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-valueLTV 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 increaseddecreased in the current quarter, principallyprimarily reflecting a provisionrelease in the allowance for credit losses within the Institutional Securities business segment resulting fromsegment. The allowance release was primarily a result of improvements in the economicoutlook for macroeconomic conditions and the impact of COVID-19. This provisionpaydowns on Corporate loans, including by lower-rated borrowers. The base scenario used in our ACL models as of March 31, 2021 was primarilygenerated using a combination of industry consensus economic forecasts, forward rates, and internally developed and validated models. Given the resultnature of higher actualour 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 relationshipaccommodative monetary policy. See Notes 10 and event-driven loans, as well as revisions14 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 lossACL 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 20202021 Form 10-Q |
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 wasare primarily driven by clients with non-investment gradetrading positions that are measured at fair value and BBB internal credit ratings, who sought liquidity inrisk-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-19The decline incontinuing 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 uncertainremain 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, referchange 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-drivenOther. 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 typescollateral. For a description of collateral, including residential real estate, commercial real estate, corporateInstitutional 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 declineRisk” in the underlying collateral2020 Form 10-K.
| | | | | | | | | March 20202021 Form 10-Q | 3227 | |
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 Loans1
| | | | | | | | $ 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.
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
“Quantitative and Qualitative Disclosures about Risk—Credit Risk” in the 20192020 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, approximately2021, 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'sManagement’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 whichthat 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. |
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 20192020 Form 10-K and Note 67 to the financial statements.
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 20192020 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
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, 20202021 | | | | | | | | | | | | | | | | | | $ 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 |
|
| | | | | | | | | | | 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.
|
| | 3. | Amounts represent net CDS hedges (purchased and sold) on net counterparty exposure and lending executed by trading desks responsible for hedging counterparty and lending credit risk exposures. Amounts are based on the CDS notional amount assuming zero recovery adjusted for any fair value receivable or payable. For further description of the contractual terms for purchased credit protection and whether they may limit the effectiveness of our hedges, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Derivatives” in the 2019 Form 10-K. |
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 cashSpain 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.
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.ge.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 20192020 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 20192020 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 20192020 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 20192020 Form 10-K.
| | | | | | | | | | 37 | March 20202021 Form 10-Q | 31 | |
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, 20202021 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, 20192020 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, 20203, 2021 |
| | | | | | | | | | 32 | March 20202021 Form 10-Q | 38 | |
| | | | | | | | 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 20202021 Form 10-Q |
| | | | | | | | 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 20202021 Form 10-Q | 4034 | See Notes to Consolidated Financial Statements |
| | | | | 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 |
| | | | | 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 162.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 |
| | | | | 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 |
| | | | | | | | | | | See Notes to Consolidated Financial Statements | 35 | March 2021 Form 10-Q |
| | | | | | | | 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 |
| | | | | | | | 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: Institutional Securities provides investment banking, salesa 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. SalesOur Equity and trading servicesFixed 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. 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. CertainThe financial statements reflect the effects of the following reclassifications have been made to prior periods to conform toperiod 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 20192020 Form 10-K. Certain footnote disclosures included in the 20192020 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 noncontrollingNoncontrolling interests. The net income attributable to noncontrollingNoncontrolling interests for such subsidiaries is
| | | | | | | | 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 20192020 Form 10-K.
| | | | | 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 20192020 Form 10-K. During the three months ended March 31, 20202021 (“current quarter”), there were no significant revisionsupdates to the Firm’s significant accounting policies, other than for the accounting updates adopted. Accounting Updates Adoptedas 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 conceptFirm’s acquisition of other-than-temporary impairment for AFS securities and instead requires impairmentsEaton 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 asbalance 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 resultquantitative 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 VanceInstruments Measured at Amortized CostOn 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 costcash 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 lifebreadth of the financial instrument.
Factors considered by management when determiningInvestment 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 payments69 million common shares issued from Common stock held in treasury and cash of principalapproximately $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 thatexcess 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 considerspurchase price over the fair value of the collateral when measuringnet 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 iflimited time since the loan is collateral dependent (i.e.,repaymentdate of the loan is expectedacquisition, 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 substantiallyMarch 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 operationhistorical financial information of the underlying collateralFirm 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 electpotential benefits of cost and funding synergies, opportunities to use an approach to measureearn additional revenues, or other factors, and therefore does not represent what the ACL usingactual Net revenues and Net income would have been had the fair valuecompanies 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 20202021 Form 10-Q | 38 | |
| | | | | | | | 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.
| | | | | 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 requirementrequirements 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 20202021 Form 10-Q |
| | | | | | | | 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 20192020 Form 10-K. During the current quarter, there were no significant revisions made to the Firm’s valuation techniques.
| | | | | 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 20202021 Form 10-Q | 40 | |
| | | | | | | | 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) | | | |
| | | | | | | | 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.
| | | | | 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 | | Corporate and other debt | $ | 3,319 | | $ | 3,435 | | Comparable pricing: | | Comparable pricing: | | Bond price | | Bond price | 13 to 133 points (100 points) | 10 to 133 points (101 points) | Discounted cash flow: | | Discounted cash flow: | | Recovery rate | | Recovery rate | 40% to 62% (46% / 40%) | 40% to 62% (46% / 40%) | | Option model: | | Option model: | | Equity volatility | | Equity volatility | 18% to 21% (18%) | 18% to 21% (19%) | Corporate equities | | Corporate equities | $ | 114 | | $ | 86 | | Comparable pricing: | | Comparable pricing: | | Equity price | | Equity price | 100% | 100% | Investments | | Investments | $ | 924 | | $ | 828 | | Discounted cash flow: | | Discounted cash flow: | | WACC | | WACC | 8% to 17% (15%) | 8% to 18% (15%) | Exit multiple | | Exit multiple | 8 to 17 times (12 times) | 7 to 17 times (12 times) | Market approach: | | Market approach: | | EBITDA multiple | | EBITDA multiple | 8 to 38 times (11 times) | 8 to 32 times (11 times) | Comparable pricing: | | Comparable pricing: | | Equity price | | Equity price | 45% to 100% (99%) | 45% to 100% (99%) | Investment securities —AFS | | Investment securities —AFS | $ | 127 | | $ | 2,804 | | Comparable pricing: | | Comparable pricing: | | Bond price | | Bond price | 102 to 107 points (104 points) | 97 to 107 points (101 points) | Net derivative and other contracts: | | Net derivative and other contracts: | | Interest rate | | Interest rate | $ | 691 | | $ | 682 | | Option model: | | Option model: | | IR volatility skew | | IR volatility skew | 23% to 111% (61% / 60%) | 0% to 349% (62% / 59%) | IR curve correlation | | IR curve correlation | 74% to 98% (84% / 85%) | 54% to 99% (87% / 89%) | Bond volatility | | Bond volatility | 3% to 24% (12% / 8%) | 6% to 24% (13% / 13%) | Inflation volatility | | Inflation volatility | 25% to 66% (45% / 43%) | 25% to 66% (45% / 43%) | IR curve | | IR curve | 1% | 1% | Credit | $ | 198 |
| $ | 124 |
| Credit | $ | (82) | | $ | 49 | | Credit default swap model: | Credit default swap model: | | Credit default swap model: | | Cash-synthetic basis | 6 points |
| 6 points |
| Cash-synthetic basis | 7 points | 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: | | 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) | | $ | 61 | | Option model: | | 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 | % | 10% to 11% (10% / 10%) |
| IR curve | 5% to 7% (6% / 7%) | 6% to 8% (7% / 8%) | Foreign exchange volatility skew | | Foreign exchange volatility skew | -7% to -3% (-5% / -5%) | -22% to 28% (3% / 1%) | Contingency probability | 95 | % | 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: | | 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 | | Equity volatility | 15% to 93% (39%) | 16% to 97% (43%) | Equity volatility skew | | Equity volatility skew | -3% to 0% (-1%) | -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%) |
| -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 20202021 Form 10-Q | 42 | |
| | | | | | | | 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 rate2.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. ThereGenerally, 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 20192020 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 Interests1.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 20192020 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 20202021 Form 10-Q | 52 | |
| | | | | | | | 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.
|
| | 2. | Nonrecurring changes in the fair value of loans and lending commitments were calculated as follows: for the held-for-investment category, based on the value of the underlying collateral; and for the held-for-sale category, based on recently executed transactions, market price quotations, valuation models that incorporate market observable inputs where possible, such as comparable loan or debt prices and CDS spread levels adjusted for any basis difference between cash and derivative instruments, or default recovery analysis where such transactions and quotations are unobservable.
|
| | 3. | Losses related to Other assets—Other investments were determined using techniques that included discounted cash flow models, methodologies that incorporate multiples of certain comparable companies and recently executed transactions.
|
| | 4. | Losses related to Other assets—Premises, equipment and software generally include write-offs related to the disposal of certain assets.
|
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.
| | | | | 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 | ) |
| | 1. | 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 | ) |
| | 1. | 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 | |
| | | | | 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 |
|
| | | | | | | | 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 20202021 Form 10-Q | 46 | |
| | | | | | | | 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, 20201.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 itsthe 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'sFirm’s derivative instruments and hedging activities, see Note 57 to the financial statements in the 20192020 Form 10-K.
| | | | | 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 amount currently 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 |
|
| | | | | | | | 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 betweenBilateral 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 |
|
| | | | | 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. | | 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.
|
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 20192020 Form 10-K.
| | | | | | | | | March 20202021 Form 10-Q | 5848 | |
| | | | | | | | 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.
| | | | | Notes to Consolidated Financial Statements
(Unaudited)
| |
InvestmentInvestment 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-gradeinvestment grade and the Firm expects to recover the amortized cost basis.
As of March 31, 2020, theThe HTM securities net carrying amount reflects an amortized costamounts at March 31, 2021 and December 31, 2020 reflect ACL of $47,312$24 million less an allowance for credit losses ofand $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'sFirm’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 allpredominantly 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 20202021 Form 10-Q | 60 | |
| | | | | | | | 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.
|
| | | | | 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 | |
| | | | | | | | 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 20192020 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 | |
| | | | | 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.
| | | | | | | | 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 whichthat 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 activitiesMargin 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 20192020 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 | |
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. | | | | | 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 |
|
| | | | | | | | | | | | | | | | | | 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 |
|
| | | | | | | | 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 datecollateral 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 StatusLoans 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 Allowance1
| | | | | | | | | | | | | | | | | | 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. |
| | | | | 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 |
|
| | | | | | | | | | | | | | | | | $ 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 |
|
| | | | | | | | 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 lendingThe aggregate allowance for loans and lending commitments increaseddecreased in the current quarter, principallyprimarily reflecting a provisionrelease in the allowance for credit losses within the Institutional Securities business segment resulting fromsegment. The allowance release was primarily a result of improvements in the economicoutlook for macroeconomic conditions and the impact of COVID-19. This provisionpaydowns on Corporate loans, including by lower-rated borrowers.The base scenario used in our ACL models as of March 31, 2021 was primarilygenerated using a combination of industry consensus economic forecasts, forward rates, and internally developed and validated models. Given the resultnature of higher actualour 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 20192020 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.
| | | | | 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 lossesACL 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.
| | | | | 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 interestsee 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 |
|
| | | | | | | | 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. |
| | | | | 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 |
|
| | 1. | Beginning in the first quarter of 2020, commitments to central counterparties are presented separately; these commitments were previously included in Corporate Lending commitments and Forward-starting secured financing receivables depending on the type of agreement. These commitments relate to the Firm's membership in certain clearinghouses and are contingent upon the default of a clearinghouse member or other stress events. |
| | | | | | | | | | | | | | | | | | | Years to Maturity at March 31, 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 20192020 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 | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | 1. | 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.
| | | | | | | | 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
| | | | | Notes to Consolidated Financial Statements
(Unaudited)
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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 20192020 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 20192020 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 arethose 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 willcould 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
| | | | | Notes to Consolidated Financial Statements
(Unaudited)
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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
| | | | | | | | 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
| | | | | Notes to Consolidated Financial Statements
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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 beforeMay 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 hearing22, 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’sHigh 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 inand 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. | | 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.
| | | | | Notes to Consolidated Financial Statements
(Unaudited)
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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. | | 1. | Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets. and may be in loan or security form.2.Other primarily includes exposures to commercial real estate property and investment funds. 3.Where notional amounts are utilized in quantifying the maximum exposure related to derivatives, such amounts do not reflect changes in fair value recorded by the Firm. 4.Additional VIE assets owned represents the carrying value of total exposure to non-consolidated VIEs for which the maximum exposure to loss is less than specific thresholds, primarily interests issued by securitization SPEs. The Firm’s 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.
|
| | 4. | Additional VIE assets owned represents the carrying value of total exposure to non-consolidated VIEs for which the maximum exposure to loss is less than specific thresholds, primarily interests issued by securitization SPEs. The Firm’s primary risk exposure is to the most subordinate class of beneficial interest and maximum exposure to loss generally equals the fair value of the assets owned. These assets are primarily included in Trading assets and Investment securities and are measured at fair value (see Note 3). The Firm does not provide additional support in these transactions through contractual facilities, guarantees or similar derivatives.
|
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.
| | | | | | | | 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 | |
| | | | | 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 Involvement2.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 20192020 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 SPEs1, 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).
| | | | | | | | 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 20192020 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 20192020 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
| | | | | 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, 20202021 and December 31, 2019,2020, the Firm's ratios for determining regulatory compliance are based ondifference between the Advanced Approachactual 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 ourthe 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 addition1.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 FirmFirm'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 subjectequal to the following Common Equity Tier 1 buffers: | | • | A greater than 2.5% capital conservation buffer;
|
Thesum 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 | |
| | 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. 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, 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, SubsidiariesN.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 SubsidiariesMSBNA 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, theits U.S. Bank Subsidiariesbank subsidiaries must remain well-capitalized in accordance with the OCC’s PCA standards. In addition, failure by the U.S. Bank Subsidiariesbank 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, 20202021 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
| | | | | 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 ourMSBNA’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, 20202021 and December 31, 2019,2020, MS&Co. has exceeded its net capital requirement and hashad 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 |
|
| | | | | | | | 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 MSMSthe 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.
| | | | | 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 Repurchases1.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 20192020 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 Dividendswas 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 | | | | | | | | | | | | | | | 1. | Dividends on all series are payable quarterly, unless otherwise noted.
|
| | 2. | Series G preferred stock was redeemed during the first quarter of 2020. For further information, see Note 16 to the 2019 Form 10-K. |
| | 3. | Series H was payable semiannually until July 15, 2019, and is now payable quarterly.
|
| | 4. | Series J is payable semiannually until July 15, 2020, and then quarterly thereafter.
|
| | | | | | | | | | | | | | | $ 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.
| | | | | | | | 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 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 statementsstatement 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)
| | | | | | | | | Three Months Ended March 31, | $ in millions | 2020 | 2019 | Recurring1 | $ | (99 | ) | $ | (107 | ) | Intermittent | (31 | ) | (101 | ) |
| | | | | | | | Notes to Consolidated Financial Statements (Unaudited) | |
1. Recurring discrete tax items are related to conversion of employee share-based awards.
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.
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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 20192020 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 feesincome in the form of unrealized carried interest, (forfor which the Firm is not obligated to pay compensation) arecompensation, 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.
| | | | | | | | 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 20192020 Form 10-K.
| | | | | Notes to Consolidated Financial Statements
(Unaudited)
| |
RevenueRevenues 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 revenuerevenues from contracts with customers recognized where some or all services were performed in prior periodsperiods. 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 ofinclude 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.
| | | | | | | | Financial Data Supplement (Unaudited) | |
Average Balances and Interest Rates and Net Interest Income
| | | | | | 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 | % | Borrowings1, 5 | 192,061 |
| 997 |
| 2.1 |
| 189,181 |
| 1,380 |
| 3.0 |
| Securities sold under agreements to repurchase and Securities loaned6: | U.S. | 31,461 |
| 328 |
| 4.2 |
| 26,615 |
| 450 |
| 6.9 |
| Non-U.S. | 29,682 |
| 181 |
| 2.5 |
| 32,350 |
| 150 |
| 1.9 |
| Customer payables and Other7: | U.S. | 128,744 |
| 109 |
| 0.3 |
| 117,932 |
| 554 |
| 1.9 |
| Non-U.S. | 63,914 |
| 126 |
| 0.8 |
| 65,498 |
| 280 |
| 1.7 |
| Total | $ | 645,436 |
| $ | 2,147 |
| 1.3 | % | $ | 612,593 |
| $ | 3,276 |
| 2.2 | % | Net interest income and net interest rate spread | $ | 1,356 |
| 0.9 | % | | $ | 1,014 |
| 0.5 | % |
| | 1. | | Amounts include primarily U.S. balances.
|
| | | | | 2. | Includes fees paid on Securities borrowed.
|
| | | | | 3. | | Excludes non-interest earning assets and non-interest bearing liabilities, such as equity securities.
|
| | | | | 4. | Includes Cash and cash equivalents.
|
| | | | | 5. | | Includes borrowings carried at fair value, whose interest expense is considered part of fair value and therefore is recorded within Trading revenues.
|
| | | | | 6. | Includes fees received on Securities loaned. The annualized average rate was calculated using (a) interest expense incurred on all securities sold under agreements to repurchase and securities loaned transactions, whether or not such transactions were reported in the balance sheets and (b) net average on-balance sheet balances, which exclude certain securities-for-securities transactions. |
| | | | | 7. | Includes fees received from prime brokerage customers for stock loan transactions entered into to cover customers’ short positions.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | 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 20202021 Form 10-Q | 66 | |
| | | | | | | | Glossary of Common Terms and Acronyms | |
| | | | | | 20192020 Form 10-K | Annual report on Form 10-K for year ended December 31, 20192020 filed with the SEC |
ABS |
Asset-backed securities | ABSACL | Asset-backed securitiesAllowance for credit losses |
AFS |
Available-for-sale | AFSAML | Available-for-saleAnti-money laundering |
AOCI |
| AML | Anti-money laundering |
|
| AOCI | Accumulated other comprehensive income (loss) |
|
| AUM | Assets under management or supervision |
|
| Balance sheets | Consolidated balance sheets |
|
| BEATBHC | 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 |
|
| GILTIG-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 |
|
|
| | | | | 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 |
|
| NAVN/M | Not Meaningful | | | NAV | Net asset value |
|
| N/MNon-GAAP | Not Meaningful |
|
| Non-GAAP | Non-generally accepted accounting principles |
|
| NSFR | Net stable funding ratio, as proposedadopted 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 |
|
|
| | | ROEOCI | 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 |
|
| SECSCB | Stress capital buffer | | | SEC | U.S. Securities and Exchange Commission |
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| SLR | Supplementary leverage ratio |
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| SOFR | Secured Overnight Financing Rate |
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| S&P | Standard & Poor’s |
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| SPE | Special purpose entity |
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| SPOE | Single point of entry |
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| TDR | Troubled debt restructuring |
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| TLAC | Total loss-absorbing capacity |
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| U.K. | United Kingdom |
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| UPB | Unpaid principal balance |
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| U.S. | United States of America |
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| U.S. GAAP | Accounting principles generally accepted in the United States of America |
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| VaR | Value-at-Risk |
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| VIE | Variable interest entity |
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| WACC | Implied weighted average cost of capital |
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| WM | Wealth Management |
| | | | | | | | | | 8367 | March 20202021 Form 10-Q |
Other Information None. Legal Proceedings The following development hasdevelopments have occurred since previously reporting certain matters in the Firm’s 20192020 Form 10-K. See also the disclosures set forth under “Legal Proceedings” in the 20192020 Form 10-K.
Residential Mortgage and Credit Crisis Related Matter
On March 19, 2020,22, 2021, the Firm filed a motion for partial summary judgmentparties in DeutscheChina 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 Capitalthis 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, 20202021 | | | | | | | | | | | | | | | $ 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 Program2,3 | Dollar Value of Remaining Authorized Repurchase | January | 11,966,543 |
| $ | 55.82 |
| 4,860,960 |
| $ | 2,733 |
| February | 7,624,176 |
| $ | 52.63 |
| 7,135,908 |
| $ | 2,354 |
| March | 17,552,911 |
| $ | 40.65 |
| 17,278,471 |
| $ | 1,653 |
| Total | 37,143,630 |
| $ | 48.00 |
| 29,275,339 |
| |
| | 1. | Includes 7,868,2911.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. |
| | 2. | Share purchases under publicly announced programs are made pursuant to open-market purchases, Rule 10b5-1 plans or privately negotiated transactions (including with employee benefit plans) as market conditions warrant and at prices the Firm deems appropriate and may be suspended at any time. On April 18, 2018, the Firm entered into a sales plan with Mitsubishi UFJ Financial Group, Inc. (“MUFG”). See Note 16 to the financial statements for further information on the sales plan. |
| | 3. | The Firm’s Board of Directors has authorized the repurchase of the Firm’s outstanding stock under a share repurchase program (the “Share Repurchase Program”). The Share Repurchase Program is a program for capital management purposes that considers, among other things, business segment capital needs, as well as equity-based compensation and benefit plan requirements. The Share Repurchase Program has no set expiration or termination date.
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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 resultsReserve. 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 andDirectors 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 duringin 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'sFirm’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 | | 15 | | | | 31.1 | | | | 31.2 | | | | 32.1 | | | | 32.2 | | | | 101 | Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline eXtensible Business Reporting Language (“Inline XBRL”). | | | 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). |
| | | | | | | | | March 20202021 Form 10-Q | 8468 | |
SIGNATURESSignatures
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/ PRAULAJA C. WJ. AIRTHKRAM | | Paul C. WirthRaja J. Akram
Deputy Chief Financial Officer, Chief Accounting Officer and Controller |
Date: May 5, 20203, 2021
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