismiss the complaint. On December 20, 2018, the First Department denied plaintiff’s motion for leave to appeal ~~its decision~~ to the New York Court of Appeals ("(“Court of ~~Appeals"~~Appeals”) or, in the alternative, for re-argument. Based on currently available information, the Firm believes that it could incur a loss in this action of up to approximately $277 million, the total original unpaid balance of the mortgage loans for which the Firm received repurchase demands from a certificate holder and FGIC that the Firm did not repurchase, plus pre- and post- judgment interest, fees and costs, as well as claim payments that FGIC has made and will make in the future. In addition, plaintiff is seeking to expand the number of loans at issue and the possible range of loss could increase.

On January 23, 2015, Deutsche Bank National Trust Company, in its capacity as trustee, filed a complaint against the Firm styled Deutsche Bank National Trust Company solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.05 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential, rescissory, equitable and punitive damages, attorneys’ fees, costs and other related expenses, and interest. On December 11, 2015, the court granted in part and denied in part the Firm’s motion to dismiss the complaint. On October 19, 2018, the court granted the Firm’s motion for leave to amend its answer and to stay the case pending resolution of Deutsche Bank National Trust Company’s appeal to the Court of Appeals in another case, styled Deutsche Bank National Trust Company v. Barclays Bank PLC, regarding the applicable statute of limitations. On January 17, 2019, the First Department reversed the trial court’s order to the extent that it had granted in part the Firm’s motion to dismiss the complaint. On June 4, 2019, the First Department granted the Firm’s motion for leave



~~March 2020 Form 10-Q~~	70



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

to appeal its January 17, 2019 decision to the Court of Appeals. On March 19, 2020, the Firm filed a motion for partial summary judgment. Based on currently available information, the Firm believes that it could incur a loss in this

action of up to approximately $277 million, the total original unpaid balance of the mortgage loans for which the Firm received repurchase demands from a certificate holder and a monoline insurer that the Firm did not repurchase, plus pre- and post-judgment interest, fees and costs, but plaintiff is seeking to expand the number of loans at issue and the possible range of loss could increase.

Tax

In matters styled Case number 15/3637 and Case number 15/4353, the Dutch Tax Authority (“Dutch Authority”) ~~has challenged,~~is challenging in the ~~District Court in Amsterdam,~~Dutch courts, the prior set-off by the Firm of approximately €124 million (approximately ~~$137~~$145 million) plus accrued interest of withholding tax credits against the Firm’s corporation tax liabilities for the tax years 2007 to 2013. The Dutch Authority alleges that the Firm was not entitled to receive the withholding tax credits on the basis, inter alia, that a Firm subsidiary did not hold legal title to certain securities subject to withholding tax on the relevant dates. The Dutch Authority has also alleged that the Firm failed to provide certain information to the Dutch Authority and keep adequate books and records. On April 26, 2018, the District Court in Amsterdam issued a decision dismissing the Dutch Authority’s ~~claims.~~claims with respect to certain of the tax years in dispute. On ~~June 4, 2018, the Dutch Authority filed an appeal before~~May 12, 2020, the Court of Appeal in Amsterdam granted the Dutch Authority’s appeal in matters re-styled Case number 18/00318 and Case number 18/00319. On June ~~26 and July 2, 2019, a hearing~~22, 2020, the Firm filed an appeal against the decision of the Court of Appeal in Amsterdam before the Dutch High Court. On January 29, 2021, the Advocate General of the Dutch ~~Authority’s~~High Court in matters re-styled Case number 15/3637 and Case number 15/4353 issued an advisory opinion on the Firm’s appeal, ~~was held. Based on currently available information,~~which rejected the Firm’s principal grounds of appeal. On February 11, 2021, the Firm ~~believes that it could incur a loss in~~and the Dutch Tax Authority each responded to this ~~action of up to approximately €124 million (approximately $137 million) plus accrued interest.~~opinion.

~~14.~~15. Variable Interest Entities and Securitization Activities

Consolidated VIE Assets and Liabilities by Type of Activity


	At March 31, 2021				At December 31, 2020
$ in millions	VIE Assets		VIE Liabilities		VIE Assets		VIE Liabilities
OSF1	$	1,324	$	1,107	$	551	$	350
MABS2	921		615		590		17
Other3	1,151		151		977		47
Total	$	3,396	$	1,873	$	2,118	$	414

At March 31, 2020 At December 31, 2019
$ in millions VIE Assets VIE Liabilities VIE Assets VIE Liabilities
OSF $ 728
$ 415
$ 696
$ 391
MABS¹
368
108
265
4
Other²
934
44
987
66
Total $ 2,030
$ 567
$ 1,948
$ 461

OSF—Other structured financings

1.OSF primarily includes assets and liabilities as a result of the consolidation of CLO vehicles.

2.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.

3.Other primarily includes operating entities, investment funds and structured transactions.


1.			57			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.March 2021 Form 10-Q


2. Table of Contents
Notes to Consolidated Financial Statements (Unaudited)			~~Other primarily includes operating entities, investment funds and structured transactions.~~

Consolidated VIE Assets and Liabilities by Balance Sheet Caption

$ in millions At
March 31,
2020 At
December 31,
2019
Assets
Cash and cash equivalents $ 328
$ 488
Trading assets at fair value 1,234
943
Customer and other receivables 16
18
Intangible assets 107
111
Other assets 345
388
Total $ 2,030
$ 1,948
Liabilities
Other secured financings $ 519
$ 422
Other liabilities and accrued expenses 48
39
Total $ 567
$ 461
Noncontrolling interests $ 245
$ 192


$ in millions	At March 31, 2021		At December 31, 2020
Assets
Cash and cash equivalents	$	425	$	269


Trading assets at fair value	2,582		1,445
Customer and other receivables	18		23

Intangible assets	95		98
Other assets	276		283
Total	$	3,396	$	2,118
Liabilities
Other secured financings	$	1,716	$	366
Other liabilities and accrued expenses	157		48
Total	$	1,873	$	414
Noncontrolling interests	$	178	$	196

Consolidated VIE assets and liabilities are presented in the previous tables after intercompany eliminations. Generally, most assets owned by consolidated VIEs cannot be removed unilaterally by the Firm and are not available to the Firm while the related liabilities issued by consolidated VIEs are non-recourse to the Firm. However, in certain consolidated VIEs, the Firm either has the unilateral right to remove assets or provides additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.

In general, the Firm’s exposure to loss in consolidated VIEs is limited to losses that would be absorbed on the VIE net assets recognized in its financial statements, net of amounts absorbed by third-party variable interest holders.



	71	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

Non-consolidated VIEs


	At March 31, 2021
$ in millions	MABS1		CDO		MTOB		OSF		Other2
VIE assets (UPB)	$	169,015	$	2,068	$	6,163	$	1,994	$	48,464
Maximum exposure to loss3
Debt and equity interests	$	24,265	$	205	$	8	$	1,172	$	10,963
Derivative and other contracts	0		0		4,116		0		5,480
Commitments, guarantees and other	868		0		0		0		1,599
Total	$	25,133	$	205	$	4,124	$	1,172	$	18,042
Carrying value of variable interests—Assets
Debt and equity interests	$	24,265	$	205	$	8	$	1,172	$	10,963
Derivative and other contracts	0		0		6		0		1,152
Total	$	24,265	$	205	$	14	$	1,172	$	12,115
Additional VIE assets owned4									$	19,743
Carrying value of variable interests—Liabilities

Derivative and other contracts	$	0	$	0	$	0	$	0	$	314

At March 31, 2020
$ in millions
MABS¹
CDO MTOB OSF
Other²
VIE assets (UPB) $ 124,211
$ 1,881
$ 6,585
$ 2,263
$ 51,280
Maximum exposure to loss³

Debt and equity interests $ 15,173
$ 254
$ 277
$ 1,086
$ 10,468
Derivative and other contracts —
—
4,047
—
3,659
Commitments, guarantees and other 572
—
—
—
334
Total $ 15,745
$ 254
$ 4,324
$ 1,086
$ 14,461
Carrying value of variable interests—Assets
Debt and equity interests $ 15,173
$ 254
$ 277
$ 1,084
$ 10,468
Derivative and other contracts —
—
6
—
835
Total $ 15,173
$ 254
$ 283
$ 1,084
$ 11,303
Additional VIE assets owned⁴
$ 11,024
Carrying value of variable interests—Liabilities
Derivative and other contracts $ —
$ —
$ —
$ —
$ 272


	At December 31, 2020
$ in millions	MABS1		CDO		MTOB		OSF		Other2
VIE assets (UPB)	$	184,153	$	3,527	$	6,524	$	2,161	$	48,241
Maximum exposure to loss3
Debt and equity interests	$	26,247	$	257	$	0	$	1,187	$	11,008
Derivative and other contracts	0		0		4,425		0		5,639
Commitments, guarantees and other	929		0		0		0		749
Total	$	27,176	$	257	$	4,425	$	1,187	$	17,396
Carrying value of variable interests–Assets
Debt and equity interests	$	26,247	$	257	$	0	$	1,187	$	11,008
Derivative and other contracts	0		0		5		0		851
Total	$	26,247	$	257	$	5	$	1,187	$	11,859
Additional VIE assets owned4									$	20,019
Carrying value of variable interests—Liabilities
Derivative and other contracts	$	0	$	0	$	0	$	0	$	222

At December 31, 2019
$ in millions
MABS¹
CDO MTOB OSF
Other²
VIE assets (UPB) $ 125,603
$ 2,976
$ 6,965
$ 2,288
$ 51,305
Maximum exposure to loss³

Debt and equity interests $ 16,314
$ 240
$ —
$ 1,009
$ 11,977
Derivative and other contracts —
—
4,599
—
2,995
Commitments, guarantees and other 631
—
—
—
266
Total $ 16,945
$ 240
$ 4,599
$ 1,009
$ 15,238
Carrying value of variable interests–Assets

Debt and equity interests $ 16,314
$ 240
$ —
$ 1,008
$ 11,977
Derivative and other contracts —
—
6
—
388
Total $ 16,314
$ 240
$ 6
$ 1,008
$ 12,365
Additional VIE assets owned⁴
$ 11,453
Carrying value of variable interests—Liabilities
Derivative and other contracts $ —
$ —
$ —
$ —
$ 444

MTOB—Municipal tender option bonds

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.

~~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 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 5). The Firm does not provide additional support in these transactions through contractual facilities, guarantees or similar derivatives.


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.~~

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.

The majority of the VIEs included in the previous tables are sponsored by unrelated parties; examples of the Firm’s involvement with these VIEs include its secondary market-making activities and the securities held in its Investment securities portfolio (see Note 7)8).

The Firm’s maximum exposure to loss is dependent on the nature of the Firm’s variable interest in the VIE and is limited to the notional amounts of certain liquidity facilities and other credit support, total return swaps and written put options, as well as the fair value of certain other derivatives and investments the Firm has made in the VIE.

The Firm’s maximum exposure to loss in the previous tables does not include the offsetting benefit of hedges or any reductions associated with the amount of collateral held as part of a transaction with the VIE or any party to the VIE directly against a specific exposure to loss.

Liabilities issued by VIEs generally are non-recourse to the Firm.


March 2021 Form 10-Q			58


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Detail of Mortgage- and Asset-Backed Securitization Assets

At March 31, 2020 At December 31, 2019
$ in millions UPB
Debt and
Equity
Interests
UPB
Debt and
Equity
Interests
Residential mortgages $ 20,460
$ 3,298
$ 30,353
$ 3,993
Commercial mortgages 52,672
3,677
53,892
3,881
U.S. agency collateralized mortgage obligations 45,958
6,257
36,366
6,365
Other consumer or commercial loans 5,121
1,941
4,992
2,075
Total $ 124,211
$ 15,173
$ 125,603
$ 16,314


	At March 31, 2021				At December 31, 2020
$ in millions	UPB		Debt and Equity Interests		UPB		Debt and Equity Interests
Residential mortgages	$	16,722	$	2,696	$	17,775	$	3,175
Commercial mortgages	58,889		3,905		62,093		4,131
U.S. agency collateralized mortgage obligations	87,031		15,727		99,182		17,224
Other consumer or commercial loans	6,373		1,937		5,103		1,717
Total	$	169,015	$	24,265	$	184,153	$	26,247

Transferred Assets with Continuing Involvement¹


	At March 31, 2021
$ in millions	RML		CML		U.S. Agency CMO		CLN and Other1
SPE assets (UPB)2	$	8,673	$	72,001	$	26,257	$	12,496
Retained interests
Investment grade	$	68	$	895	$	585	$	0
Non-investment grade	18		216		0		82
Total	$	86	$	1,111	$	585	$	82
Interests purchased in the secondary market
Investment grade	$	0	$	121	$	132	$	0
Non-investment grade	76		46		0		0
Total	$	76	$	167	$	132	$	0
Derivative assets	$	0	$	0	$	0	$	392
Derivative liabilities	0		0		0		283


	At December 31, 2020
$ in millions	RML		CML		U.S. Agency CMO		CLN and Other1
SPE assets (UPB)2	$	7,515	$	84,674	$	21,061	$	12,978
Retained interests
Investment grade	$	49	$	822	$	615	$	0
Non-investment grade	16		195		0		114
Total	$	65	$	1,017	$	615	$	114
Interests purchased in the secondary market
Investment grade	$	0	$	96	$	116	$	0
Non-investment grade	43		80		0		21
Total	$	43	$	176	$	116	$	21
Derivative assets	$	0	$	0	$	0	$	400
Derivative liabilities	0		0		0		436


	Fair Value At March 31, 2021
$ in millions	Level 2		Level 3		Total
Retained interests
Investment grade	$	654	$	0	$	654
Non-investment grade	9		62		71
Total	$	663	$	62	$	725
Interests purchased in the secondary market
Investment grade	$	243	$	10	$	253
Non-investment grade	101		21		122
Total	$	344	$	31	$	375
Derivative assets	$	391	$	1	$	392
Derivative liabilities	234		49		283

At March 31, 2020
$ in millions RML CML
U.S. Agency
CMO
CLN and
Other³
SPE assets (UPB)⁴
$ 9,501
$ 79,516
$ 15,480
$ 11,109
Retained interests
Investment grade $ 26
$ 780
$ 763
$ —
Non-investment grade 13
238
—
87
Total $ 39
$ 1,018
$ 763
$ 87
Interests purchased in the secondary market
Investment grade $ —
$ 65
$ 78
$ —
Non-investment grade 29
68
—
—
Total $ 29
$ 133
$ 78
$ —
Derivative assets $ —
$ —
$ —
$ 830
Derivative liabilities —
—
—
186


	Fair Value at December 31, 2020
$ in millions	Level 2		Level 3		Total
Retained interests
Investment grade	$	663	$	0	$	663
Non-investment grade	6		63		69
Total	$	669	$	63	$	732
Interests purchased in the secondary market
Investment grade	$	196	$	16	$	212
Non-investment grade	62		82		144
Total	$	258	$	98	$	356
Derivative assets	$	388	$	12	$	400
Derivative liabilities	435		1		436



~~March 2020 Form 10-Q~~	72



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

At December 31, 2019²
$ in millions RML CML
U.S. Agency
CMO
CLN and
Other³
SPE assets (UPB)⁴
$ 9,850
$ 86,203
$ 19,132
$ 8,410
Retained interests
Investment grade $ 29
$ 720
$ 2,376
$ 1
Non-investment grade 17
254
—
92
Total $ 46
$ 974
$ 2,376
$ 93
Interests purchased in the secondary market
Investment grade $ 6
$ 197
$ 77
$ —
Non-investment grade 75
51
—
—
Total $ 81
$ 248
$ 77
$ —
Derivative assets $ —
$ —
$ —
$ 339
Derivative liabilities —
—
—
145

Fair Value At March 31, 2020
$ in millions Level 2 Level 3 Total
Retained interests
Investment grade $ 790
$ —
$ 790
Non-investment grade 7
83
90
Total $ 797
$ 83
$ 880
Interests purchased in the secondary market
Investment grade $ 141
$ 2
$ 143
Non-investment grade 85
12
97
Total $ 226
$ 14
$ 240
Derivative assets $ 820
$ 10
$ 830
Derivative liabilities 185
1
186

Fair Value at December 31, 2019
$ in millions Level 2 Level 3 Total
Retained interests
Investment grade $ 2,401
$ 4
$ 2,405
Non-investment grade 6
97
103
Total $ 2,407
$ 101
$ 2,508
Interests purchased in the secondary market
Investment grade $ 278
$ 2
$ 280
Non-investment grade 68
58
126
Total $ 346
$ 60
$ 406
Derivative assets $ 337
$ 2
$ 339
Derivative liabilities 144
1
145

RML—Residential mortgage loans

CML—Commercial mortgage loans

1.Amounts include CLO transactions managed by unrelated third parties.


1.	~~The Transferred Assets with Continuing Involvement~~ 2.Amounts include assets transferred by unrelated transferors. The previous tables include transactions with SPEs in which the Firm, acting as principal, transferred financial assets with continuing involvement and received sales treatment. The 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.~~

~~Transferred~~ assets are carried at fair value prior to securitization, and any changes in fair value are recognized in the income statements. The Firm may act as underwriter of the beneficial interests issued by these securitization vehicles, for which Investment banking revenues are recognized. The Firm may retain interests in the securitized financial assets as one or more tranches of the securitization. These retained interests are generally carried at fair value in the balance sheets with changes in fair value recognized in the income statements. Fair value for

these interests is measured using techniques that are consistent with the valuation techniques applied to the Firm’s major categories of assets and liabilities as described in Note 2 in the ~~2019~~2020 Form 10-K and Note 45 herein. Further, 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.

Proceeds from New Securitization Transactions and Sales of Loans


	Three Months Ended March 31,
$ in millions		2021		2020
New transactions1		$	14,790	$	8,471
Retained interests		2,579		4,088
Sales of corporate loans to CLO SPEs1, 2		0		66

Three Months Ended
March 31,
$ in millions 2020 2019
New transactions¹
$ 8,471
$ 4,733
Retained interests 4,088
2,887
Sales of corporate loans to CLO SPEs^{1, 2}
66
—
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.


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.


2.	~~Sponsored by non-affiliates.~~

The Firm has provided, or otherwise agreed to be responsible for, representations and warranties regarding certain assets transferred in securitization transactions sponsored by the Firm (see Note ~~13)~~14).


			59			March 2021 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Assets Sold with Retained Exposure


$ in millions	At March 31, 2021		At December 31, 2020
Gross cash proceeds from sale of assets1	$	57,512	$	45,051
Fair value
Assets sold	$	58,117	$	46,609
Derivative assets recognized in the balance sheets	1,008		1,592
Derivative liabilities recognized in the balance sheets	411		64

$ in millions At
March 31,
2020 At
December 31,
2019
Gross cash proceeds from sale of assets¹
$ 28,213
$ 38,661
Fair value
Assets sold $ 28,068
$ 39,137
Derivative assets recognized
in the balance sheets 862
647
Derivative liabilities recognized
in the balance sheets 1,004
152
1.The carrying value of assets derecognized at the time of sale approximates gross cash proceeds.


1.	~~The carrying value of assets derecognized at the time of sale approximates gross cash proceeds.~~

The Firm enters into transactions in which it sells securities, primarily equities, and contemporaneously enters into bilateral OTC derivatives with the purchasers of the securities, through which it retains exposure to the sold securities.

For a discussion of the Firm’s VIEs, the determination and structure of VIEs and securitization activities, see Note 1416 to the financial statements in the ~~2019~~2020 Form 10-K.

~~15.~~16. Regulatory Requirements

Regulatory Capital Framework and Requirements

For a discussion of the Firm’s regulatory capital framework, see Note 1517 to the financial statements in the ~~2019~~2020 Form 10-K.

The Firm is required to maintain minimum risk-based and leverage-based capital ratios under regulatory capital requirements. A summary of the calculations of regulatory capital and RWA follows.

Minimum risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital



	73	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

~~(which~~ (which includes Tier 2 capital). Capital standards require certain adjustments to, and deductions from, capital for purposes of determining these ratios. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the ~~Firm's ratios for determining regulatory compliance are based on~~difference between the ~~Advanced Approach~~actual and required ratio was lower under the Standardized ~~Approach rules, respectively.~~Approach.

In ~~the current quarter,~~2020, the U.S. banking agencies ~~have~~ adopted a final rule, consistent with an interim final rule that was effective March 31, 2020, altering, for purposes of the regulatory capital rules, the required adoption time period for CECL. As of March 31, 2021 and December 31, 2020, the risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure are calculated excluding the effect of the adoption of CECL based on ~~our~~the Firm’s election to defer this effect over a five-year transition period in accordance with the ~~interim~~ final rule.

Risk-Based Regulatory Capital Ratio Requirements


			At March 31, 2021 and December 31, 2020
			Standardized	Advanced
Capital buffers
Capital conservation buffer			—	2.5%
SCB			5.7%	N/A
G-SIB capital surcharge			3.0%	3.0%
CCyB1			0%	0%
Capital buffer requirement2			8.7%	5.5%

			At March 31, 2021 and December 31, 2020
	Regulatory Minimum		Standardized	Advanced
Required ratios3
Common Equity Tier 1 capital ratio	4.5	%	13.2%	10.0%
Tier 1 capital ratio	6.0	%	14.7%	11.5%
Total capital ratio	8.0	%	16.7%	13.5%

~~In addition~~1.The CCyB can be set up to 2.5%, but is currently set by the U.S. banking agencies at 0.

2.The capital buffer requirement represents the amount of Common Equity Tier 1 capital the Firm must maintain above the minimum risk-based capital ~~ratio~~ requirements in order to avoid restrictions on the ~~Firm~~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. The Firm's Standardized Approach capital buffer requirement is ~~subject~~equal to the ~~following Common Equity Tier 1 buffers:~~


•	~~A greater than 2.5% capital conservation buffer;~~

~~The~~sum of the SCB, G-SIB capital surcharge ~~currently at 3%;~~ and CCyB, and the Advanced Approach capital buffer requirement is equal to the 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB.

~~Up to a 2.5% CCyB, currently set by U.S. banking agencies at zero.~~3.Required ratios represent the regulatory minimum plus the capital buffer requirement.

The Firm’s Regulatory Capital and Capital Ratios


	At March 31, 2021

$ in millions	Required Ratio1		Amount			Ratio
Risk-based capital
Common Equity Tier 1 capital	13.2	%	$	76,176		16.7		%
Tier 1 capital	14.7	%	84,059			18.5		%
Total capital	16.7	%	92,823			20.4		%
Total RWA			455,071




$ in millions			Required Ratio1			At March 31, 2021
Leverage-based capital
Adjusted average assets2						$	1,121,413
Tier 1 leverage ratio			4.0		%	7.5		%
Supplementary leverage exposure3,4						$	1,263,959
SLR4			5.0		%	6.7		%

At March 31, 2020
$ in millions
Required
Ratio¹
Amount Ratio
Risk-based capital
Common Equity Tier 1 capital 10.0 % $ 65,195
15.2 %
Tier 1 capital 11.5 % 73,896
17.3 %
Total capital 13.5 % 83,847
19.6 %
Total RWA 427,782

Leverage-based capital
Tier 1 leverage 4.0 % $ 73,896
8.1 %
Adjusted average assets²
910,499

SLR 5.0 % 73,896
6.2 %
Supplementary leverage exposure³
1,185,734

At December 31, 2019
$ in millions
Required
Ratio¹
Amount Ratio
Risk-based capital
Common Equity Tier 1 capital 10.0 % $ 64,751
16.4 %
Tier 1 capital 11.5 % 73,443
18.6 %
Total capital 13.5 % 82,708
21.0 %
Total RWA 394,177

Leverage-based capital
Tier 1 leverage 4.0 % $ 73,443
8.3 %
Adjusted average assets²
889,195

SLR 5.0 % 73,443
6.4 %
Supplementary leverage exposure³
1,155,177


1.March 2021 Form 10-Q			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. 60


2.			~~Adjusted average assets represents the denominator~~Table 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.Contents


3.Notes to Consolidated Financial Statements (Unaudited)			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.


	At December 31, 2020
$ in millions	Required Ratio1		Amount			Ratio
Risk-based capital
Common Equity Tier 1 capital	13.2	%	$	78,650		17.4		%
Tier 1 capital	14.7	%	88,079			19.4		%
Total capital	16.7	%	97,213			21.5		%
Total RWA			453,106




$ in millions			Required Ratio1			At December 31, 2020
Leverage-based capital
Adjusted average assets2						$	1,053,510
Tier 1 leverage ratio			4.0		%	8.4		%
Supplementary leverage exposure3,4						$	1,192,506
SLR4			5.0		%	7.4		%

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 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.

4.Based on a Federal Reserve interim final rule that was in effect until March 31, 2021, the Firm’s SLR and Supplementary leverage exposure as of March 31, 2021 and December 31, 2020 reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks.

Certain U.S. Bank Subsidiaries’ Regulatory Capital and Capital Ratios

The OCC establishes capital requirements for the Firm’s U.S. bank subsidiaries, which as of March 31, 2021 and December 31, 2020 include, among others, Morgan Stanley Bank, ~~Subsidiaries~~N.A. (“MSBNA”) and Morgan Stanley Private Bank, National Association (“MSPBNA”), and evaluates their compliance with such capital requirements. Regulatory capital requirements for ~~the U.S. Bank Subsidiaries~~MSBNA and MSPBNA are calculated in a similar manner to the Firm’s regulatory capital requirements, although G-SIB capital surcharge and SCB requirements do not apply to the U.S. ~~Bank Subsidiaries.~~bank subsidiaries.

The OCC’s regulatory capital framework includes Prompt Corrective Action (“PCA”) standards, including “well-capitalized” PCA standards that are based on specified regulatory capital ratio minimums. For the Firm to remain an FHC, ~~the~~its U.S. ~~Bank Subsidiaries~~bank subsidiaries must remain well-capitalized in accordance with the OCC’s PCA standards. In addition, failure by the U.S. ~~Bank Subsidiaries~~bank subsidiaries to meet minimum capital requirements may result in certain mandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on the U.S. ~~Bank Subsidiaries’~~bank subsidiaries’ and the Firm’s financial statements.

At March 31, ~~2020~~2021 and December 31, ~~2019, the U.S. Bank Subsidiaries’~~2020, MSBNA and MSPBNA risk-based capital ratios are based on the

Standardized Approach rules. At March 31, 2021 and December 31, 2020, the risk-based



~~March 2020 Form 10-Q~~	74



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

and leverage-based capital amounts and ratios are calculated excluding the effect of the adoption of CECL based on ~~our~~MSBNA’s and MSPBNA’s election to defer this effect over a five-year transition period.

MSBNA’s Regulatory Capital

At March 31, 2020
$ in millions Well-Capitalized Requirement
Required
Ratio¹
Amount Ratio
Risk-based capital
Common Equity Tier 1 capital 6.5 % 7.0 % $ 16,839
18.2 %
Tier 1 capital 8.0 % 8.5 % 16,839
18.2 %
Total capital 10.0 % 10.5 % 17,349
18.7 %
Leverage-based capital
Tier 1 leverage 5.0 % 4.0 % $ 16,839
11.2 %
SLR 6.0 % 3.0 % 16,839
8.8 %

At December 31, 2019
$ in millions Well-Capitalized Requirement
Required
Ratio¹
Amount Ratio
Risk-based capital
Common Equity Tier 1 capital 6.5 % 7.0 % $ 15,919
18.5 %
Tier 1 capital 8.0 % 8.5 % 15,919
18.5 %
Total capital 10.0 % 10.5 % 16,282
18.9 %
Leverage-based capital
Tier 1 leverage 5.0 % 4.0 % $ 15,919
11.3 %
SLR 6.0 % 3.0 % 15,919
8.7 %


					At March 31, 2021				At December 31, 2020
$ in millions	Well-Capitalized Requirement		Required Ratio1		Amount		Ratio		Amount		Ratio
Risk-based capital
Common Equity Tier 1 capital	6.5	%	7.0	%	$	17,530	19.5	%	$	17,238	18.7	%
Tier 1 capital	8.0	%	8.5	%	17,530		19.5	%	17,238		18.7	%
Total capital	10.0	%	10.5	%	18,138		20.2	%	17,882		19.4	%
Leverage-based capital
Tier 1 leverage	5.0	%	4.0	%	$	17,530	10.0	%	$	17,238	10.1	%
SLR	6.0	%	3.0	%	17,530		7.9	%	17,238		8.0	%

MSPBNA’s Regulatory Capital


					At March 31, 2021				At December 31, 2020
$ in millions	Well-Capitalized Requirement		Required Ratio1		Amount		Ratio		Amount		Ratio
Risk-based capital
Common Equity Tier 1 capital	6.5	%	7.0	%	$	8,471	22.8	%	$	8,213	21.3	%
Tier 1 capital	8.0	%	8.5	%	8,471		22.8	%	8,213		21.3	%
Total capital	10.0	%	10.5	%	8,542		23.0	%	8,287		21.5	%




Leverage-based capital
Tier 1 leverage	5.0	%	4.0	%	$	8,471	6.8	%	$	8,213	7.2	%
SLR	6.0	%	3.0	%	8,471		6.5	%	8,213		6.9	%

At March 31, 2020
$ in millions Well-Capitalized Requirement
Required
Ratio¹
Amount Ratio
Risk-based capital
Common Equity Tier 1 capital 6.5 % 7.0 % $ 8,487
22.9 %
Tier 1 capital 8.0 % 8.5 % 8,487
22.9 %
Total capital 10.0 % 10.5 % 8,556
23.0 %
Leverage-based capital
Tier 1 leverage 5.0 % 4.0 % $ 8,487
9.7 %
SLR 6.0 % 3.0 % 8,487
9.3 %

At December 31, 2019
$ in millions Well-Capitalized Requirement
Required
Ratio¹
Amount Ratio
Risk-based capital
Common Equity Tier 1 capital 6.5 % 7.0 % $ 7,962
24.8 %
Tier 1 capital 8.0 % 8.5 % 7,962
24.8 %
Total capital 10.0 % 10.5 % 8,016
25.0 %
Leverage-based capital
Tier 1 leverage 5.0 % 4.0 % $ 7,962
9.9 %
SLR 6.0 % 3.0 % 7,962
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 ability to make capital distributions, including the payment of dividends.


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.

U.S. Broker-Dealer Regulatory Capital Requirements

MS&Co. Regulatory Capital

$ in millions At March 31, 2020 At December 31, 2019
Net capital $ 10,887
$ 13,708
Excess net capital 6,620
10,686


$ in millions	At March 31, 2021		At December 31, 2020
Net capital	$	15,982	$	12,869
Excess net capital	12,167		9,034

MS&Co. is a registered U.S. broker-dealer and registered futures commission merchant and, accordingly, is subject to the minimum net capital requirements of the SEC and the CFTC. MS&Co. has consistently operated with capital in excess of its regulatory capital requirements.

As an Alternative Net Capital broker-dealer, and in accordance with Securities Exchange Act of 1934 (“Exchange Act”) Rule 15c3-1, Appendix E, MS&Co. is subject to minimum net capital and tentative net capital requirements. In addition, MS&Co. must notify the SEC if its tentative net capital falls below certain levels. At March 31, ~~2020~~2021 and December 31, ~~2019~~,2020, MS&Co. ~~has~~ exceeded its net capital requirement and ~~has~~had tentative net capital in excess of the minimum and notification requirements.

~~MSSB Regulatory Capital~~

$ in millions At March 31, 2020 At December 31, 2019
Net capital $ 2,924
$ 3,387
Excess net capital 2,774
3,238


			61			March 2021 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Other Regulated Subsidiaries

MSSB, is a registered U.S. broker-dealer and introducing broker for the futures business, ~~and, accordingly,~~ is subject to the minimum net capital requirements of the SEC. ~~MSSB has consistently operated with capital in excess of its regulatory capital requirements.~~

~~Other Regulated Subsidiaries~~

MSIP, a London-based broker-dealer subsidiary, is subject to the capital requirements of the PRA, and ~~MSMS, a Tokyo-based broker-dealer subsidiary,~~the Morgan Stanley Europe Holdings SE Group (“MSEHSE Group”) is subject to the capital requirements of the ~~Financial Services Agency.~~European Central Bank, BaFin and the German Central Bank. MSSB, MSIP and ~~MSMS~~the MSEHSE Group, including MSESE, a Germany-based broker-dealer, have consistently operated with capital in excess of their respective regulatory capital requirements. Additionally, E*TRADE Bank and E*TRADE Savings Bank are subject to the capital requirements of the OCC, and E*TRADE Securities LLC is subject to the minimum net capital requirements of the SEC; each of these entities has consistently operated with capital in excess of their respective regulatory capital requirements.

Certain other U.S. and non-U.S. subsidiaries of the Firm are subject to various securities, commodities and banking regulations, and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These subsidiaries have also consistently operated with capital in excess of their local capital adequacy requirements.



	75	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

~~16.~~17. Total Equity

Preferred Stock


	Shares Outstanding			Carrying Value
$ in millions, except per share data	At March 31, 2021	Liquidation Preference per Share		At March 31, 2021		At December 31, 2020
Series
A	44,000	$	25,000	$	1,100	$	1,100
C1	519,882	1,000		408		408
E	34,500	25,000		862		862
F	34,000	25,000		850		850
H	52,000	25,000		1,300		1,300
I	40,000	25,000		1,000		1,000
J	0	0		0		1,500
K	40,000	25,000		1,000		1,000
L	20,000	25,000		500		500
M	400,000	1,000		430		430
N	3,000	100,000		300		300
Total				$	7,750	$	9,250
Shares authorized						30,000,000

~~Share Repurchases~~1.Series C preferred stock is held by MUFG.

Three Months Ended March 31,
$ in millions 2020 2019
Repurchases of common stock under the Firm's Share Repurchase Program $ 1,347
$ 1,180

The Firm’s 2019 Capital Plan (“Capital Plan”) includes the share repurchase of up to $6.0 billion of outstanding common stock for the period beginning July 1, 2019 through June 30, 2020. Additionally, the Capital Plan includes quarterly common stock dividends of up to $0.35 per share, beginning with the common stock dividend announced on July 18, 2019. On March 15, 2020, the Financial Services Forum announced that each of its eight member banks, including the Firm, had voluntarily suspended their share repurchase programs. For information about the Firm's 2019 Capital Plan, see Note 16 to the financial statements in the 2019 Form 10-K.

A portion of common stock repurchases was conducted under a sales plan with MUFG, whereby MUFG sold shares of the Firm’s common stock to the Firm, as part of the Firm’s Share Repurchase Program. The sales plan is only intended to maintain MUFG’s ownership percentage below 24.9% in order to comply with MUFG’s passivity commitments to the Board of Governors of the Federal Reserve System and has no impact on the strategic alliance between MUFG and the Firm, including the joint ventures in Japan.

~~Common Stock Dividends per Share~~

Three Months Ended March 31,
2020 2019
Dividends declared per common share $ 0.35
$ 0.30

~~Common Shares Outstanding for Basic and Diluted EPS~~

Three Months Ended
March 31,
in millions 2020 2019
Weighted average common shares outstanding, basic 1,555
1,658
Effect of dilutive Stock options, RSUs and PSUs 18
19
Weighted average common shares outstanding and common stock equivalents, diluted 1,573
1,677
Weighted average antidilutive common stock equivalents (excluded from the computation of diluted EPS) 12
6

~~Preferred Stock~~

Shares
Outstanding
Carrying Value
$ in millions, except per share data At
March 31,
2020
Liquidation
Preference
per Share
At
March 31,
2020 At
December 31,
2019
Series
A 44,000
$ 25,000
$ 1,100
$ 1,100
C¹
519,882
1,000
408
408
E 34,500
25,000
862
862
F 34,000
25,000
850
850
H 52,000
25,000
1,300
1,300
I 40,000
25,000
1,000
1,000
J 60,000
25,000
1,500
1,500
K 40,000
25,000
1,000
1,000
L 20,000
25,000
500
500
Total $ 8,520
$ 8,520
Shares authorized 30,000,000


1.	Series C is composed of the issuance of 1,160,791 shares of Series C Preferred Stock to MUFG for an aggregate purchase price of $911 million, less the redemption of 640,909 shares of Series C Preferred Stock of $503 million, which were converted to common shares of approximately $705 million in 2009.

For a description of Series A through Series LN preferred stock issuances, see Note 1618 to the financial statements in the ~~2019~~2020 Form 10-K. The preferred stock has a preference over the common stock upon liquidation. The Firm’s preferred stock qualifies as and is included in Tier 1 capital in accordance with regulatory capital requirements (see Note ~~15)~~16).

On March 15, 2021, the Firm announced the redemption in whole of its outstanding Series J preferred stock. On notice of

redemption, the amount due to holders of Series J Preferred Stock ~~Dividends~~

was reclassified to Borrowings, and on April 15, 2021 the redemption settled at the carrying value of $1.5 billion.

$ 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 $ 253
$ 11
$ 250
$ 11
C 25
13
25
13
E 445
15
445
15
F 430
14
430
15
G²
—
—
414
8
H³
344
18
—
—
I 398
16
398
16
J⁴
—
—
—
—
K 366
15
366
15
L 305
6
—
—
Total $ 108
$ 93
Share Repurchases


	Three Months Ended March 31,
$ in millions		2021		2020
Repurchases of common stock under the Firm's Share Repurchase Program		$	2,135	$	1,347

Beginning late in the first quarter of 2020, the Firm suspended its share repurchase program. On December 18, 2020 the Federal Reserve published summary results of the second round of supervisory stress tests for each large BHC, including the Firm, and permitted the resumption of share repurchases in the first quarter of 2021. The Firm’s Board of Directors authorized the repurchase of up to $10 billion of outstanding common stock in 2021, from time to time as conditions warrant and subject to limitations on distributions from the Federal Reserve. For more information on share repurchases, see Note 18 to the financial statements in the 2020 Form 10-K.

Common Shares Outstanding for Basic and Diluted EPS


	Three Months Ended March 31,
in millions	2021	2020
Weighted average common shares outstanding, basic	1,795	1,555
Effect of dilutive Stock options, RSUs and PSUs	23	18
Weighted average common shares outstanding and common stock equivalents, diluted	1,818	1,573
Weighted average antidilutive common stock equivalents (excluded from the computation of diluted EPS)	1	12

Dividends

~~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~~


$ in millions, except per share data	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
	Per Share1		Total		Per Share1		Total
Preferred Stock Series
A	$	250	$	11	$	253	$	11
C	25		13		25		13
E	445		15		445		15
F	430		14		430		14
H	241		13		344		18
I	398		16		398		16
J2	253		15		0		0
K	366		15		366		15
L	305		6		305		6
M3	29		12		0		0
N4	2,650		8		0		0
Total Preferred stock			$	138			$	108
Common stock	$	0.35	$	635	$	0.35	$	561

1.Common and Preferred Stock dividends are payable quarterly, unless otherwise noted.

2.Series J was payable semiannually until July 15, 2020, after which it was payable quarterly until the redemption notice.

3.Series M will be payable semiannually beginning on March 15, 2021 until September 15, 2026, and thereafter will be payable quarterly.

4.Series N will be payable semiannually beginning on March 15, 2021 until March 15, 2023, and thereafter will be payable quarterly.


March 2021 Form 10-Q			62


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Accumulated Other Comprehensive Income (Loss)¹


$ in millions																$ in millions	CTA		AFS Securities		Pension and Other		DVA		Total

$ in millions	CTA			AFS Securities			Pension, Postretirement and Other			DVA			Total

December 31, 2020																December 31, 2020	$	(795)	$	1,787	$	(498)	$	(2,456)	$	(1,962)
OCI during the period																OCI during the period	(141)		(776)		5		120		(792)
March 31, 2021																March 31, 2021	$	(936)	$	1,011	$	(493)	$	(2,336)	$	(2,754)
December 31, 2019	$	(897	)	$	207		$	(644	)	$	(1,454	)	$	(2,788	)	December 31, 2019	$	(897)	$	207	$	(644)	$	(1,454)	$	(2,788)
OCI during the period	(141		)	1,325			25			3,674			4,883			OCI during the period	(141)		1,325		25		3,674		4,883
March 31, 2020	$	(1,038	)	$	1,532		$	(619	)	$	2,220		$	2,095		March 31, 2020	$	(1,038)	$	1,532	$	(619)	$	2,220	$	2,095
December 31, 2018	$	(889	)	$	(930	)	$	(578	)	$	105		$	(2,292	)
OCI during the period	(12		)	429			1			(599		)	(181		)
March 31, 2019	$	(901	)	$	(501	)	$	(577	)	$	(494	)	$	(2,473	)

CTA—Cumulative foreign currency translation adjustments


1.	~~Amounts are net of tax and noncontrolling interests.~~

1.Amounts are net of tax and noncontrolling interests.

Components of Period Changes in OCI

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 $ (20 ) $ (112 ) $ (132 ) $ 9
$ (141 )
Reclassified to earnings —
—
—
—
—
Net OCI $ (20 ) $ (112 ) $ (132 ) $ 9
$ (141 )
Change in net unrealized gains (losses) on AFS securities
OCI activity $ 1,773
$ (416 ) $ 1,357
$ —
$ 1,357
Reclassified to earnings (41 ) 9
(32 ) —
(32 )
Net OCI $ 1,732
$ (407 ) $ 1,325
$ —
$ 1,325
Pension, postretirement and other
OCI activity $ 25
$ (4 ) $ 21
$ —
$ 21
Reclassified to earnings 5
(1 ) 4
—
4
Net OCI $ 30
$ (5 ) $ 25
$ —
$ 25
Change in net DVA
OCI activity $ 5,015
$ (1,216 ) $ 3,799
$ 129
$ 3,670
Reclassified to earnings 5
(1 ) 4
—
4
Net OCI $ 5,020
$ (1,217 ) $ 3,803
$ 129
$ 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 $ (4 ) $ (18 ) $ (22 ) $ (10 ) $ (12 )
Reclassified to earnings —
—
—
—
—
Net OCI $ (4 ) $ (18 ) $ (22 ) $ (10 ) $ (12 )
Change in net unrealized gains (losses) on AFS securities
OCI activity $ 570
$ (133 ) $ 437
$ —
$ 437
Reclassified to earnings (10 ) 2
(8 ) —
(8 )
Net OCI $ 560
$ (131 ) $ 429
$ —
$ 429
Pension, postretirement and other
OCI activity $ —
$ (1 ) $ (1 ) $ —
$ (1 )
Reclassified to earnings 3
(1 ) 2
—
2
Net OCI $ 3
$ (2 ) $ 1
$ —
$ 1
Change in net DVA
OCI activity $ (824 ) $ 201
$ (623 ) $ (21 ) $ (602 )
Reclassified to earnings 4
(1 ) 3
—
3
Net OCI $ (820 ) $ 200
$ (620 ) $ (21 ) $ (599 )

~~Cumulative Adjustments to Beginning Retained Earnings Related to the Adoption of Accounting Updates~~

Three Months Ended
$ in millions March 31, 2020
Financial Instruments—Credit Losses $ (100 )

Three Months Ended
$ in millions March 31, 2019
Leases $ 63

~~March 2020 Form 10-Q~~

~~Table of Contents~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~


	Three Months Ended March 31, 2021
$ in millions	Pre-tax Gain (Loss)		Income Tax Benefit (Provision)		After-tax Gain (Loss)		Non- controlling Interests		Net
CTA
OCI activity	$	(104)	$	(115)	$	(219)	$	(78)	$	(141)
Reclassified to earnings	0		0		0		0		0
Net OCI	$	(104)	$	(115)	$	(219)	$	(78)	$	(141)
Change in net unrealized gains (losses) on AFS securities
OCI activity	$	(876)	$	203	$	(673)	$	0	$	(673)
Reclassified to earnings	(134)		31		(103)		0		(103)
Net OCI	$	(1,010)	$	234	$	(776)	$	0	$	(776)
Pension and other
OCI activity	$	0	$	0	$	0	$	0	$	0
Reclassified to earnings	7		(2)		5		0		5
Net OCI	$	7	$	(2)	$	5	$	0	$	5
Change in net DVA
OCI activity	$	167	$	(43)	$	124	$	17	$	107
Reclassified to earnings	17		(4)		13		0		13
Net OCI	$	184	$	(47)	$	137	$	17	$	120


	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	$	(20)	$	(112)	$	(132)	$	9	$	(141)
Reclassified to earnings	0		0		0		0		0
Net OCI	$	(20)	$	(112)	$	(132)	$	9	$	(141)
Change in net unrealized gains (losses) on AFS securities
OCI activity	$	1,773	$	(416)	$	1,357	$	0	$	1,357
Reclassified to earnings	(41)		9		(32)		0		(32)
Net OCI	$	1,732	$	(407)	$	1,325	$	0	$	1,325
Pension and other
OCI activity	$	25	$	(4)	$	21	$	0	$	21
Reclassified to earnings	5		(1)		4		0		4
Net OCI	$	30	$	(5)	$	25	$	0	$	25
Change in net DVA
OCI activity	$	5,015	$	(1,216)	$	3,799	$	129	$	3,670
Reclassified to earnings	5		(1)		4		0		4
Net OCI	$	5,020	$	(1,217)	$	3,803	$	129	$	3,674

~~17.~~18. Interest Income and Interest Expense


	Three Months Ended March 31,
$ in millions		2021		2020
Interest income
Investment securities		$	849	$	445
Loans		988		1,154
Securities purchased under agreements to resell and Securities borrowed1		(296)		398
Trading assets, net of Trading liabilities		510		749
Customer receivables and Other2		386		757
Total interest income		$	2,437	$	3,503

Interest expense
Deposits		$	120	$	406
Borrowings		714		997
Securities sold under agreements to repurchase and Securities loaned3		114		509
Customer payables and Other4		(539)		235
Total interest expense		$	409	$	2,147
Net interest		$	2,028	$	1,356

1.Includes fees paid on Securities borrowed.

2.Includes interest from Cash and cash equivalents.

Three Months Ended
March 31,
$ in millions 2020 2019
Interest income
Investment securities $ 445
$ 475
Loans 1,154
1,195
Securities purchased under agreements to resell and Securities borrowed¹
398
947
Trading assets, net of Trading liabilities 749
713
Customer receivables and Other²
757
960
Total interest income $ 3,503
$ 4,290

Interest expense
Deposits $ 406
$ 462
Borrowings 997
1,380
Securities sold under agreements to repurchase and Securities loaned³
509
600
Customer payables and Other⁴
235
834
Total interest expense $ 2,147
$ 3,276
Net interest $ 1,356
$ 1,014
3.Includes fees received on Securities loaned.

4.Includes fees received from Equity Financing customers for stock loan transactions entered into to cover customers’ short positions.


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.~~

Interest income and Interest expense are classified in the income statements based on the nature of the instrument and related market conventions. When included as a component of the instrument’s fair value, interest is included within Trading revenues or Investments revenues. Otherwise, it is included within Interest income or Interest expense. k

Accrued Interest

~~18.~~


$ in millions	At March 31, 2021		At December 31, 2020
Customer and other receivables	$	2,195	$	1,652
Customer and other payables	2,329		2,119

19. Income Taxes

The Firm is under continuous examination by the IRS and other tax authorities in certain countries, such as Japan and the U.K., and in states and localities in which it has significant business operations, such as New York.

The Firm believes that the resolution of these tax examinations will not have a material effect on the annual financial statements, although a resolution could have a material impact in the income ~~statements~~statement and on the effective tax rate for any period in which such resolutions occur.

The Firm has established a liability for unrecognized tax benefits, and associated interest, if applicable (“tax liabilities”), that it believes is adequate in relation to the potential for additional assessments. Once established, the Firm adjusts such tax liabilities only when new information is available or when an event occurs necessitating a change.

It is reasonably possible that significant changes in the balance of unrecognized tax benefits may occur within the next 12 months. At this time, however, it is not possible to reasonably

estimate the expected change to the total amount of unrecognized tax benefits and the impact on the Firm’s effective tax rate over the next 12 months.

~~See Note 13~~ ~~regarding the Dutch Tax Authority’s challenge, in the District Court in Amsterdam (matters styled~~ ~~Case number 15/3637~~ ~~and~~ ~~Case number 15/4353), of the Firm’s entitlement to certain withholding tax credits, which may impact the balance of unrecognized tax benefits.~~

~~Net Discrete Tax Provisions/(Benefits)~~


			63			March 2021 Form 10-Q

Three Months Ended March 31,
$ in millions 2020 2019
Recurring¹
$ (99 ) $ (107 )
Intermittent (31 ) (101 )


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

~~1. Recurring discrete tax items are related to conversion of employee share-based awards.~~

~~19.~~20. Segment, Geographic and Revenue Information

Selected Financial Information by Business Segment

~~Selected Financial Information by Business Segment~~

Three Months Ended March 31, 2020
$ in millions IS WM IM I/E Total
Investment banking $ 1,144
$ 158
$ —
$ (31 ) $ 1,271
Trading 3,416
(347 ) (37 ) 24
3,056
Investments (25 ) —
63
—
38
Commissions and fees¹
874
588
—
(102 ) 1,360
Asset management¹
113
2,680
665
(41 ) 3,417
Other (1,079 ) 62
7
(1 ) (1,011 )
Total non-interest revenues 4,443
3,141
698
(151 ) 8,131
Interest income 2,423
1,193
8
(121 ) 3,503
Interest expense 1,961
297
14
(125 ) 2,147
Net interest 462
896
(6 ) 4
1,356
Net revenues $ 4,905
$ 4,037
$ 692
$ (147 ) $ 9,487
Income before provision for income taxes $ 950
$ 1,055
$ 143
$ (2 ) $ 2,146
Provision for income taxes 151
191
25
(1 ) 366
Net income 799
864
118
(1 ) 1,780
Net income applicable to noncontrolling interests 42
—
40
—
82
Net income applicable to Morgan Stanley $ 757
$ 864
$ 78
$ (1 ) $ 1,698

~~March 2020 Form 10-Q~~

~~Table of Contents~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~


	Three Months Ended March 31, 2021
$ in millions	IS		WM		IM		I/E		Total
Investment banking	$	2,613	$	251	$	0	$	(24)	$	2,840
Trading	4,073		126		3		23		4,225
Investments	86		2		230		0		318
Commissions and fees1	870		851		0		(95)		1,626
Asset management1,2	139		3,191		1,103		(35)		4,398
Other	158		153		(24)		(3)		284
Total non-interest revenues	7,939		4,574		1,312		(134)		13,691
Interest income	970		1,486		8		(27)		2,437
Interest expense	332		101		6		(30)		409
Net interest	638		1,385		2		3		2,028
Net revenues	$	8,577	$	5,959	$	1,314	$	(131)	$	15,719
Provision for credit losses	$	(93)	$	(5)	$	0	$	0	$	(98)
Compensation and benefits	3,114		3,170		514		0		6,798
Non-compensation expenses	2,185		1,194		430		(134)		3,675
Total non-interest expenses	$	5,299	$	4,364	$	944	$	(134)	$	10,473
Income before provision for income taxes	$	3,371	$	1,600	$	370	$	3	$	5,344
Provision for income taxes	736		358		81		1		1,176


Net income	2,635		1,242		289		2		4,168
Net income applicable to noncontrolling interests	34		0		14		0		48
Net income applicable to Morgan Stanley	$	2,601	$	1,242	$	275	$	2	$	4,120

Three Months Ended March 31, 2019
$ in millions IS WM IM I/E Total
Investment banking $ 1,151
$ 109
$ —
$ (18 ) $ 1,242
Trading 3,130
302
(3 ) 12
3,441
Investments 81
1
191
—
273
Commissions and fees¹
621
406
—
(61 ) 966
Asset management¹
107
2,361
617
(36 ) 3,049
Other 222
80
3
(4 ) 301
Total non-interest revenues 5,312
3,259
808
(107 ) 9,272
Interest income 3,056
1,413
4
(183 ) 4,290
Interest expense 3,172
283
8
(187 ) 3,276
Net interest (116 ) 1,130
(4 ) 4
1,014
Net revenues $ 5,196
$ 4,389
$ 804
$ (103 ) $ 10,286
Income before provision for income taxes $ 1,595
$ 1,188
$ 174
$ (2 ) $ 2,955
Provision for income taxes 190
264
33
—
487
Net income 1,405
924
141
(2 ) 2,468
Net income applicable to noncontrolling interests 34
—
5
—
39
Net income applicable to Morgan Stanley $ 1,371
$ 924
$ 136
$ (2 ) $ 2,429


	Three Months Ended March 31, 2020
$ in millions	IS		WM		IM		I/E		Total
Investment banking	$	1,144	$	158	$	0	$	(31)	$	1,271
Trading3	3,161		(347)		(37)		24		2,801
Investments	(25)		0		63		0		38
Commissions and fees1	874		588		0		(102)		1,360
Asset management1,2	113		2,680		665		(41)		3,417
Other3	(551)		81		7		(1)		(464)
Total non-interest revenues	4,716		3,160		698		(151)		8,423
Interest income	2,423		1,193		8		(121)		3,503
Interest expense	1,961		297		14		(125)		2,147
Net interest	462		896		(6)		4		1,356
Net revenues3	$	5,178	$	4,056	$	692	$	(147)	$	9,779
Provision for credit losses3	$	388	$	19	$	0	$	0	$	407
Compensation and benefits	1,814		2,212		257		0		4,283
Non-compensation expenses3	2,026		770		292		(145)		2,943
Total non-interest expenses3	$	3,840	$	2,982	$	549	$	(145)	$	7,226
Income before provision for income taxes	$	950	$	1,055	$	143	$	(2)	$	2,146
Provision for income taxes	151		191		25		(1)		366


Net income	799		864		118		(1)		1,780
Net income applicable to noncontrolling interests	42		0		40		0		82
Net income applicable to Morgan Stanley	$	757	$	864	$	78	$	(1)	$	1,698

I/E–Intersegment Eliminations


1.	~~Substantially all revenues are from contracts with customers.~~

1.Substantially all revenues are from contracts with customers.

2.Includes certain fees which may relate to services performed in prior periods.

3.Certain prior period amounts have been reclassified to conform to the current presentation. See Note 1 for additional information.

For a discussion about the Firm’s business segments, see Note 2123 to the financial statements in the ~~2019~~2020 Form 10-K.

Detail of Investment Banking Revenues

Three Months Ended
March 31,
$ in millions 2020 2019
Institutional Securities Advisory $ 362
$ 406
Institutional Securities Underwriting 782
745
Firm Investment banking revenues from contracts with customers 89 % 85 %


	Three Months Ended March 31,
$ in millions		2021			2020
Institutional Securities Advisory		$	480		$	362
Institutional Securities Underwriting		2,133			782
Firm Investment banking revenues from contracts with customers		92		%	89		%

Trading Revenues by Product Type1


	Three Months Ended March 31,
$ in millions		2021		2020
Interest rate		$	859	$	1,074
Foreign exchange		274		338
Equity security and index2		1,695		1,072
Commodity and other		861		11
Credit		536		306
Total		$	4,225	$	2,801

Three Months Ended
March 31,
$ in millions 2020 2019
Interest rate $ 1,074
$ 785
Foreign exchange 338
241
Equity security and index¹
1,072
1,451
Commodity and other 266
422
Credit 306
542
Total $ 3,056
$ 3,441

1.Certain prior period amounts have been reclassified to conform to the current presentation. See Note 1 for additional information.


1.	2.Dividend income is included within equity security and index contracts.

The previous table summarizes realized and unrealized gains and losses, from derivative and non-derivative financial instruments, included in Trading revenues in the income statements. The Firm generally utilizes financial instruments across a variety of product types in connection with its market-making and related risk management strategies. The trading

revenues presented in the table are not representative of the manner in which the Firm manages its business activities and are prepared in a manner similar to the presentation of trading revenues for regulatory reporting purposes.

Investment Management Investments Revenues—Net Cumulative Unrealized Carried Interest

$ in millions At
March 31,
2020 At
December 31,
2019
Net cumulative unrealized performance-based fees at risk of reversing $ 714
$ 774


$ in millions	At March 31, 2021		At December 31, 2020
Net cumulative unrealized performance-based income at risk of reversing	$	708	$	735

The Firm’s portion of net cumulative performance-based ~~fees~~income in the form of unrealized carried interest, ~~(for~~for which the Firm is not obligated to pay ~~compensation) are~~compensation, is at risk of reversing when the return in certain funds fall below specified performance targets. See Note 1314 for information regarding general partner guarantees, which include potential obligations to return performance fee distributions previously received.


March 2021 Form 10-Q			64


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Investment Management Asset Management ~~Revenues~~—Revenues—Reduction of Fees Due to Fee Waivers

Three Months Ended
March 31,
$ in millions 2020 2019
Fee waivers $ 11
$ 11


	Three Months Ended March 31,
$ in millions		2021		2020
Fee waivers		$	94	$	11

The Firm waives a portion of its fees in the Investment Management business segment from certain registered money market funds that comply with the requirements of Rule 2a-7 of the Investment Company Act of 1940.

Certain Other Fee Waivers

Separately, the Firm’s employees, including its senior officers, may participate on the same terms and conditions as other investors in certain funds that the Firm sponsors, primarily for client investment, and the Firm may waive or lower applicable fees and charges for its employees.

Other Expenses—Transaction Taxes


	Three Months Ended March 31,
$ in millions	2021		2020
Transaction taxes	$	238	$	184

Transaction taxes are composed of securities transaction taxes and stamp duties, which are levied on the sale or purchase of securities listed on recognized stock exchanges in certain markets. These taxes are imposed mainly on trades of equity securities in Asia and EMEA. Similar transaction taxes are levied on trades of listed derivative instruments in certain countries.

Net Revenues by Region1

Three Months Ended
March 31,
$ in millions 2020 2019
Americas $ 6,646
$ 7,321
EMEA 1,148
1,702
Asia 1,693
1,263
Total $ 9,487
$ 10,286


	Three Months Ended March 31,
$ in millions		2021		2020
Americas		$	11,191	$	6,888
EMEA		2,159		1,197
Asia		2,369		1,694
Total		$	15,719	$	9,779

1.Certain prior period amounts have been reclassified to conform to the current presentation. See Note 1 for additional information.

For a discussion about the Firm’s geographic net revenues, see Note 2123 to the financial statements in the ~~2019~~2020 Form 10-K.



	79	~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Notes to Consolidated Financial Statements~~ ~~(Unaudited)~~

~~Revenue~~Revenues Recognized from Prior Services


	Three Months Ended March 31,					Three Months Ended March 31,
$ in millions	2020		2019		$ in millions		2021		2020
Non-interest revenues	$	614	$	671	Non-interest revenues		$	541	$	614

The previous table includes ~~revenue~~revenues from contracts with customers recognized where some or all services were performed in prior ~~periods~~periods. For the three months ended March

31, 2021 these revenues primarily include investment banking advisory fees, and isfor the three months ended March 31, 2020, these revenues primarily ~~composed of~~include investment banking advisory fees and distribution fees.

Receivables from Contracts with Customers

$ in millions At
March 31,
2020 At
December 31,
2019
Customer and other receivables $ 2,199
$ 2,916


$ in millions	At March 31, 2021		At December 31, 2020
Customer and other receivables	$	4,101	$	3,200

Receivables from contracts with customers, which are included within Customer and other receivables in the balance sheets, arise when the Firm has both recorded revenues and has the right per the contract to bill the customer.

Assets by Business Segment


$ in millions	At March 31, 2021		At December 31, 2020
Institutional Securities	$	778,555	$	753,322
Wealth Management	361,674		355,595
Investment Management	18,543		6,945
Total1	$	1,158,772	$	1,115,862

$ in millions At
March 31,
2020 At
December 31,
2019
Institutional Securities $ 707,489
$ 691,201
Wealth Management 233,824
197,682
Investment Management 6,482
6,546
Total¹
$ 947,795
$ 895,429

1. Parent assets have been fully allocated to the business segments.


			65			March 2021 Form 10-Q


Table of Contents
Financial Data Supplement (Unaudited)

Average Balances and Interest Rates and Net Interest Income

~~March 2020 Form 10-Q~~



~~Table of Contents~~
~~Financial Data Supplement (Unaudited)~~

~~Average Balances and Interest Rates and Net Interest Income~~

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 %
Borrowings^{1, 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.~~

~~Includes fees paid on Securities borrowed.~~

~~Excludes non-interest earning assets and non-interest bearing liabilities, such as equity securities.~~

~~Includes Cash and cash equivalents.~~

~~Includes borrowings carried at fair value, whose interest expense is considered part of fair value and therefore is recorded within Trading revenues.~~

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.

~~Includes fees received from prime brokerage customers for stock loan transactions entered into to cover customers’ short positions.~~


	Three Months Ended March 31,
	2021						2020
$ in millions	Average Daily Balance		Interest		Annualized Average Rate		Average Daily Balance		Interest		Annualized Average Rate
Interest earning assets
Investment securities1	$	187,294	$	849	1.8	%	$	110,277	$	445	1.6	%
Loans1	151,636		988		2.6	%	134,441		1,154		3.5	%
Securities purchased under agreements to resell and Securities borrowed2:
U.S.	147,276		(169)		(0.5)	%	121,106		378		1.3	%
Non-U.S.	67,334		(127)		(0.8)	%	56,865		20		0.1	%
Trading assets, net of Trading liabilities3:
U.S.	72,416		410		2.3	%	78,771		626		3.2	%
Non-U.S.	17,946		100		2.3	%	22,903		123		2.2	%
Customer receivables and Other4:
U.S.	137,859		337		1.0	%	68,772		555		3.2	%
Non-U.S.	75,177		49		0.3	%	60,787		202		1.3	%
Total	$	856,938	$	2,437	1.2	%	$	653,922	$	3,503	2.2	%
Interest bearing liabilities
Deposits1	$	320,257	$	120	0.2	%	$	199,574	$	406	0.8	%
Borrowings1, 5	215,688		714		1.3	%	192,061		997		2.1	%
Securities sold under agreements to repurchase and Securities loaned6:
U.S.	34,089		44		0.5	%	31,461		328		4.2	%
Non-U.S.	27,063		70		1.0	%	29,682		181		2.5	%
Customer payables and Other7:
U.S.	129,438		(437)		(1.4)	%	128,744		109		0.3	%
Non-U.S.	68,782		(102)		(0.6)	%	63,914		126		0.8	%
Total	$	795,317	$	409	0.2	%	$	645,436	$	2,147	1.3	%
Net interest income and net interest rate spread			$	2,028	1.0	%			$	1,356	0.9	%

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 Equity Financing customers for stock loan transactions entered into to cover customers’ short positions.



81	March ~~2020~~2021 Form 10-Q	66



Table of Contents
Glossary of Common Terms and Acronyms



~~2019~~2020 Form 10-K		Annual report on Form 10-K for year ended December 31, ~~2019~~2020 filed with the SEC
ABS		Asset-backed securities
~~ABS~~ACL		~~Asset-backed securities~~Allowance for credit losses
AFS		Available-for-sale
~~AFS~~AML		~~Available-for-sale~~Anti-money laundering
AOCI
~~AML~~	~~Anti-money laundering~~

~~AOCI~~	Accumulated other comprehensive income (loss)

AUM		Assets under management or supervision

Balance sheets		Consolidated balance sheets

~~BEAT~~BHC		~~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)~~



ELN		Equity-linked note(s)
~~EMEA~~
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~~G-SIB		~~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

LTV			Loan-to-value

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



~~Table of Contents~~MSMS
~~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~~N/M		Not Meaningful

NAV		Net asset value

~~N/M~~Non-GAAP		~~Not Meaningful~~

~~Non-GAAP~~	Non-generally accepted accounting principles

NSFR		Net stable funding ratio, as ~~proposed~~adopted 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~~OCI			Other comprehensive income (loss)

OIS			Overnight index swap

OTC			Over-the-counter

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~~SCB			Stress capital buffer

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



			8367			March ~~2020~~2021 Form 10-Q



Table of Contents

Other Information

None.

Legal Proceedings

The following ~~development has~~developments have occurred since previously reporting certain matters in the Firm’s ~~2019~~2020 Form 10-K. See also the disclosures set forth under “Legal Proceedings” in the ~~2019~~2020 Form 10-K.

Residential Mortgage and Credit Crisis Related Matter

On March ~~19, 2020,~~22, 2021, the ~~Firm filed a motion for partial summary judgment~~parties in ~~Deutsche~~China Development Industrial Bank ~~National Trust Company solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007- NC4~~ v. Morgan Stanley ~~Mortgage Capital Holdings LLC as Successor-by-Merger~~& Co. Incorporated entered into a settlement agreement. On April 16, 2021, the court entered a stipulation of voluntary discontinuance, with prejudice.

European Matter

On January 29, 2021, the Advocate General of the Dutch High Court in matters re-styled Case number 15/3637 and Case number 15/4353 issued an advisory opinion on the Firm’s appeal, which rejected the Firm’s principal grounds of appeal. On February 11, 2021, the Firm and the Dutch Tax Authority each responded to ~~Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital~~this opinion.

Risk Factors

For a discussion of the risk factors affecting the Firm, see “Risk Factors” in Part I, ~~Inc~~.Item 1A of the 2020 Form 10-K.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Three Months Ended March 31, ~~2020~~2021


$ 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	18,296,995	$	74.00	12,800,000	$	9,057
February	2,358,797	$	71.57	1,600,000	$	8,947
March	13,231,966	$	82.18	13,161,366	$	7,865
Total	33,887,758	$	77.03	27,561,366

$ in millions, except per share data
Total
Number of Shares Purchased¹
Average Price Paid Per Share
Total Shares
Purchased as Part of Share Repurchase Program^2,3
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~~1.Includes 6,326,392 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.~~

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.

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.

~~Share repurchases~~ 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, 2021.

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”). For further information on the sales plan, see Note 18 to the financial statements in the 2020 Form 10-K.

3.The Firm’s Board of Directors has authorized the repurchase of the Firm’s outstanding common stock under a share repurchase program (the “Share Repurchase Program”) from time to time as conditions warrant and subject to ~~regulatory non-objection. On June 27, 2019,~~limitations on distributions from the Federal ~~Reserve published summary results~~Reserve. 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.

On December 18, 2020, our Board of ~~CCAR and and~~Directors authorized the ~~Firm received a non-objection to its 2019 Capital Plan. The Firm’s 2019 Capital Plan includes a share~~ repurchase of up to ~~$6.0~~$10 billion of ~~its~~ outstanding common stock ~~during~~in 2021, from time to time as conditions warrant and subject to limitations on distributions from the period beginning July 1, 2019 through June 30, 2020. On March 15, 2020, the Financial Services Forum announced that each of its eight member banks, including the Firm, had voluntarily suspended their share repurchase programs.Federal Reserve. For further information, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, ~~and~~ Stress Tests. and the Stress Capital Buffer.”

Controls and Procedures

Under the supervision and with the participation of the Firm’s management, including the Chief Executive Officer and Chief Financial Officer, the Firm conducted an evaluation of the effectiveness of the Firm’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the ~~Firm's~~Firm’s disclosure controls and procedures were effective as of the end of the period covered by this report.

No change in the Firm’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) occurred during the period covered by this report that materially affected, or is reasonably likely to materially affect, the Firm’s internal control over financial reporting.

Exhibits

~~Exhibit Index~~



Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation of Morgan Stanley, as amended to date.
15		Letter of awareness from Deloitte & Touche LLP, dated May ~~5, 2020,~~3 , 202 1 , concerning unaudited interim financial information.

31.1	Rule 13a-14(a) Certification of Chief Executive Officer.

31.2	Rule 13a-14(a) Certification of Chief Financial Officer.

32.1	Section 1350 Certification of Chief Executive Officer.

32.2	Section 1350 Certification of Chief Financial Officer.

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~~2021 Form 10-Q			8468



Table of Contents

~~SIGNATURES~~Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



MORGAN STANLEY (Registrant)

By:			/s/ JONATHAN PRUZAN
			Jonathan Pruzan Executive Vice President and Chief Financial Officer

By:			/s/ PR~~AUL~~AJA ~~C. W~~J. A~~IRTH~~KRAM
			~~Paul C. Wirth~~Raja J. Akram Deputy Chief Financial Officer, Chief Accounting Officer and Controller

Date: May ~~5, 2020~~3, 2021


			69			March 2021 Form 10-Q

~~S-1~~



	At March 31, 2020		At December 31, 2019
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	%



	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



	At March 31, 2020			At December 31, 2019
$ in billions, except employee data	At March 31, 2020			At December 31, 2019
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



$ in billions	At December 31, 2018		Inflows		Outflows			Market Impact			At March 31, 2019
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



$ in billions	At December 31, 2018		Inflows		Outflows			Market Impact		Other			At March 31, 2019
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



	Average Daily Balance Three Months Ended
$ in millions	March 31, 2020			December 31, 2019
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		%



	At March 31, 2020
$ 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			At March 31, 2020
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		%


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		At March 31, 2021			At December 31, 2020
External TLAC2					$	216,426		$	216,129
External TLAC as a % of RWA	18.0	%	21.5	%	47.6		%	47.7		%
External TLAC as a % of leverage exposure	7.5	%	9.5	%	17.1		%	18.1		%
Eligible LTD3					$	122,234		$	120,561
Eligible LTD as a % of RWA	9.0	%	9.0	%	26.9		%	26.6		%
Eligible LTD as a % of leverage exposure	4.5	%	4.5	%	9.7		%	10.1		%


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.~~


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.


1.	~~Amounts represent the potential gain for each 1 bps widening of our credit spread.~~2.Relates to Borrowings carried at fair value.


	Loss from 10% Decline					Loss from 10% Decline
$ in millions	At March 31, 2020		At December 31, 2019		$ in millions	At March 31, 2021		At December 31, 2020
Investments related to Investment Management activities	$	327	$	367	Investments related to Investment Management activities	$	472	$	386
Other investments:					Other investments:
MUMSS	173		169		MUMSS	174		184
Other Firm investments	197		195		Other Firm investments	223		210



	At March 31, 2020
$ 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


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.



$ in millions
December 31, 2019¹	$	590
Effect of CECL adoption	(41		)
Gross charge-offs	(32		)
Provision	407
Other	(3		)
March 31, 2020	$	921
Allowance for credit losses—Loans	$	617
Allowance for credit losses—Lending commitments	304

Announcement date

April 16, ~~2020~~

Amount per share

Date to be paid

May ~~15, 2020~~

Shareholders of record as of

April 30, ~~2020~~