☒
EXCHANGE ACT OF 1934
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
2020
Delaware | 1585 Broadway | 36-3145972 | (212) | 761-4000 | ||||
(State or other jurisdiction of incorporation or organization) |
New York, | NY | 10036 | (I.R.S. Employer Identification No.) | (Registrant’s telephone number, including area code) | |||
(Address of principal executive offices, including zip code) |
Securities registered pursuant to Section 12(b) of the Act: |
| |
Title of each class | Trading Symbol(s) |
Name of exchange on which registered |
Common Stock, $0.01 par value | MS | New York Stock Exchange |
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate | MS/PA | New York Stock Exchange |
Non-Cumulative Preferred Stock, Series A, $0.01 par value | ||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | MS/PE | New York Stock Exchange |
Non-Cumulative Preferred Stock, Series E, $0.01 par value | ||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | MS/PF | New York Stock Exchange |
Non-Cumulative Preferred Stock, Series F, $0.01 par value | ||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | MS/PI | New York Stock Exchange |
Non-Cumulative Preferred Stock, Series I, $0.01 par value | ||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | MS/PK | New York Stock Exchange |
Non-Cumulative Preferred Stock, Series K, $0.01 par value | ||
Depository Shares, each representing 1/1000th interest in a share of 4.875% | MS/PL | New York Stock Exchange |
Non-Cumulative Preferred Stock, Series L, $0.01 par value | ||
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026 | MS/26C | New York Stock Exchange |
of Morgan Stanley Finance LLC (and Registrant’s | ||
Morgan Stanley Cushing® MLP High Income Index ETNs due March 21, 2031 | MLPY | NYSE Arca, Inc. |
Large accelerated filer | ☒ | Accelerated | ☐ |
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| ☐ | Smaller reporting company | |||||||
| ☐ | Emerging growth company | ☐ |
Table of Contents | Part | Item | Page | |||||
I | 1 | |||||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 2 | 1 | ||||||
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1 | 44 | |||||||
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Consolidated Balance Sheets (Unaudited at September 30, 2017) | 46 | |||||||
Consolidated Statements of Changes in Total Equity (Unaudited) | 47 | |||||||
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12. Variable Interest Entities and Securitization Activities | 80 | |||||||
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II | 95 | |||||||
1 | 95 | |||||||
2 | 96 | |||||||
6 | 96 | |||||||
E-1 | ||||||||
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S-1 |
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2020
Table of Contents | Part | Item | Page | ||
II | 1A | ||||
I | |||||
I | 2 | ||||
I | 3 | ||||
I | 1 | ||||
II | |||||
II | 1 | ||||
II | 2 | ||||
I | 4 | ||||
II | 6 | ||||
S-1 |
website.
Amended and Restated Certificate of Incorporation;
Amended and Restated Bylaws;
• | Amended and Restated Certificate of Incorporation; |
• | Amended and Restated Bylaws; |
• | Charters for our Audit Committee, Compensation, Management Development and Succession Committee, Nominating and Governance Committee, Operations and Technology Committee, and Risk Committee; |
• | Corporate Governance Policies; |
• | Policy Regarding Corporate Political Activities; |
• | Policy Regarding Shareholder Rights Plan; |
• | Equity Ownership Commitment; |
• | Code of Ethics and Business Conduct; |
• | Code of Conduct; |
• | Integrity Hotline Information; |
• | Environmental and Social Policies; and |
• | Sustainability Report. |
Charters for our Audit Committee, Compensation, Management Development and Succession Committee, Nominating and Governance Committee, Operations and Technology Committee, and Risk Committee;
Corporate Governance Policies;
Policy Regarding Corporate Political Activities;
Policy Regarding Shareholder Rights Plan;
Equity Ownership Commitment;
Code of Ethics and Business Conduct;
Code of Conduct;
Integrity Hotline Information; and
Environmental and Social Policies.
Our Code of Ethics and Business Conduct applies to all directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer and Deputy Chief Financial Officer. We will post any amendments to the Code of Ethics and Business Conduct and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange LLC (“NYSE”) on our internet site.website. You can request a copy of these documents, excluding exhibits, at no cost, by contacting Investor Relations, 1585 Broadway, New York, NY 10036(212-761-4000). The information on our internet sitewebsite is not incorporated by reference into this report.
1 | September 2020 Form 10-Q |
See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.
research.
small tomedium-sized businesses/ businesses and institutions coveringcovering: brokerage and investment advisory services,services; financial and wealth planning services,services; stock plan administration services; annuity and insurance products, creditproducts; securities-based lending, residential real estate loans and other lending products, bankingproducts; banking; and retirement plan services.
September 2020 Form 10-Q | 2 |
Management’s Discussion and Analysis |
Consolidated Results
Results—Three Months Ended September 30, 2020
• | On October 2, 2020, we completed the acquisition of E*TRADE Financial Corporation (“E*TRADE”). For further information, see “Business Segments—Wealth Management.” |
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We reported net revenues of $28,445$34,558 million in the nine months ended September 30, 20172020 (“current year period,” or “YTD 2017”2020”), compared with $25,610$30,562 million in the nine monthsperiod ended September 30, 20162019 (“prior year period,” or “YTD 2016”2019”). For the current year period, net income applicable to Morgan Stanley was $5,468$7,611 million, or $2.79$4.62 per diluted common share, compared with $4,313$6,803 million or $2.11$3.89 per diluted common share, in the prior year period.
3 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
1
1. | The percentages on the bars in the chart represent the contribution of compensation and benefits expenses and non-compensation expenses to the total. |
• | Non-compensation expenses of $9,166 million in the current year period increased 9% from the prior year period, primarily as a result of higher volume-related expenses, an increase in the provision for credit losses for lending commitments and off-balance sheet instruments, and increased information processing and communication expenses. These increases were partially offset by a decrease in marketing and business development expenses. |
September |
Management’s Discussion and Analysis |
|
Non-compensation expenses were $2,546 million in the current quarter and $7,626 million in the current year period compared with $2,431 million in the prior year quarter and $7,213 million in the prior year period, representing a 5% and a 6% increase, respectively. These increases were primarily as a result of higher volume-driven expenses. In addition,non-compensation expenses increased in the current year period due to a provision related to a United Kingdom (“U.K.”) indirect tax (i.e. value-added tax or “VAT”) matter and higher litigation costs. For further discussion of the U.K. VAT matter, see “Institutional Securities—Investments, Other Revenues,Non-interest Expenses and Other Items—Other Items” herein.
Expense Efficiency Ratio
The expense efficiency ratio was 73.0% in the current quarter and 72.1% in the current year period. The expense efficiency ratio was 73.3% in the prior year quarter and 74.2% in the prior year period (see “SelectedNon-Generally Accepted Accounting Principles(“Non-GAAP”) Financial Information” herein).
Return on Average Common Equity
The annualized return on average common equity (“ROE”) was 9.6% in the current quarter and 9.8% in the current year period. The annualized ROE was 8.7% in the prior year quarter and 7.7% in the prior year period (see “SelectedNon-Generally Accepted Accounting Principles(“Non-GAAP”) Financial Information” herein).
2
1. | The percentages on the bars in the charts represent the contribution of each business segment to the |
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• | Institutional Securities net revenues of |
5 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
• | Institutional Securities net revenues of $18,944 million in the current year period |
| |
• | Wealth Management net revenues of |
Institutional Securities net revenues of $4,376 million in the current quarter and $14,290 million in the current year period decreased 4% from the prior year quarter and increased 11% from the prior year period. The current quarter results primarily reflected lower revenues from fixed income sales and trading, partially offset by higher underwriting and advisory revenues. The current year period results primarily reflected higher revenues from underwriting and fixed income sales and trading.
WealthInvestment Management net revenues of $4,220 million in the current quarter and $12,429$2,634 million in the current year period increased 9% both from the prior year quarter and the prior year period. The current quarter and the current year period results reflected growth in assetprimarily due to higher Asset management fee revenues and Net interest income.
Investment Management net revenuesas a result of $675 million in the current quarter and $1,949 million in the current year period increased 22% from the prior year quarter and increased 21% from the prior year period. The current quarter and the current year period results primarily reflected higher carried interest and investment gains and growth in asset management fee revenues.
The percentages on the bars in the charts represent the contribution of each region to the total.EMEA—Europe, Middle East and Africa1. 2. For a discussion of how the geographic breakdown forof net revenues is determined, see Note 2120 to the consolidated financial statements in the 20162019 Form10-K.
September |
Management’s Discussion and Analysis |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Income from continuing operations applicable to Morgan Stanley | $ | 1,775 | $ | 1,589 | $ | 5,489 | $ | 4,312 | ||||||||
Income (loss) from discontinued operations applicable to Morgan Stanley | 6 | 8 | (21 | ) | 1 | |||||||||||
Net income applicable to Morgan Stanley | 1,781 | 1,597 | 5,468 | 4,313 | ||||||||||||
Preferred stock dividends and other | 93 | 79 | 353 | 314 | ||||||||||||
Earnings applicable to Morgan Stanley common shareholders | $ | 1,688 | $ | 1,518 | $ | 5,115 | $ | 3,999 | ||||||||
Effective income tax rate from continuing operations | 28.1% | 31.5% | 29.7% | 32.7% |
At September 30, 2017 | At December 31, 2016 | |||||||
Capital ratios |
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Common Equity Tier 1 capital ratio1 | 16.9% | 16.9% | ||||||
Tier 1 capital ratio1 | 19.3% | 19.0% | ||||||
Total capital ratio1 | 22.2% | 22.0% | ||||||
Tier 1 leverage ratio | 8.4% | 8.4% |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Net income applicable to Morgan Stanley | $ | 2,717 | $ | 2,173 | $ | 7,611 | $ | 6,803 | ||||
Preferred stock dividends | 120 | 113 | 377 | 376 | ||||||||
Earnings applicable to Morgan Stanley common shareholders | $ | 2,597 | $ | 2,060 | $ | 7,234 | $ | 6,427 | ||||
Expense efficiency ratio1 | 70.1 | % | 73.0 | % | 71.1 | % | 72.0 | % | ||||
ROE2 | 13.2 | % | 11.2 | % | 12.6 | % | 11.8 | % | ||||
Adjusted ROE3 | 12.6 | % | 10.7 | % | 12.5 | % | 11.5 | % | ||||
ROTCE2,3 | 15.0 | % | 12.9 | % | 14.3 | % | 13.5 | % | ||||
Adjusted ROTCE3 | 14.3 | % | 12.3 | % | 14.2 | % | 13.1 | % | ||||
Pre-tax profit margin4 | 29.9 | % | 27.0 | % | 28.9 | % | 28.0 | % | ||||
Pre-tax profit margin by segment4 | ||||||||||||
Institutional Securities | 34 | % | 26 | % | 32 | % | 28 | % | ||||
Wealth Management | 24 | % | 28 | % | 25 | % | 28 | % | ||||
Investment Management | 30 | % | 22 | % | 26 | % | 22 | % |
in millions, except per share and employee data | At September 30, 2020 | At December 31, 2019 | ||||
Liquidity resources5 | $ | 267,292 | $ | 215,868 | ||
Loans6 | $ | 146,237 | $ | 130,637 | ||
Total assets | $ | 955,940 | $ | 895,429 | ||
Deposits | $ | 239,253 | $ | 190,356 | ||
Borrowings | $ | 203,444 | $ | 192,627 | ||
Common shares outstanding | 1,576 | 1,594 | ||||
Common shareholders' equity | $ | 79,874 | $ | 73,029 | ||
Tangible common shareholders’ equity3 | $ | 70,646 | $ | 63,780 | ||
Book value per common share7 | $ | 50.67 | $ | 45.82 | ||
Tangible book value per common share3,7 | $ | 44.81 | $ | 40.01 | ||
Worldwide employees | 63,051 | 60,431 | ||||
Capital ratios8 | ||||||
Common Equity Tier 1 capital—Advanced | 16.9 | % | 16.9 | % | ||
Common Equity Tier 1 capital—Standardized | 17.4 | % | 16.4 | % | ||
Tier 1 capital—Advanced | 19.0 | % | 19.2 | % | ||
Tier 1 capital—Standardized | 19.5 | % | 18.6 | % | ||
Tier 1 leverage | 8.3 | % | 8.3 | % | ||
SLR9 | 7.4 | % | 6.4 | % |
1. |
The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. |
2. | ROE and ROTCE represent annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. |
3. | Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. |
4. | Pre-tax profit margin represents income before income taxes as a percentage of net revenues. |
5. | For a discussion of |
in millions, except per share and employee data | At September 30, 2017 | At December 31, 2016 | ||||||
Loans1 | $ | 104,431 | $ | 94,248 | ||||
Total assets | $ | 853,693 | $ | 814,949 | ||||
Global Liquidity Reserve2 | $ | 189,966 | $ | 202,297 | ||||
Deposits | $ | 154,639 | $ | 155,863 | ||||
Long-term borrowings | $ | 191,677 | $ | 164,775 | ||||
Common shareholders’ equity | $ | 70,458 | $ | 68,530 | ||||
Common shares outstanding | 1,812 | 1,852 | ||||||
Book value per common share3 | $ | 38.87 | $ | 36.99 | ||||
Worldwide employees | 57,702 | 55,311 |
6. | Amounts include loans held for investment (net of allowance) and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheets (see Note |
|
Book value per common share |
8. | At September 30, 2020 and December 31, 2019, our risk-based capital ratios are based on the Advanced Approach and the Standardized Approach rules, respectively. For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein. |
9. | At September 30, 2020, our SLR reflects the impact of a Federal Reserve interim final rule in effect until March 31, 2021. For further information, see “Liquidity and Capital Resources—Regulatory Requirements—Regulatory Developments” herein. |
Reconciliations from U.S. GAAP toNon-GAAP Consolidated Financial Measures
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions, except per share data | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income applicable to Morgan Stanley |
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U.S. GAAP | $ | 1,781 | $ | 1,597 | $ | 5,468 | $ | 4,313 | ||||||||
Impact of discrete tax provision1 | (83 | ) | — | (65 | ) | — | ||||||||||
Net income applicable to Morgan Stanley, excluding discrete taxprovision—non-GAAP | $ | 1,698 | $ | 1,597 | $ | 5,403 | $ | 4,313 | ||||||||
Earnings per diluted common share |
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U.S. GAAP | $ | 0.93 | $ | 0.81 | $ | 2.79 | $ | 2.11 | ||||||||
Impact of discrete tax provision1 | (0.05 | ) | — | (0.03 | ) | — | ||||||||||
Earnings per diluted common share, excluding discrete taxprovision—non-GAAP | $ | 0.88 | $ | 0.81 | $ | 2.76 | $ | 2.11 | ||||||||
Effective income tax rate | ||||||||||||||||
U.S. GAAP | 28.1% | 31.5% | 29.7% | 32.7% | ||||||||||||
Impact of discrete tax provision1 | 3.3% | — | 0.8% | — | ||||||||||||
Effective income tax rate from continuing operations, excluding discrete taxprovision—non-GAAP | 31.4% | 31.5% | 30.5% | 32.7% |
7 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
Tangible Equity
Monthly Average Balance | ||||||||||||||||||||||||
Three Months September 30, | Nine Months September 30, | |||||||||||||||||||||||
$ in millions | At September 30, | At December 31, | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
U.S. GAAP | ||||||||||||||||||||||||
Common equity | $ | 70,458 | $ | 68,530 | $ | 70,487 | $ | 69,531 | $ | 69,786 | $ | 68,859 | ||||||||||||
Preferred equity | 8,520 | 7,520 | 8,520 | 7,520 | 8,420 | 7,520 | ||||||||||||||||||
Morgan Stanley shareholders’ equity | 78,978 | 76,050 | 79,007 | 77,051 | 78,206 | 76,379 | ||||||||||||||||||
Junior subordinated debentures issued to capital trusts | — | — | — | 1,427 | — | 2,278 | ||||||||||||||||||
Less: Goodwill and net intangible assets | (9,079 | ) | (9,296) | (9,120 | ) | (9,368 | ) | (9,192 | ) | (9,447 | ) | |||||||||||||
Morgan Stanley tangible shareholders’equity—non-GAAP | $ | 69,899 | $ | 66,754 | $ | 69,887 | $ | 69,110 | $ | 69,014 | $ | 69,210 | ||||||||||||
U.S. GAAP | ||||||||||||||||||||||||
Common equity | $ | 70,458 | $ | 68,530 | $ | 70,487 | $ | 69,531 | $ | 69,786 | $ | 68,859 | ||||||||||||
Less: Goodwill and net intangible assets | (9,079 | ) | (9,296) | (9,120 | ) | (9,368 | ) | (9,192 | ) | (9,447 | ) | |||||||||||||
Tangible commonequity—non-GAAP | $ | 61,379 | $ | 59,234 | $ | 61,367 | $ | 60,163 | $ | 60,594 | $ | 59,412 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in billions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Average common equity1, 2 |
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Unadjusted | $ | 70.5 | $ | 69.5 | $ | 69.8 | $ | 68.9 | ||||||||
Excluding DVA | 71.3 | 69.6 | 70.4 | 69.0 | ||||||||||||
Excluding DVA and discrete tax provision (benefit) | 71.2 | 69.6 | 70.4 | 69.0 | ||||||||||||
Return on average common equity1, 3, 4 |
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Unadjusted | 9.6% | 8.7% | 9.8% | 7.7% | ||||||||||||
Excluding DVA | 9.5% | 8.7% | 9.7% | 7.7% | ||||||||||||
Excluding DVA and discrete tax provision (benefit) | 9.0% | 8.7% | 9.6% | 7.7% | ||||||||||||
Average tangible common equity1, 2, 5 |
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Unadjusted | $ | 61.4 | $ | 60.2 | $ | 60.6 | $ | 59.4 | ||||||||
Excluding DVA | 62.1 | 60.2 | 61.2 | 59.5 | ||||||||||||
Excluding DVA and discrete tax provision (benefit) | 62.1 | 60.2 | 61.3 | 59.5 | ||||||||||||
Return on average tangible common equity1, 4 |
| |||||||||||||||
Unadjusted | 11.0% | 10.1% | 11.3% | 9.0% | ||||||||||||
Excluding DVA | 10.9% | 10.1% | 11.1% | 9.0% | ||||||||||||
Excluding DVA and discrete tax provision (benefit) | 10.3% | 10.1% | 11.0% | 9.0% | ||||||||||||
Expense efficiency ratio6 | 73.0% | 73.3% | 72.1% | 74.2% |
At September 30, 2017 | At December 31, 2016 | |||||||
Tangible book value per common share5 | $ | 33.86 | $ | 31.98 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions, except per share data | 2020 | 2019 | 2020 | 2019 | ||||||||
Earnings applicable to Morgan Stanley common shareholders | $ | 2,597 | $ | 2,060 | $ | 7,234 | $ | 6,427 | ||||
Impact of adjustments | (113 | ) | (89 | ) | (10 | ) | (190 | ) | ||||
Adjusted earnings applicable to Morgan Stanley common shareholders—non-GAAP1 | $ | 2,484 | $ | 1,971 | $ | 7,224 | $ | 6,237 | ||||
Earnings per diluted common share | $ | 1.66 | $ | 1.27 | $ | 4.62 | $ | 3.89 | ||||
Impact of adjustments | (0.07 | ) | (0.06 | ) | — | (0.12 | ) | |||||
Adjusted earnings per diluted common share—non-GAAP1 | $ | 1.59 | $ | 1.21 | $ | 4.62 | $ | 3.77 | ||||
Effective income tax rate | 21.1 | % | 18.2 | % | 22.2 | % | 19.1 | % | ||||
Impact of adjustments | 3.2 | % | 3.2 | % | 0.1 | % | 2.2 | % | ||||
Adjusted effective income tax rate—non-GAAP1 | 24.3 | % | 21.4 | % | 22.3 | % | 21.3 | % |
Average Monthly Balance | ||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Tangible equity | ||||||||||||
Morgan Stanley shareholders' equity | $ | 87,210 | $ | 81,912 | $ | 85,378 | $ | 81,028 | ||||
Less: Goodwill and net intangible assets | (9,260 | ) | (9,389 | ) | (9,248 | ) | (9,097 | ) | ||||
Tangible Morgan Stanley shareholders' equity—Non-GAAP | $ | 77,950 | $ | 72,523 | $ | 76,130 | $ | 71,931 | ||||
Common shareholders' equity | $ | 78,690 | $ | 73,392 | $ | 76,858 | $ | 72,508 | ||||
Less: Goodwill and net intangible assets | (9,260 | ) | (9,389 | ) | (9,248 | ) | (9,097 | ) | ||||
Tangible common shareholders' equity—Non-GAAP | $ | 69,430 | $ | 64,003 | $ | 67,610 | $ | 63,411 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in billions | 2020 | 2019 | 2020 | 2019 | ||||||||
Average common equity | ||||||||||||
Unadjusted—GAAP | $ | 78.7 | $ | 73.4 | $ | 76.9 | $ | 72.5 | ||||
Adjusted1—Non-GAAP | 78.7 | 73.4 | 76.9 | 72.4 | ||||||||
ROE2 | ||||||||||||
Unadjusted—GAAP | 13.2 | % | 11.2 | % | 12.6 | % | 11.8 | % | ||||
Adjusted—Non-GAAP1, 3 | 12.6 | % | 10.7 | % | 12.5 | % | 11.5 | % | ||||
Average tangible common equity—Non-GAAP | ||||||||||||
Unadjusted | $ | 69.4 | $ | 64.0 | $ | 67.6 | $ | 63.4 | ||||
Adjusted1 | 69.4 | 64.0 | 67.6 | 63.3 | ||||||||
ROTCE2—Non-GAAP | ||||||||||||
Unadjusted | 15.0 | % | 12.9 | % | 14.3 | % | 13.5 | % | ||||
Adjusted1, 3 | 14.3 | % | 12.3 | % | 14.2 | % | 13.1 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in billions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Pre-tax profit margin7 | ||||||||||||||||
Institutional Securities | 28% | 30% | 31% | 30% | ||||||||||||
Wealth Management | 27% | 23% | 25% | 22% | ||||||||||||
Investment Management | 19% | 18% | 19% | 16% | ||||||||||||
Consolidated | 27% | 27% | 28% | 26% | ||||||||||||
Average common equity8 |
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Institutional Securities | $ | 40.2 | $ | 43.2 | $ | 40.2 | $ | 43.2 | ||||||||
Wealth Management | 17.2 | 15.3 | 17.2 | 15.3 | ||||||||||||
Investment Management | 2.4 | 2.8 | 2.4 | 2.8 | ||||||||||||
Parent Company | 10.7 | 8.2 | 10.0 | 7.6 | ||||||||||||
Consolidated average common equity | $ | 70.5 | $ | 69.5 | $ | 69.8 | $ | 68.9 | ||||||||
Return on average common equity4 |
| |||||||||||||||
Institutional Securities | 8.9% | 8.3% | 9.6% | 7.1% | ||||||||||||
Wealth Management | 15.8% | 14.5% | 15.0% | 13.3% | ||||||||||||
Investment Management | 18.8% | 9.3% | 15.4% | 9.0% | ||||||||||||
Consolidated | 9.6% | 8.7% | 9.8% | 7.7% |
DVA—Debt valuation adjustment represents the change in the fair value resulting from fluctuations in our credit spreads and other credit factors related to liabilities carried at fair value under the fair value option, primarily certain Long-term and Short-term borrowings.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in billions | 2020 | 2019 | 2020 | 2019 | ||||||||
Average common equity4, 5 | ||||||||||||
Institutional Securities | $ | 42.8 | $ | 40.4 | $ | 42.8 | $ | 40.4 | ||||
Wealth Management | 18.2 | 18.2 | 18.2 | 18.2 | ||||||||
Investment Management | 2.6 | 2.5 | 2.6 | 2.5 | ||||||||
Average tangible common equity4, 5 | ||||||||||||
Institutional Securities | $ | 42.3 | $ | 39.9 | $ | 42.3 | $ | 39.9 | ||||
Wealth Management | 10.4 | 10.2 | 10.4 | 10.2 | ||||||||
Investment Management | 1.7 | 1.5 | 1.7 | 1.5 | ||||||||
ROE6 | ||||||||||||
Institutional Securities | 14.5 | % | 9.8 | % | 13.4 | % | 10.8 | % | ||||
Wealth Management | 17.9 | % | 20.6 | % | 18.2 | % | 20.2 | % | ||||
Investment Management | 34.0 | % | 22.1 | % | 23.0 | % | 21.5 | % | ||||
ROTCE6 | ||||||||||||
Institutional Securities | 14.7 | % | 9.9 | % | 13.5 | % | 10.9 | % | ||||
Wealth Management | 31.4 | % | 36.9 | % | 31.7 | % | 36.2 | % | ||||
Investment Management | 52.6 | % | 35.6 | % | 35.6 | % | 34.7 | % |
1. |
|
2. |
|
|
|
|
|
|
The calculations used in determining our “ROE and ROTCE Targets” referred to in the following section are the Adjusted ROE and Adjusted ROTCE amounts shown in this table. |
Average common equity and |
|
5. | The sums of the segments' Average common equity and |
6. | The calculation of ROE and ROTCE by segment uses annualized net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment. |
September 2020 Form 10-Q | 8 |
Management’s Discussion and Analysis |
We have
Information—Income Tax Matters” herein.
Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues,non-interest expenses or other relevant measures.
As a result
Net Revenues, Compensation Expense and Income Taxes
For discussionscomponents of our business segments, net revenues, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Net Revenues” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Net Revenues by Segment” in Part II, Item 7 of the 2016 Form10-K. For a discussion of our compensation expense see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Compensation Expense” in Part II, Item 7 of the 2016 Form10-K. For a discussion of income taxes, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Income Taxes”Segments” in Part II, Item 7 of the 20162019 Form10-K.
9 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
Three Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Revenues | ||||||||||||
Investment banking | $ | 1,270 | $ | 1,104 | 15% | |||||||
Trading | 2,504 | 2,393 | 5% | |||||||||
Investments | 52 | 36 | 44% | |||||||||
Commissions and fees | 561 | 592 | (5)% | |||||||||
Asset management, distribution and administration fees | 88 | 68 | 29% | |||||||||
Other | 143 | 243 | (41)% | |||||||||
Totalnon-interest revenues | 4,618 | 4,436 | 4% | |||||||||
Interest income | 1,421 | 980 | 45% | |||||||||
Interest expense | 1,663 | 863 | 93% | |||||||||
Net interest | (242) | 117 | N/M | |||||||||
Net revenues | 4,376 | 4,553 | (4)% | |||||||||
Compensation and benefits | 1,532 | 1,657 | (8)% | |||||||||
Non-compensation expenses | 1,608 | 1,513 | 6% | |||||||||
Totalnon-interest expenses | 3,140 | 3,170 | (1)% | |||||||||
Income from continuing operations before income taxes | 1,236 | 1,383 | (11)% | |||||||||
Provision for income taxes | 260 | 381 | (32)% | |||||||||
Income from continuing operations | 976 | 1,002 | (3)% | |||||||||
Income (loss) from discontinued operations, net of income taxes | 6 | 8 | (25)% | |||||||||
Net income | 982 | 1,010 | (3)% | |||||||||
Net income applicable to noncontrolling interests | 9 | 44 | (80)% | |||||||||
Net income applicable to | $ | 973 | $ | 966 | 1% |
Nine Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Revenues | ||||||||||||
Investment banking | $ | 4,100 | $ | 3,202 | 28% | |||||||
Trading | 8,241 | 6,782 | 22% | |||||||||
Investments | 155 | 144 | 8% | |||||||||
Commissions and fees | 1,811 | 1,854 | (2)% | |||||||||
Asset management, distribution and administration fees | 268 | 210 | 28% | |||||||||
Other | 442 | 385 | 15% | |||||||||
Totalnon-interest revenues | 15,017 | 12,577 | 19% | |||||||||
Interest income | 3,788 | 2,999 | 26% | |||||||||
Interest expense | 4,515 | 2,731 | 65% | |||||||||
Net interest | (727) | 268 | N/M | |||||||||
Net revenues | 14,290 | 12,845 | 11% | |||||||||
Compensation and benefits | 5,069 | 4,664 | 9% | |||||||||
Non-compensation expenses | 4,812 | 4,384 | 10% | |||||||||
Totalnon-interest expenses | 9,881 | 9,048 | 9% | |||||||||
Income from continuing operations before income taxes | 4,409 | 3,797 | 16% | |||||||||
Provision for income taxes | 1,132 | 1,109 | 2% | |||||||||
Income from continuing operations | 3,277 | 2,688 | 22% | |||||||||
Income (loss) from discontinued operations, net of income taxes | (21) | 1 | N/M | |||||||||
Net income | 3,256 | 2,689 | 21% | |||||||||
Net income applicable to | 77 | 144 | (47)% | |||||||||
Net income applicable to | $ | 3,179 | $ | 2,545 | 25% |
N/M—Not Meaningful
Three Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Revenues | ||||||||
Investment banking | $ | 1,707 | $ | 1,535 | 11 | % | ||
Trading | 2,807 | 2,533 | 11 | % | ||||
Investments | 87 | (18 | ) | N/M | ||||
Commissions and fees | 639 | 643 | (1 | )% | ||||
Asset management | 114 | 100 | 14 | % | ||||
Other | 114 | 51 | 124 | % | ||||
Total non-interest revenues | 5,468 | 4,844 | 13 | % | ||||
Interest income | 1,086 | 3,112 | (65 | )% | ||||
Interest expense | 492 | 2,933 | (83 | )% | ||||
Net interest | 594 | 179 | N/M | |||||
Net revenues | 6,062 | 5,023 | 21 | % | ||||
Compensation and benefits | 2,001 | 1,768 | 13 | % | ||||
Non-compensation expenses | 2,013 | 1,948 | 3 | % | ||||
Total non-interest expenses | 4,014 | 3,716 | 8 | % | ||||
Income before provision for income taxes | 2,048 | 1,307 | 57 | % | ||||
Provision for income taxes | 385 | 189 | 104 | % | ||||
Net income | 1,663 | 1,118 | 49 | % | ||||
Net income applicable to noncontrolling interests | 16 | 45 | (64 | )% | ||||
Net income applicable to Morgan Stanley | $ | 1,647 | $ | 1,073 | 53 | % |
Nine Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Revenues | ||||||||
Investment banking | $ | 4,902 | $ | 4,158 | 18 | % | ||
Trading | 10,375 | 8,221 | 26 | % | ||||
Investments | 98 | 257 | (62 | )% | ||||
Commissions and fees | 2,230 | 1,889 | 18 | % | ||||
Asset management | 342 | 310 | 10 | % | ||||
Other | (628 | ) | 416 | N/M | ||||
Total non-interest revenues | 17,319 | 15,251 | 14 | % | ||||
Interest income | 4,809 | 9,457 | (49 | )% | ||||
Interest expense | 3,184 | 9,376 | (66 | )% | ||||
Net interest | 1,625 | 81 | N/M | |||||
Net revenues | 18,944 | 15,332 | 24 | % | ||||
Compensation and benefits | 6,767 | 5,376 | 26 | % | ||||
Non-compensation expenses | 6,186 | 5,591 | 11 | % | ||||
Total non-interest expenses | 12,953 | 10,967 | 18 | % | ||||
Income before provision for income taxes | 5,991 | 4,365 | 37 | % | ||||
Provision for income taxes | 1,326 | 703 | 89 | % | ||||
Net income | 4,665 | 3,662 | 27 | % | ||||
Net income applicable to noncontrolling interests | 75 | 97 | (23 | )% | ||||
Net income applicable to Morgan Stanley | $ | 4,590 | $ | 3,565 | 29 | % |
Three Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Advisory | $ | 357 | $ | 550 | (35 | )% | ||
Underwriting: | ||||||||
Equity | 874 | 401 | 118 | % | ||||
Fixed income | 476 | 584 | (18 | )% | ||||
Total Underwriting | 1,350 | 985 | 37 | % | ||||
Total Investment banking | $ | 1,707 | $ | 1,535 | 11 | % |
Nine Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Advisory | $ | 1,181 | $ | 1,462 | (19 | )% | ||
Underwriting: | ||||||||
Equity | 2,092 | 1,286 | 63 | % | ||||
Fixed income | 1,629 | 1,410 | 16 | % | ||||
Total Underwriting | 3,721 | 2,696 | 38 | % | ||||
Total Investment banking | $ | 4,902 | $ | 4,158 | 18 | % |
September |
Management’s Discussion and Analysis |
|
Three Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Advisory | $ | 555 | $ | 504 | 10% | |||||||
Underwriting: | ||||||||||||
Equity | 273 | 236 | 16% | |||||||||
Fixed income | 442 | 364 | 21% | |||||||||
Total underwriting | 715 | 600 | 19% | |||||||||
Total investment banking | $ | 1,270 | $ | 1,104 | 15% | |||||||
Nine Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Advisory | $ | 1,555 | $ | 1,592 | (2)% | |||||||
Underwriting: | ||||||||||||
Equity | 1,068 | 662 | 61% | |||||||||
Fixed income | 1,477 | 948 | 56% | |||||||||
Total underwriting | 2,545 | 1,610 | 58% | |||||||||
Total investment banking | $ | 4,100 | $ | 3,202 | 28% |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in billions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Completed mergers and acquisitions1 | $ | 229 | $ | 190 | $ | 585 | $ | 728 | ||||||||
Equity andequity- related offerings2, 3 | 16 | 13 | 46 | 34 | ||||||||||||
Fixed income offerings2, 4 | 60 | 72 | 201 | 185 |
Volumes
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in billions | 2020 | 2019 | 2020 | 2019 | ||||||||
Completed mergers and acquisitions1 | $ | 88 | $ | 215 | $ | 633 | $ | 582 | ||||
Equity and equity-related offerings2, 3 | 25 | 17 | 74 | 47 | ||||||||
Fixed income offerings2, 4 | 91 | 90 | 304 | 211 |
1. |
Includes transactions of $100 million or more. |
2. |
Based on full credit for single book managers and equal credit for joint book managers. |
3. |
Includes Rule 144A issuances and registered public offerings of common stock, |
4. |
|
Investment banking revenues of $1,270$1,707 million in the current quarter increased 11% from the prior year quarter, reflecting an increase in revenues in our Equity underwriting business, partially offset by a decrease in revenues in our Advisory and $4,100Fixed income underwriting businesses.
revenues in our Advisory revenues increased in the current quarter reflecting the higher volumes of completed merger, acquisition and restructuring transactions (“M&A”) (see Investment Banking Volumes table). business.
Three Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Trading | $ | 2,807 | $ | 2,533 | 11 | % | ||
Commissions and fees | 639 | 643 | (1 | )% | ||||
Asset management | 114 | 100 | 14 | % | ||||
Net interest | 594 | 179 | N/M | |||||
Total | $ | 4,154 | $ | 3,455 | 20 | % |
Nine Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Trading | $ | 10,375 | $ | 8,221 | 26 | % | ||
Commissions and fees | 2,230 | 1,889 | 18 | % | ||||
Asset management | 342 | 310 | 10 | % | ||||
Net interest | 1,625 | 81 | N/M | |||||
Total | $ | 14,572 | $ | 10,501 | 39 | % |
Three Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Equity | $ | 2,262 | $ | 1,991 | 14 | % | ||
Fixed Income | 1,924 | 1,430 | 35 | % | ||||
Other | (32 | ) | 34 | (194 | )% | |||
Total | $ | 4,154 | $ | 3,455 | 20 | % |
Nine Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Equity | $ | 7,303 | $ | 6,136 | 19 | % | ||
Fixed Income | 7,160 | 4,273 | 68 | % | ||||
Other | 109 | 92 | 18 | % | ||||
Total | $ | 14,572 | $ | 10,501 | 39 | % |
11 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
Three Months Ended September 30, 2020 | ||||||||||||
Net | ||||||||||||
$ in millions | Trading | Fees1 | Interest2 | Total | ||||||||
Financing | $ | 929 | $ | 108 | $ | 116 | $ | 1,153 | ||||
Execution services | 606 | 580 | (77 | ) | 1,109 | |||||||
Total Equity | $ | 1,535 | $ | 688 | $ | 39 | $ | 2,262 | ||||
Total Fixed Income | $ | 1,420 | $ | 65 | $ | 439 | $ | 1,924 |
Three Months Ended September 30, 2019 | ||||||||||||
Net | ||||||||||||
$ in millions | Trading | Fees1 | Interest2 | Total | ||||||||
Financing | $ | 1,049 | $ | 88 | $ | (90 | ) | $ | 1,047 | |||
Execution services | 446 | 564 | (66 | ) | 944 | |||||||
Total Equity | $ | 1,495 | $ | 652 | $ | (156 | ) | $ | 1,991 | |||
Total Fixed Income | $ | 1,329 | $ | 90 | $ | 11 | $ | 1,430 |
Nine Months Ended September 30, 2020 | ||||||||||||
Net | ||||||||||||
$ in millions | Trading | Fees1 | Interest2 | Total | ||||||||
Financing | $ | 2,847 | $ | 325 | $ | 172 | $ | 3,344 | ||||
Execution services | 2,134 | 2,014 | (189 | ) | 3,959 | |||||||
Total Equity | $ | 4,981 | $ | 2,339 | $ | (17 | ) | $ | 7,303 | |||
Total Fixed Income | $ | 5,661 | $ | 234 | $ | 1,265 | $ | 7,160 |
Nine Months Ended September 30, 2019 | ||||||||||||
Net | ||||||||||||
$ in millions | Trading | Fees1 | Interest2 | Total | ||||||||
Financing | $ | 3,249 | $ | 280 | $ | (500 | ) | $ | 3,029 | |||
Execution services | 1,597 | 1,671 | (161 | ) | 3,107 | |||||||
Total Equity | $ | 4,846 | $ | 1,951 | $ | (661 | ) | $ | 6,136 | |||
Total Fixed Income | $ | 4,200 | $ | 249 | $ | (176 | ) | $ | 4,273 |
1. | Includes Commissions and fees and Asset management revenues. |
2. | Includes funding costs, which are allocated to the businesses based on funding usage. |
September 2020 Form 10-Q | 12 |
Management’s Discussion and Analysis |
Equity underwritingGlobal macro products revenues increased primarily due to higher client activity in both rates and foreign exchange products and improved inventory management results.
Sales off-balance sheet instruments, and Trading Net Revenues
By higher information processing and communications expenses. Partially offsetting these increases were lower marketing and business development expenses.
Three Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Trading | $ | 2,504 | $ | 2,393 | 5% | |||||||
Commissions and fees | 561 | 592 | (5)% | |||||||||
Asset management, distribution and administration fees | 88 | 68 | 29% | |||||||||
Net interest | (242) | 117 | N/M | |||||||||
Total | $ | 2,911 | $ | 3,170 | (8)% | |||||||
Nine Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Trading | $ | 8,241 | $ | 6,782 | 22% | |||||||
Commissions and fees | 1,811 | 1,854 | (2)% | |||||||||
Asset management, distribution and administration fees | 268 | 210 | 28% | |||||||||
Net interest | (727) | 268 | N/M | |||||||||
Total | $ | 9,593 | $ | 9,114 | 5% |
N/M—Not Meaningful
13 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
By Business
Three Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Equity | $ | 1,891 | $ | 1,883 | —% | |||||||
Fixed income | 1,167 | 1,479 | (21)% | |||||||||
Other | (147) | (192) | 23% | |||||||||
Total | $ | 2,911 | $ | 3,170 | (8)% | |||||||
Nine Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Equity | $ | 6,062 | $ | 6,084 | —% | |||||||
Fixed income | 4,120 | 3,649 | 13% | |||||||||
Other | (589) | (619) | 5% | |||||||||
Total | $ | 9,593 | $ | 9,114 | 5% |
Sales and Trading Activities—Equity and Fixed Income
Following is a description of the sales and trading activities within our equities and fixed income businesses as well as how their results impact the income statement line items, followed by a presentation and explanation of results.
Equities—Financing.We provide financing and prime brokerage services to our clients active in the equity markets through a variety of products including margin lending, securities lending and swaps. Results from this business are largely driven by the difference between financing income earned and financing costs incurred, which are reflected in Net interest for securities and equity lending products and in Trading revenues for derivative products.
Equities—Execution services. We make markets for our clients in equity-related securities and derivative products, including providing liquidity and hedging products. A significant portion of the results for this business is generated by commissions and fees from executing and clearing client transactions on major stock and derivative exchanges as well as fromover-the-counter (“OTC”) transactions. Market-making also generates gains and losses on inventory, which are reflected in Trading revenues.
Fixed income—Within fixed income we make markets in order to facilitate client activity as part of the following products and services.
|
|
Three Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Revenues | ||||||||
Investment banking | $ | 135 | $ | 118 | 14 | % | ||
Trading | 268 | 61 | N/M | |||||
Investments | 1 | — | N/M | |||||
Commissions and fees | 477 | 416 | 15 | % | ||||
Asset management | 2,793 | 2,639 | 6 | % | ||||
Other | 94 | 81 | 16 | % | ||||
Total non-interest revenues | 3,768 | 3,315 | 14 | % | ||||
Interest income | 1,065 | 1,378 | (23 | )% | ||||
Interest expense | 176 | 335 | (47 | )% | ||||
Net interest | 889 | 1,043 | (15 | )% | ||||
Net revenues | 4,657 | 4,358 | 7 | % | ||||
Compensation and benefits | 2,684 | 2,340 | 15 | % | ||||
Non-compensation expenses | 853 | 780 | 9 | % | ||||
Total non-interest expenses | 3,537 | 3,120 | 13 | % | ||||
Income before provision for income taxes | $ | 1,120 | $ | 1,238 | (10 | )% | ||
Provision for income taxes | 278 | 276 | 1 | % | ||||
Net income applicable to Morgan Stanley | $ | 842 | $ | 962 | (12 | )% |
Nine Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Revenues | ||||||||
Investment banking | $ | 403 | $ | 365 | 10 | % | ||
Trading | 413 | 525 | (21 | )% | ||||
Investments | 9 | 1 | N/M | |||||
Commissions and fees | 1,538 | 1,250 | 23 | % | ||||
Asset management | 7,980 | 7,544 | 6 | % | ||||
Other | 216 | 281 | (23 | )% | ||||
Total non-interest revenues | 10,559 | 9,966 | 6 | % | ||||
Interest income | 3,468 | 4,139 | (16 | )% | ||||
Interest expense | 653 | 950 | (31 | )% | ||||
Net interest | 2,815 | 3,189 | (12 | )% | ||||
Net revenues | 13,374 | 13,155 | 2 | % | ||||
Compensation and benefits | 7,625 | 7,184 | 6 | % | ||||
Non-compensation expenses | 2,432 | 2,302 | 6 | % | ||||
Total non-interest expenses | 10,057 | 9,486 | 6 | % | ||||
Income before provision for income taxes | $ | 3,317 | $ | 3,669 | (10 | )% | ||
Provision for income taxes | 758 | 830 | (9 | )% | ||||
Net income applicable to Morgan Stanley | $ | 2,559 | $ | 2,839 | (10 | )% |
At September 30, 2020 | At December 31, 2019 | |||||
$ in billions, except employee data | ||||||
Client assets | $ | 2,852 | $ | 2,700 | ||
Fee-based client assets1 | $ | 1,333 | $ | 1,267 | ||
Fee-based client assets as a percentage of total client assets | 47 | % | 47 | % | ||
Client liabilities2 | $ | 100 | $ | 90 | ||
Investment securities | $ | 88.6 | $ | 67.2 | ||
Loans and lending commitments | $ | 105.9 | $ | 93.2 | ||
Wealth Management representatives | 15,469 | 15,468 |
Three Months Ended September 30, | ||||||
2020 | 2019 | |||||
Per representative: | ||||||
Annualized revenues ($ in thousands)3 | $ | 1,207 | $ | 1,118 | ||
Client assets ($ in millions)4 | $ | 184 | $ | 165 | ||
Fee-based asset flows ($ in billions)5 | $ | 23.8 | $ | 15.5 |
Nine Months Ended September 30, | ||||||
2020 | 2019 | |||||
Per representative: | ||||||
Annualized revenues ($ in thousands)3 | $ | 1,155 | $ | 1,121 | ||
Client assets ($ in millions)4 | $ | 184 | $ | 165 | ||
Fee-based asset flows ($ in billions)5 | $ | 53.3 | $ | 40.1 |
1. |
Fee-based client assets represent the amount |
|
Sales and Trading Net Revenues—Equity and Fixed Income
Three Months Ended September 30, 2017 | ||||||||||||||||
$ in millions | Trading | Fees1 | Net Interest2 | Total | ||||||||||||
Financing | $ | 1,029 | $ | 92 | $ | (206 | ) | $ | 915 | |||||||
Execution services | 540 | 495 | (59 | ) | 976 | |||||||||||
Total Equity | $ | 1,569 | $ | 587 | $ | (265 | ) | $ | 1,891 | |||||||
Total Fixed income | $ | 1,073 | $ | 65 | $ | 29 | $ | 1,167 |
Three Months Ended September 30, 2016 | ||||||||||||||||
$ in millions | Trading | Fees1 | Net Interest2 | Total | ||||||||||||
Financing | $ | 872 | $ | 83 | $ | (110 | ) | $ | 845 | |||||||
Execution services | 536 | 541 | (39 | ) | 1,038 | |||||||||||
Total Equity | $ | 1,408 | $ | 624 | $ | (149 | ) | $ | 1,883 | |||||||
Total Fixed income | $ | 1,209 | $ | 38 | $ | 232 | $ | 1,479 |
Nine Months Ended September 30, 2017 | ||||||||||||||||
$ in millions | Trading | Fees1 | Net Interest2 | Total | ||||||||||||
Financing | $ | 3,126 | $ | 269 | $ | (621 | ) | $ | 2,774 | |||||||
Execution services | 1,805 | 1,643 | (160 | ) | 3,288 | |||||||||||
Total Equity | $ | 4,931 | $ | 1,912 | $ | (781 | ) | $ | 6,062 | |||||||
Total Fixed income | $ | 3,785 | $ | 167 | $ | 168 | $ | 4,120 |
Nine Months Ended September 30, 2016 | ||||||||||||||||
$ in millions | Trading | Fees1 | Net Interest2 | Total | ||||||||||||
Financing | $ | 2,797 | $ | 259 | $ | (152 | ) | $ | 2,904 | |||||||
Execution services | 1,621 | 1,690 | (131 | ) | 3,180 | |||||||||||
Total Equity | $ | 4,418 | $ | 1,949 | $ | (283 | ) | $ | 6,084 | |||||||
Total Fixed income | $ | 2,782 | $ | 115 | $ | 752 | $ | 3,649 |
|
2. |
Client liabilities include securities-based and |
3. | Revenues per representative equals Wealth Management’s annualized net revenues divided by the average number of representatives. |
4. | Client assets per representative equals total period-end client assets divided by period-end number of representatives. |
5. | Excludes institutional cash management-related activity. For a description of the Inflows and Outflows included within Fee-based asset flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Wealth Management” in the 2019 Form 10-K. |
September |
Management’s Discussion and Analysis |
We manage each of the sales and trading businesses based on its aggregate net revenues, which are comprised of the income statement line items quantified in the previous table. Trading revenues are affected by a variety of market dynamics, including volumes,bid-offer spreads, and inventory prices, as well as impacts from hedging activity, which are interrelated. We provide qualitative commentary in the discussion of results that follow on the key drivers of period over period variances, as the quantitative impact of the various market dynamics typically cannot be disaggregated.
For additional information on total Trading revenues, see the table “Trading
Sales and Trading
Three Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Investment banking | $ | 135 | $ | 118 | 14 | % | ||
Trading | 268 | 61 | N/M | |||||
Commissions and fees | 477 | 416 | 15 | % | ||||
Total | $ | 880 | $ | 595 | 48 | % | ||
Transactional revenues as a % of Net revenues | 19 | % | 14 | % |
Nine Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Investment banking | $ | 403 | $ | 365 | 10 | % | ||
Trading | 413 | 525 | (21 | )% | ||||
Commissions and fees | 1,538 | 1,250 | 23 | % | ||||
Total | $ | 2,354 | $ | 2,140 | 10 | % | ||
Transactional revenues as a % of Net revenues | 18 | % | 16 | % |
Equity
Equity sales and trading net
FinancingTransactional revenues of $2,354 million in the current year period increased 8%10% from the prior year period primarily as a result of higher Commissions and fees, partially offset by lower Trading revenues.
Execution services decreasedcurrent year period increased 6% from the prior year quarterperiod primarily
Fixed Income
Fixed income net revenues
Credit products decreasedCompensation and benefits expenses increased in the current year period primarily due to tighter corporate credit spreadsan increase in the formulaic payout to Wealth Management representatives, driven by higher compensable revenues, as well as higher salaries.
15 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
$ in billions | At June 30, 2020 | Inflows | Outflows | Market Impact | At September 30, 2020 | ||||||||||
Separately managed1 | $ | 313 | $ | 19 | $ | (4 | ) | $ | 14 | $ | 342 | ||||
Unified managed | 305 | 16 | (12 | ) | 18 | 327 | |||||||||
Advisor | 149 | 8 | (8 | ) | 9 | 158 | |||||||||
Portfolio manager | 431 | 21 | (16 | ) | 23 | 459 | |||||||||
Subtotal | $ | 1,198 | $ | 64 | $ | (40 | ) | $ | 64 | $ | 1,286 | ||||
Cash management | 38 | 12 | (3 | ) | — | 47 | |||||||||
Total fee-based client assets | $ | 1,236 | $ | 76 | $ | (43 | ) | $ | 64 | $ | 1,333 |
$ in billions | At June 30, 2019 | Inflows | Outflows | Market Impact | At September 30, 2019 | ||||||||||
Separately managed1 | $ | 296 | $ | 15 | $ | (5 | ) | $ | 6 | $ | 312 | ||||
Unified managed | 292 | 12 | (10 | ) | 1 | 295 | |||||||||
Advisor | 149 | 7 | (8 | ) | — | 148 | |||||||||
Portfolio manager | 400 | 19 | (14 | ) | 2 | 407 | |||||||||
Subtotal | $ | 1,137 | $ | 53 | $ | (37 | ) | $ | 9 | $ | 1,162 | ||||
Cash management | 22 | 4 | (3 | ) | 1 | 24 | |||||||||
Total fee-based client assets | $ | 1,159 | $ | 57 | $ | (40 | ) | $ | 10 | $ | 1,186 |
$ in billions | At December 31, 2019 | Inflows | Outflows | Market Impact | At September 30, 2020 | ||||||||||
Separately managed1 | $ | 322 | $ | 37 | $ | (14 | ) | $ | (3 | ) | $ | 342 | |||
Unified managed | 313 | 43 | (33 | ) | 4 | 327 | |||||||||
Advisor | 155 | 22 | (21 | ) | 2 | 158 | |||||||||
Portfolio manager | 435 | 62 | (43 | ) | 5 | 459 | |||||||||
Subtotal | $ | 1,225 | $ | 164 | $ | (111 | ) | $ | 8 | $ | 1,286 | ||||
Cash management | 42 | 21 | (16 | ) | — | 47 | |||||||||
Total fee-based client assets | $ | 1,267 | $ | 185 | $ | (127 | ) | $ | 8 | $ | 1,333 |
$ in billions | At December 31, 2018 | Inflows | Outflows | Market Impact | At September 30, 2019 | ||||||||||
Separately managed1 | $ | 279 | $ | 38 | $ | (15 | ) | $ | 10 | $ | 312 | ||||
Unified managed | 257 | 35 | (30 | ) | 33 | 295 | |||||||||
Advisor | 137 | 20 | (24 | ) | 15 | 148 | |||||||||
Portfolio manager | 353 | 54 | (38 | ) | 38 | 407 | |||||||||
Subtotal | $ | 1,026 | $ | 147 | $ | (107 | ) | $ | 96 | $ | 1,162 | ||||
Cash management | 20 | 12 | (12 | ) | 4 | 24 | |||||||||
Total fee-based client assets | $ | 1,046 | $ | 159 | $ | (119 | ) | $ | 100 | $ | 1,186 |
1. | Includes non-custody account values reflecting prior quarter-end balances due to a lag in the reporting of asset values by third-party custodians. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
Fee rate in bps | 2020 | 2019 | 2020 | 2019 | ||||
Separately managed | 15 | 15 | 14 | 15 | ||||
Unified managed | 99 | 99 | 99 | 100 | ||||
Advisor | 85 | 86 | 85 | 87 | ||||
Portfolio manager | 94 | 96 | 94 | 95 | ||||
Subtotal | 73 | 74 | 72 | 74 | ||||
Cash management | 5 | 6 | 5 | 6 | ||||
Total fee-based client assets | 71 | 73 | 70 | 73 |
E*TRADE Revenues | Morgan Stanley Revenues |
Net interest income | Net interest |
Fees and service charges | Commissions and fees1 Asset management |
Commissions | Commissions and fees |
1. | The primary element of this mapping is revenues from order flow payments. |
September 2020 Form 10-Q | 16 |
Management’s Discussion and Analysis |
Three Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Revenues | ||||||||
Trading | $ | 2 | $ | 2 | — | % | ||
Investments | 258 | 105 | 146 | % | ||||
Commissions and fees | 1 | 1 | — | % | ||||
Asset management | 795 | 664 | 20 | % | ||||
Other | 1 | — | N/M | |||||
Total non-interest revenues | 1,057 | 772 | 37 | % | ||||
Interest income | 7 | 4 | 75 | % | ||||
Interest expense | 8 | 12 | (33 | )% | ||||
Net interest | (1 | ) | (8 | ) | 88 | % | ||
Net revenues | 1,056 | 764 | 38 | % | ||||
Compensation and benefits | 401 | 319 | 26 | % | ||||
Non-compensation expenses | 340 | 280 | 21 | % | ||||
Total non-interest expenses | 741 | 599 | 24 | % | ||||
Income before provision for income taxes | 315 | 165 | 91 | % | ||||
Provision for income taxes | 72 | 27 | 167 | % | ||||
Net income | 243 | 138 | 76 | % | ||||
Net income applicable to noncontrolling interests | 18 | — | N/M | |||||
Net income applicable to Morgan Stanley | $ | 225 | $ | 138 | 63 | % |
Nine Months Ended September 30, | ||||||||
$ in millions | 2020 | 2019 | % Change | |||||
Revenues | ||||||||
Investment banking | $ | — | $ | (1 | ) | 100 | % | |
Trading | (13 | ) | (2 | ) | N/M | |||
Investments | 552 | 543 | 2 | % | ||||
Commissions and fees | 1 | 1 | — | % | ||||
Asset management | 2,144 | 1,893 | 13 | % | ||||
Other | (39 | ) | (6 | ) | N/M | |||
Total non-interest revenues | 2,645 | 2,428 | 9 | % | ||||
Interest income | 22 | 14 | 57 | % | ||||
Interest expense | 33 | 35 | (6 | )% | ||||
Net interest | (11 | ) | (21 | ) | 48 | % | ||
Net revenues | 2,634 | 2,407 | 9 | % | ||||
Compensation and benefits | 1,012 | 1,049 | (4 | )% | ||||
Non-compensation expenses | 948 | 820 | 16 | % | ||||
Total non-interest expenses | 1,960 | 1,869 | 5 | % | ||||
Income before provision for income taxes | 674 | 538 | 25 | % | ||||
Provision for income taxes | 136 | 104 | 31 | % | ||||
Net income | 538 | 434 | 24 | % | ||||
Net income applicable to noncontrolling interests | 81 | 32 | 153 | % | ||||
Net income applicable to Morgan Stanley | $ | 457 | $ | 402 | 14 | % |
Global macro products decreased due to lower market and interest rate volatility, which reduced Trading revenues. In addition, Net interest revenues decreased due to the effect of interest rate products inventory management.
Commodities products and Other remained relatively unchangedan Asia private equity fund, principally driven by gains from the prior year quarter.
Sales and Trading Net Revenues during the Current Year Period
Equity
Equity sales and trading netInvestments revenues of $6,062$552 million in the current year period were relatively unchanged from the prior year period reflecting lower resultsas higher accrued carried interest and investment gains in our financing business,an Asia private equity fund, principally driven by gains from an underlying investment, were mostly offset by higher resultsthe reversal of accrued carried interest and investment losses in execution services.
FinancingAsset Management
Execution services increased 3% from the prior year period primarily due to improved results in cash equity inventory management reflected in Trading revenues, partially offset by lower commissionscurrent quarter and fees driven by reduced market volumes in the United States.
Fixed Income
Fixed income net revenues of $4,120$2,144 million in the current year period wereincreased 20% and 13% higher thanfrom the prior year period, driven by higher results across all three product areas.
Credit products increased due to the absence of inventory losses driven by a widening spread environment in thequarter and prior year period, which increased Trading revenues. This was partially offsetrespectively, primarily as a result of higher average AUM, driven by a lower levelstrong investment performance and positive long-term net flows.
17 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
Global macro productsNon-interest Expenses
Commodities products and Other increased due to improved metals trading, commodities lending results and the absence of losses from counterparty risk management incurred in the prior year period.
Investments, Other Revenues,Non-interest Expenses and Other Items
Investments
Net investment gains of $52 millionNon-compensation expenses in the current quarter increased from the prior year quarter primarily as a result of higher gainsfee sharing paid to intermediaries on real estate investments,higher average AUM.
Net investment gains of $155 millionNon-compensation expenses in the current year period increased from the prior year period primarily reflecting gains on investments associated with our compensation plans in the current year period compared with losses in the prior year period and higher gains on real estate investments, partially offset by lower gains on equities business related investments.
Other
Other revenues of $143 million in the current quarter decreased from the prior year quarter primarily reflecting lowermark-to-market gains on loans held for sale. Other revenues of $442 million in the current year period increased from the prior year period primarily reflecting a decrease in the provision on loans held for investment.
Non-interest Expenses
Non-interest expenses of $3,140 million in the current quarter were relatively unchanged from the prior year quarter primarily reflecting an 8% decrease in Compensation and benefits expenses and a 6% increase inNon-compensation expenses.Non-interest expenses of $9,881 million in the current year period increased from the prior year period reflecting a 9% increase in Compensation and benefits expenses and a 10% increase inNon-compensation expenses.
Compensation and benefits expenses decreased in the current quarter primarily due to decreases in discretionary incentive compensation driven mainly by lower revenues,
|
Non-compensation expenses increased in the current quarter and current year period primarily due to higher volume-driven expenses and litigation costs. In addition to higher volume-driven expenses and litigation costs,non-compensation expenses increased in the current year period due to a provision related to the U.K. VAT matter (see Other Items below).
Other Items
During the second quarter, the Firm self-identified an issue regarding VAT on intercompany services provided by certain overseas affiliates to our U.K. group. The Firm is reviewing the reporting of U.K. VAT as the focus and nature of services shifted among geographic locations. In the current year period, we have recorded a provision of $86 million that incorporates potential additional VAT, interest and penalties for this exposure. We are actively working with Her Majesty’s Revenue and Customs to resolve this matter. The provision reflected is based on currently available information and analyses, and our review of this matter is continuing.
Wealth Management
Income Statement Information
Three Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Revenues | ||||||||||||
Investment banking | $ | 125 | $ | 129 | (3)% | |||||||
Trading | 212 | 229 | (7)% | |||||||||
Investments | 1 | — | N/M | |||||||||
Commissions and fees | 402 | 433 | (7)% | |||||||||
Asset management, distribution | 2,393 | 2,133 | 12% | |||||||||
Other | 62 | 72 | (14)% | |||||||||
Totalnon-interest revenues | 3,195 | 2,996 | 7% | |||||||||
Interest income | 1,155 | 979 | 18% | |||||||||
Interest expense | 130 | 94 | 38% | |||||||||
Net interest | 1,025 | 885 | 16% | |||||||||
Net revenues | 4,220 | 3,881 | 9% | |||||||||
Compensation and benefits | 2,326 | 2,203 | 6% | |||||||||
Non-compensation expenses | 775 | 777 | —% | |||||||||
Totalnon-interest expenses | 3,101 | 2,980 | 4% | |||||||||
Income from continuing | 1,119 | 901 | 24% | |||||||||
Provision for income taxes | 421 | 337 | 25% | |||||||||
Net income applicable to | $ | 698 | $ | 564 | 24% |
Nine Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 20161 | % Change | |||||||||
Revenues | ||||||||||||
Investment banking | $ | 405 | $ | 373 | 9% | |||||||
Trading | 657 | 675 | (3)% | |||||||||
Investments | 3 | (2 | ) | N/M | ||||||||
Commissions and fees | 1,266 | 1,268 | —% | |||||||||
Asset management, distribution and administration fees | 6,879 | 6,269 | 10% | |||||||||
Other | 191 | 232 | (18)% | |||||||||
Totalnon-interest revenues | 9,401 | 8,815 | 7% | |||||||||
Interest income | 3,348 | 2,813 | 19% | |||||||||
Interest expense | 320 | 268 | 19% | |||||||||
Net interest | 3,028 | 2,545 | 19% | |||||||||
Net revenues | 12,429 | 11,360 | 9% | |||||||||
Compensation and benefits | 6,940 | 6,443 | 8% | |||||||||
Non-compensation expenses | 2,340 | 2,371 | (1)% | |||||||||
Totalnon-interest expenses | 9,280 | 8,814 | 5% | |||||||||
Income from continuing operations | 3,149 | 2,546 | 24% | |||||||||
Provision for income taxes | 1,139 | 973 | 17% | |||||||||
Net income applicable to | $ | 2,010 | $ | 1,573 | 28% |
N/M – Not Meaningful
|
Financial Information and Statistical Data
$ in billions | At September 30, 2017 | At December 31, 2016 | ||||||
Client assets | $ | 2,307 | $ | 2,103 | ||||
Fee-based client assets1 | $ | 1,003 | $ | 877 | ||||
Fee-based client assets as a percentage of total client assets | 43% | 42% | ||||||
Client liabilities2 | $ | 78 | $ | 73 | ||||
Investment securities portfolio | $ | 60.6 | $ | 63.9 | ||||
Loans and lending commitments | $ | 76.2 | $ | 68.7 | ||||
Wealth Management | 15,759 | 15,763 |
Three Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Annualized revenues per representative (dollars in thousands)3 | $ | 1,071 | $ | 977 | ||||
Client assets per representative | $ | 146 | $ | 132 | ||||
Fee-based asset flows5 | $ | 15.8 | $ | 13.5 |
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Annualized revenues per representative (dollars in thousands)3 | $ | 1,051 | $ | 953 | ||||
Client assets per representative | $ | 146 | $ | 132 | ||||
Fee-based asset flows5 | $ | 54.5 | $ | 31.4 |
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Net Revenues
Transactional Revenues
Three Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Investment banking | $ | 125 | $ | 129 | (3)% | |||||||
Trading | 212 | 229 | (7)% | |||||||||
Commissions and fees | 402 | 433 | (7)% | |||||||||
Total | $ | 739 | $ | 791 | (7)% |
Nine Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Investment banking | $ | 405 | $ | 373 | 9% | |||||||
Trading | 657 | 675 | (3)% | |||||||||
Commissions and fees | 1,266 | 1,268 | —% | |||||||||
Total | $ | 2,328 | $ | 2,316 | 1% |
Transactional revenues of $739 million in the current quarter decreased 7% from the prior year quarter primarily reflecting lower Commissions and fees and Trading revenues.
Transactional revenues of $2,328 million in the current year period increased 1% from the prior year period primarily reflecting higher revenues in Investment banking revenues, partially offset by decreased Trading revenues.
Investment banking revenues were relatively unchanged in the current quarter. The increase in the current year period was due to higher revenues from structured products and equity syndicate activities, partially offset by lower preferred stock syndicate activity.
Trading revenues decreased in the current quarter primarily due to lower client activity in fixed income products. In addition to lower client activity, Trading revenues decreased in the current year period due to lower revenues related to the Fixed Income Integration, partially offset by gains related to investments associated with certain employee deferred compensation plans.
Commissions and fees decreased in the current quarter primarily due to decreased activity in equities, mutual funds and annuities. Commissions and fees were relatively unchanged in the current year period, with decreased activity in annuities and mutual funds essentially offset by the impact of the Fixed Income Integration.
Asset Management
Asset management, distribution and administration fees of $2,393 million in the current quarter and $6,879 million in the current year period increased 12% and 10%, respectively. The increase in both periods is primarily due to market appreciation and net positive flows. See“Fee-Based Client Assets” herein.
Net Interest
Net interest of $1,025 million in the current quarter and $3,028 million in the current year period increased 16% and 19%, respectively, primarily due to higher loan balances and higher interest rates, partially offset by higher interest paid on deposits.
Other
Other revenues of $62 million in the current quarter and $191 million in the current year period decreased 14% and 18%, respectively, due to lower realized gains from the available for sale (“AFS”) securities portfolio.
Non-interest Expenses
Non-interest expenses of $3,101 million in the current quarter and $9,280 million in the current year period increased 4% and 5%, respectively, as a result of the increase in Compensation and benefits expenses.
Compensation and benefits expenses increased in the current quarter primarily due to the formulaic payout to Wealth Management representatives linked to higher revenues. In addition to the higher formulaic payout, Compensation and benefits expenses increased in the current year period due to increases in the fair value of investments to which certain deferred compensation plans are referenced.
Non-compensation expenses were relatively unchanged in the current quarter.Non-compensation expenses decreased in the current year period primarily due to lower litigation and information processing costs, partially offset by higher deposit insurance expense and higher consulting fees related to strategic initiatives.
Fee-Based Client Assets
For a description offee-based client assets, including descriptions for the fee based client asset types and rollforward items in the following tables, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—WealthManagement—Fee-Based Client Assets Activity and Average Fee Rate by Account Type” in Part II, Item 7 of the 2016 Form10-K.
Fee-Based Client Assets Rollforward
$ in billions | At June 30, 2017 | Inflows | Outflows | Market Impact | At September 30, 2017 | |||||||||||||||
Separately | $ | 237 | $ | 8 | $ | (5 | ) | $ | 3 | $ | 243 | |||||||||
Unified managed accounts2 | 228 | 11 | (7 | ) | 7 | 239 | ||||||||||||||
Mutual fund | 21 | 1 | (1 | ) | — | 21 | ||||||||||||||
Representative as advisor | 138 | 9 | (7 | ) | 4 | 144 | ||||||||||||||
Representative as | 321 | 18 | (11 | ) | 10 | 338 | ||||||||||||||
Subtotal | $ | 945 | $ | 47 | $ | (31 | ) | $ | 24 | $ | 985 | |||||||||
Cash management | 17 | 3 | (2 | ) | — | 18 | ||||||||||||||
Totalfee-based | $ | 962 | $ | 50 | $ | (33 | ) | $ | 24 | $ | 1,003 |
$ in billions | At June 30, | Inflows | Outflows | Market Impact | At September 30, | |||||||||||||||
Separately | $ | 279 | $ | 8 | $ | (15 | ) | $ | 7 | $ | 279 | |||||||||
Unified managed | 120 | 17 | (5 | ) | 4 | 136 | ||||||||||||||
Mutual fund | 23 | — | (1 | ) | 1 | 23 | ||||||||||||||
Representative as | 117 | 10 | (7 | ) | 3 | 123 | ||||||||||||||
Representative as portfolio manager | 265 | 19 | (12 | ) | 6 | 278 | ||||||||||||||
Subtotal | $ | 804 | $ | 54 | $ | (40 | ) | $ | 21 | $ | 839 | |||||||||
Cash management | 16 | 2 | (2 | ) | — | 16 | ||||||||||||||
Totalfee-based | $ | 820 | $ | 56 | $ | (42 | ) | $ | 21 | $ | 855 |
$ in billions | At December 31, | Inflows | Outflows | Market Impact | At September 30, | |||||||||||||||
Separately managed accounts1, 2 | $ | 222 | $ | 24 | $ | (16 | ) | $ | 13 | $ | 243 | |||||||||
Unified managed accounts2 | 204 | 36 | (22 | ) | 21 | 239 | ||||||||||||||
Mutual fund advisory | 21 | 1 | (3 | ) | 2 | 21 | ||||||||||||||
Representative as advisor | 125 | 27 | (20 | ) | 12 | 144 | ||||||||||||||
Representative as portfolio manager | 285 | 57 | (29 | ) | 25 | 338 | ||||||||||||||
Subtotal | $ | 857 | $ | 145 | $ | (90 | ) | $ | 73 | $ | 985 | |||||||||
Cash management | 20 | 9 | (11 | ) | — | 18 | ||||||||||||||
Totalfee-based client assets | $ | 877 | $ | 154 | $ | (101 | ) | $ | 73 | $ | 1,003 |
$ in billions | At December 31, | Inflows | Outflows | Market Impact | At September 30, | |||||||||||||||
Separately managed accounts1 | $ | 283 | $ | 24 | $ | (31 | ) | $ | 3 | $ | 279 | |||||||||
Unified managed accounts | 105 | 37 | (13 | ) | 7 | 136 | ||||||||||||||
Mutual fund advisory | 25 | 1 | (5 | ) | 2 | 23 | ||||||||||||||
Representative as advisor | 115 | 22 | (20 | ) | 6 | 123 | ||||||||||||||
Representative as portfolio manager | 252 | 48 | (32 | ) | 10 | 278 | ||||||||||||||
Subtotal | $ | 780 | $ | 132 | $ | (101 | ) | $ | 28 | $ | 839 | |||||||||
Cash management | 15 | 8 | (7 | ) | — | 16 | ||||||||||||||
Totalfee-based client assets | $ | 795 | $ | 140 | $ | (108 | ) | $ | 28 | $ | 855 |
Average Fee Rates3
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Fee Rate in bps | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Separately managed | 17 | 35 | 16 | 36 | ||||||||||||
Unified managed | 97 | 104 | 98 | 106 | ||||||||||||
Mutual fund advisory | 118 | 119 | 118 | 119 | ||||||||||||
Representative as | 84 | 85 | 84 | 85 | ||||||||||||
Representative as | 94 | 98 | 96 | 99 | ||||||||||||
Subtotal | 76 | 76 | 76 | 77 | ||||||||||||
Cash management | 6 | 6 | 6 | 6 | ||||||||||||
Totalfee-based | 75 | 75 | 75 | 76 |
bps—Basis points
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Investment Management
Income Statement Information
Three Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Revenues | ||||||||||||
Investment banking | $ | — | $ | (2 | ) | N/M | ||||||
Trading | (7 | ) | (3 | ) | (133)% | |||||||
Investments | 114 | 51 | 124% | |||||||||
Asset management, distribution | 568 | 508 | 12% | |||||||||
Other | 1 | (3 | ) | 133% | ||||||||
Totalnon-interest revenues | 676 | 551 | 23% | |||||||||
Interest income | 1 | 1 | —% | |||||||||
Interest expense | 2 | — | N/M | |||||||||
Net interest | (1 | ) | 1 | (200)% | ||||||||
Net revenues | 675 | 552 | 22% | |||||||||
Compensation and benefits | 311 | 237 | 31% | |||||||||
Non-compensation expenses | 233 | 218 | 7% | |||||||||
Totalnon-interest expenses | 544 | 455 | 20% | |||||||||
Income from continuing | 131 | 97 | 35% | |||||||||
Provision for income taxes | 16 | 31 | (48)% | |||||||||
Net income | 115 | 66 | 74% | |||||||||
Net income (loss) applicable to noncontrolling interests | 1 | (1 | ) | 200% | ||||||||
Net income applicable to | $ | 114 | $ | 67 | 70% | |||||||
Nine Months Ended September 30, | ||||||||||||
$ in millions | 2017 | 2016 | % Change | |||||||||
Revenues | ||||||||||||
Investment banking | $ | — | $ | (1 | ) | N/M | ||||||
Trading | (21 | ) | (8 | ) | (163)% | |||||||
Investments | 337 | 37 | N/M | |||||||||
Commissions and fees | — | 3 | N/M | |||||||||
Asset management, distribution and administration fees | 1,624 | 1,551 | 5% | |||||||||
Other | 9 | 28 | (68)% | |||||||||
Totalnon-interest revenues | 1,949 | 1,610 | 21% | |||||||||
Interest income | 3 | 5 | (40)% | |||||||||
Interest expense | 3 | 3 | —% | |||||||||
Net interest | — | 2 | N/M | |||||||||
Net revenues | 1,949 | 1,612 | 21% | |||||||||
Compensation and benefits | 878 | 688 | 28% | |||||||||
Non-compensation expenses | 695 | 665 | 5% | |||||||||
Totalnon-interest expenses | 1,573 | 1,353 | 16% | |||||||||
Income from continuing | 376 | 259 | 45% | |||||||||
Provision for income taxes | 87 | 78 | 12% | |||||||||
Net income | 289 | 181 | 60% | |||||||||
Net income (loss) applicable to noncontrolling interests | 8 | (14 | ) | 157% | ||||||||
Net income applicable to | $ | 281 | $ | 195 | 44% |
N/M – Not Meaningful
Net Revenues
Investments
Investments gains of $114 million in the current quarter compared with $51 million in the prior year quarter reflected higher carried interest principally in Infrastructure investments, partially offset by weaker investment performance which resulted in the reversal of previously accrued carried interest in Private Equity.
Investments gains of $337 million in the current year period compared with $37 million in the prior year period reflected higher carried interest and performance gains in all asset classes.
Asset Management, Distribution and Administration Fees
Asset management, distribution and administration fees of $568 million increased 12% in the current quarter compared to the prior year quarter as a result of higher average assets under management or supervision (“AUM”) across all asset classes and higher performance fees.
Asset management, distribution and administration fees of $1,624 million increased 5% in the current year period comparedfee sharing paid to the prior year period primarily as a result ofintermediaries on higher average AUM.
See “Assets Under Management or Supervision” herein.
Non-interest Expenses
Non-interest expenses of $544 million in the current quarter and $1,573 million in the current year period increased 20% and 16% from the comparable prior periods primarily due to higher Compensation and benefits expenses.
Compensation and benefits expenses increased in the current quarter and current year period due to higher discretionary incentive compensation and an increase in deferred compensation associated with carried interest.
Non-compensation expenses increased in the current quarter and current year period primarily due to higher brokerage, clearing and exchange fees.
Assets Under Management or Supervision
$ in billions | At June 30, 2020 | Inflows | Outflows | Market Impact | Other | At September 30, 2020 | ||||||||||||
Equity | $ | 168 | $ | 24 | $ | (14 | ) | $ | 23 | $ | 1 | $ | 202 | |||||
Fixed income | 84 | 8 | (5 | ) | 1 | 4 | 92 | |||||||||||
Alternative/Other | 145 | 6 | (7 | ) | 4 | 2 | 150 | |||||||||||
Long-term AUM subtotal | 397 | 38 | (26 | ) | 28 | 7 | 444 | |||||||||||
Liquidity | 268 | 319 | (317 | ) | — | 1 | 271 | |||||||||||
Total AUM | $ | 665 | $ | 357 | $ | (343 | ) | $ | 28 | $ | 8 | $ | 715 |
$ in billions | At June 30, 2019 | Inflows | Outflows | Market Impact | Other | At September 30, 2019 | ||||||||||||
Equity | $ | 128 | $ | 10 | $ | (8 | ) | $ | (4 | ) | $ | — | $ | 126 | ||||
Fixed income | 71 | 6 | (4 | ) | 2 | (1 | ) | 74 | ||||||||||
Alternative/Other | 135 | 5 | (4 | ) | 2 | (3 | ) | 135 | ||||||||||
Long-term AUM subtotal | 334 | 21 | (16 | ) | — | (4 | ) | 335 | ||||||||||
Liquidity | 163 | 311 | (301 | ) | (1 | ) | — | 172 | ||||||||||
Total AUM | $ | 497 | $ | 332 | $ | (317 | ) | $ | (1 | ) | $ | (4 | ) | $ | 507 |
$ in billions | At December 31, 2019 | Inflows | Outflows | Market Impact | Other | At September 30, 2020 | ||||||||||||
Equity | $ | 138 | $ | 56 | $ | (35 | ) | $ | 42 | $ | 1 | $ | 202 | |||||
Fixed income | 79 | 29 | (20 | ) | 1 | 3 | 92 | |||||||||||
Alternative/Other | 139 | 21 | (15 | ) | (1 | ) | 6 | 150 | ||||||||||
Long-term AUM subtotal | 356 | 106 | (70 | ) | 42 | 10 | 444 | |||||||||||
Liquidity | 196 | 1,174 | (1,100 | ) | 1 | — | 271 | |||||||||||
Total AUM | $ | 552 | $ | 1,280 | $ | (1,170 | ) | $ | 43 | $ | 10 | $ | 715 |
$ in billions | At December 31, 2018 | Inflows | Outflows | Market Impact | Other | At September 30, 2019 | ||||||||||||
Equity | $ | 103 | $ | 28 | $ | (23 | ) | $ | 18 | $ | — | $ | 126 | |||||
Fixed income | 68 | 17 | (15 | ) | 5 | (1 | ) | 74 | ||||||||||
Alternative/Other | 128 | 17 | (14 | ) | 8 | (4 | ) | 135 | ||||||||||
Long-term AUM subtotal | 299 | 62 | (52 | ) | 31 | (5 | ) | 335 | ||||||||||
Liquidity | 164 | 965 | (956 | ) | 1 | (2 | ) | 172 | ||||||||||
Total AUM | $ | 463 | $ | 1,027 | $ | (1,008 | ) | $ | 32 | $ | (7 | ) | $ | 507 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in billions | 2020 | 2019 | 2020 | 2019 | ||||||||
Equity | $ | 190 | $ | 127 | $ | 159 | $ | 120 | ||||
Fixed income | 90 | 73 | 84 | 70 | ||||||||
Alternative/Other | 148 | 135 | 143 | 133 | ||||||||
Long-term AUM subtotal | 428 | 335 | 386 | 323 | ||||||||
Liquidity | 267 | 169 | 244 | 166 | ||||||||
Total AUM | $ | 695 | 504 | $ | 630 | $ | 489 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||
Fee rate in bps | 2020 | 2019 | 2020 | 2019 | ||
Equity | 76 | 76 | 75 | 76 | ||
Fixed income | 29 | 32 | 29 | 32 | ||
Alternative/Other | 58 | 62 | 59 | 65 | ||
Long-term AUM | 60 | 61 | 59 | 62 | ||
Liquidity | 15 | 17 | 16 | 17 | ||
Total AUM | 43 | 46 | 42 | 47 |
September |
Management’s Discussion and Analysis |
19 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
AUM Rollforwards
$ in billions | At June 30, | Inflows | Outflows | Market Impact | Other1 | At September 30, | ||||||||||||||||||
Equity | $ | 94 | $ | 5 | $ | (6 | ) | $ | 4 | $ | — | $ | 97 | |||||||||||
Fixed income | 66 | 7 | (5 | ) | 1 | — | 69 | |||||||||||||||||
Liquidity | 154 | 279 | (277 | ) | 1 | (1 | ) | 156 | ||||||||||||||||
Alternative / | 121 | 5 | (3 | ) | 1 | 1 | 125 | |||||||||||||||||
Total AUM | $ | 435 | $ | 296 | $ | (291 | ) | $ | 7 | $ | — | $ | 447 | |||||||||||
Shares of minority | 8 | 7 | ||||||||||||||||||||||
$ in billions | At June 30, 2016 | Inflows | Outflows | Market Impact | Other1 | At September 30, | ||||||||||||||||||
Equity | $ | 81 | $ | 4 | $ | (6 | ) | $ | 4 | $ | — | $ | 83 | |||||||||||
Fixed income | 61 | 6 | (5 | ) | 1 | — | 63 | |||||||||||||||||
Liquidity | 149 | 358 | (352 | ) | (1 | ) | — | 154 | ||||||||||||||||
Alternative / | 115 | 4 | (4 | ) | 2 | — | 117 | |||||||||||||||||
Total AUM | $ | 406 | $ | 372 | $ | (367 | ) | $ | 6 | $ | — | $ | 417 | |||||||||||
Shares of minority | 8 | 7 |
$ in billions | At December 31, | Inflows | Outflows | Market Impact | Other1 | At September 30, | ||||||||||||||||||
Equity | $ | 79 | $ | 16 | $ | (16 | ) | $ | 17 | $ | 1 | $ | 97 | |||||||||||
Fixed income | 60 | 20 | (16 | ) | 3 | 2 | 69 | |||||||||||||||||
Liquidity | 163 | 915 | (923 | ) | 1 | — | 156 | |||||||||||||||||
Alternative / | 115 | 18 | (13 | ) | 5 | — | 125 | |||||||||||||||||
Total AUM | $ | 417 | $ | 969 | $ | (968 | ) | $ | 26 | $ | 3 | $ | 447 | |||||||||||
Shares of minority | 8 | 7 |
$ in billions | At December 31, | Inflows | Outflows | Market Impact | Other1 | At September 30, | ||||||||||||||||||
Equity | $ | 83 | $ | 14 | $ | (18 | ) | $ | 4 | $ | — | $ | 83 | |||||||||||
Fixed income | 60 | 18 | (19 | ) | 3 | 1 | 63 | |||||||||||||||||
Liquidity | 149 | 985 | (979 | ) | (1 | ) | — | 154 | ||||||||||||||||
Alternative / | 114 | 18 | (18 | ) | 3 | — | 117 | |||||||||||||||||
Total AUM | $ | 406 | $ | 1,035 | $ | (1,034 | ) | $ | 9 | $ | 1 | $ | 417 | |||||||||||
Shares of minority | 8 | 7 |
Average AUM
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in billions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Equity | $ | 96 | $ | 83 | $ | 90 | $ | 81 | ||||||||
Fixed income | 68 | 62 | 65 | 61 | ||||||||||||
Liquidity | 156 | 151 | 155 | 149 | ||||||||||||
Alternative / | 123 | 116 | 120 | 115 | ||||||||||||
Total AUM | $ | 443 | $ | 412 | $ | 430 | $ | 406 | ||||||||
Shares of minority | 7 | 7 | 7 | 8 |
Average Fee Rate
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Fee Rate in bps | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Equity | 75 | 74 | 74 | 72 | ||||||||||||
Fixed income | 34 | 32 | 33 | 32 | ||||||||||||
Liquidity | 18 | 18 | 18 | 18 | ||||||||||||
Alternative / | 68 | 73 | 69 | 76 | ||||||||||||
Total AUM | 47 | 47 | 46 | 48 |
AUM—Assets under management or supervision
bps—Basis points
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
U.S. GAAP | 21.1 | % | 18.2 | % | 22.2 | % | 19.1 | % | ||||
Adjusted effective income tax rate—non-GAAP1 | 24.3 | % | 21.4 | % | 22.3 | % | 21.3 | % | ||||
Net discrete tax provisions (benefits) | ||||||||||||
Recurring2 | $ | — | $ | — | $ | (94 | ) | $ | (127 | ) | ||
Intermittent3 | (113 | ) | (89 | ) | (10 | ) | (190 | ) |
1. |
Provisions (benefits) related to conversion of employee share-based awards are expected to occur every year and, |
3. | Includes all tax provisions (benefits) that have been determined to be discrete, other than Recurring items as defined above. |
Supplemental Financial InformationThe current quarter included intermittent net discrete tax benefits principally associated with the remeasurement of reserves and Disclosures
related interest as a result of new information pertaining to the resolution of tax examinations in certain jurisdictions.
We provide loans to a variety of customers, from large corporate and institutional clients to high net worth individuals, primarily through our
$ in billions | At 2017 | At December 31, 2016 | ||||||
U.S. Bank Subsidiaries assets1 | $ | 182.2 | $ | 176.8 | ||||
U.S. Bank Subsidiaries investment securities portfolio: | ||||||||
Investment securities—AFS | 42.7 | 50.3 | ||||||
Investment securities—HTM | 18.1 | 13.6 | ||||||
Total investment securities | $ | 60.8 | $ | 63.9 | ||||
Deposits2 | $ | 154.2 | $ | 154.7 | ||||
Wealth Management U.S. Bank Subsidiaries data |
| |||||||
Securities-based lending and other loans3 | $ | 40.1 | $ | 36.0 | ||||
Residential real estate loans | 26.2 | 24.4 | ||||||
Total | $ | 66.3 | $ | 60.4 | ||||
Institutional Securities U.S. Bank Subsidiaries data |
| |||||||
Corporate loans | $ | 22.3 | $ | 20.3 | ||||
Wholesale real estate loans | 10.1 | 9.9 | ||||||
Total | $ | 32.4 | $ | 30.2 |
AFS—Available for sale
HTM—Held to maturity
$ in billions | At September 30, 2020 | At December 31, 2019 | ||||
Assets | $ | 266.2 | $ | 219.6 | ||
Investment securities portfolio: | ||||||
Investment securities—AFS | 62.9 | 42.4 | ||||
Investment securities—HTM | 28.2 | 26.1 | ||||
Total investment securities | $ | 91.1 | $ | 68.5 | ||
Deposits2 | $ | 238.0 | $ | 189.3 | ||
Wealth Management Loans3 | ||||||
Residential real estate | $ | 33.6 | $ | 30.2 | ||
Securities-based lending and Other4 | 57.7 | 49.9 | ||||
Total | $ | 91.3 | $ | 80.1 | ||
Institutional Securities Loans3 | ||||||
Corporate | $ | 7.8 | $ | 5.6 | ||
Secured lending facilities | 28.2 | 26.8 | ||||
Commercial and Residential real estate | 8.6 | 12.0 | ||||
Securities-based lending and Other | 4.7 | 5.4 | ||||
Total | $ | 49.3 | $ | 49.8 |
1. |
Amounts exclude transactions between the |
2. | For further information on deposits, see “Liquidity and Capital Resources—Funding Management—Unsecured Financing” herein. |
3. | For a further discussion of loans in the Wealth Management and Institutional Securities business segments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein. |
4. | Other loans primarily include tailored lending. |
Income Tax Matters
Effective Tax Rate
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
From continuing operations | 28.1% | 31.5% | 29.7% | 32.7% |
The effective tax rate for the current quarter and current year period reflects a recurring-type discrete tax benefit of $11 million and $139 million, respectively, associated with the adoption of new accounting guidance related to employee share-based payments, and other net discrete tax benefits of $83 million and $65 million, respectively, primarily resulting from the remeasurement of certain deferred taxes. See Note 2 to the financial statements for information on the adoption of the accounting updateImprovements to Employee Share-Based Payment Accounting.
The following accounting updates are currently being evaluated to determine the potential impact of adoption:
|
This accounting update will change the presentation of certain costs related to underwriting and advisory activities so that such costs will be recorded in the relevantnon-interest expense line item versus the current practice of netting such costs against Investment banking revenues. This change is estimated to gross up Investment banking revenues and affected expenses for the Institutional Securities segment by approximately5%-10%. Similarly, certain costs related to the selling and distribution of investment funds will no longer be netted against Asset management, distribution and administration fees, and therefore is expected to result in a gross up of such Investment
September |
Management’s Discussion and Analysis |
Management revenues and affected expenses by less than 5%. These changes will not have an impact on net income.
In addition, the timing of the recognition of certain performance fees from fund management activities, not in the form of carried interest, is generally expected to be deferred within a fiscal year until the fees are no longer probable of being reversed. Thus, the recognition of such revenues, which are recorded in Asset management, distribution and administration fees within the Investment Management segment, which approximated $60 million in 2016 and were recognized throughout the year, are generally expected to be recognized in the fourth quarter of each fiscal year based on current fee arrangements.
The recognition of performance fees from fund management activities in the form of carried interest that are subject to reversal will remain essentially unchanged. We will apply the equity method of accounting to such carried interest, thus excluding them from the scope of this standard.
We will continue to assess the impact of the new standard as we progress through the implementation process and as industry interpretations are resolved; therefore, additional impacts may be identified prior to adoption.
|
|
|
|
The update also eliminates the concept of other-than-temporary impairment for AFS securities. Impairments on AFS securities will be required to be recognized in earnings through an allowance, when the fair value is less than amortized cost and a credit loss exists or the securities are expected to be sold before recovery of amortized cost.
Under the update, there may be an ability to determine there are no expected credit losses in certain circumstances, e.g., based on collateral arrangements for lending and financing transactions or based on the credit quality of the borrower or issuer.
Overall, the amendments in this update are expected to accelerate the recognition of credit losses for portfolios where CECL models will be applied. This update is effective as of January 1, 2020 with early adoption permitted as of January 1, 2019.
The Balance Sheet
At September 30, 2017 | ||||||||||||||||
$ in millions | Institutional Securities | Wealth Management | Investment Management | Total | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents1 | $ | 31,100 | $ | 17,026 | $ | 65 | $ | 48,191 | ||||||||
Trading assets at fair value | 282,555 | 68 | 2,465 | 285,088 | ||||||||||||
Investment securities | 18,532 | 60,554 | — | 79,086 | ||||||||||||
Securities purchased under | 84,223 | 5,883 | — | 90,106 | ||||||||||||
Securities borrowed | 132,597 | 295 | — | 132,892 | ||||||||||||
Customer and other | 35,725 | 18,061 | 602 | 54,388 | ||||||||||||
Loans, net of allowance | 38,171 | 66,255 | 5 | 104,431 | ||||||||||||
Other assets2 | 45,378 | 12,486 | 1,647 | 59,511 | ||||||||||||
Total assets | $ | 668,281 | $ | 180,628 | $ | 4,784 | $ | 853,693 |
At December 31, 2016 | ||||||||||||||||
$ in millions | Institutional Securities | Wealth Management | Investment Management | Total | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents1 | $ | 25,291 | $ | 18,022 | $ | 68 | $ | 43,381 | ||||||||
Trading assets at fair value | 259,680 | 64 | 2,410 | 262,154 | ||||||||||||
Investment securities | 16,222 | 63,870 | — | 80,092 | ||||||||||||
Securities purchased under | 96,735 | 5,220 | — | 101,955 | ||||||||||||
Securities borrowed | 124,840 | 396 | — | 125,236 | ||||||||||||
Customer and other | 26,624 | 19,268 | 568 | 46,460 | ||||||||||||
Loans, net of allowance | 33,816 | 60,427 | 5 | 94,248 | ||||||||||||
Other assets2 | 45,941 | 13,868 | 1,614 | 61,423 | ||||||||||||
Total assets | $ | 629,149 | $ | 181,135 | $ | 4,665 | $ | 814,949 |
At September 30, 2020 | ||||||||||||
$ in millions | IS | WM | IM | Total | ||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 72,592 | $ | 22,018 | $ | 162 | $ | 94,772 | ||||
Trading assets at fair value | 289,528 | 298 | 4,142 | 293,968 | ||||||||
Investment securities | 42,149 | 88,556 | — | 130,705 | ||||||||
Securities purchased under agreements to resell | 73,637 | 14,646 | — | 88,283 | ||||||||
Securities borrowed | 100,175 | 628 | — | 100,803 | ||||||||
Customer and other receivables | 57,593 | 14,067 | 877 | 72,537 | ||||||||
Loans1 | 54,918 | 91,302 | 17 | 146,237 | ||||||||
Other assets2 | 13,731 | 12,910 | 1,994 | 28,635 | ||||||||
Total assets | $ | 704,323 | $ | 244,425 | $ | 7,192 | $ | 955,940 |
At December 31, 2019 | ||||||||||||
$ in millions | IS | WM | IM | Total | ||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 67,657 | $ | 14,247 | $ | 267 | $ | 82,171 | ||||
Trading assets at fair value | 293,477 | 47 | 3,586 | 297,110 | ||||||||
Investment securities | 38,524 | 67,201 | — | 105,725 | ||||||||
Securities purchased under agreements to resell | 80,744 | 7,480 | — | 88,224 | ||||||||
Securities borrowed | 106,199 | 350 | — | 106,549 | ||||||||
Customer and other receivables | 39,743 | 15,190 | 713 | 55,646 | ||||||||
Loans1 | 50,557 | 80,075 | 5 | 130,637 | ||||||||
Other assets2 | 14,300 | 13,092 | 1,975 | 29,367 | ||||||||
Total assets | $ | 691,201 | $ | 197,682 | $ | 6,546 | $ | 895,429 |
1. |
|
2. | Other assets primarily includes |
A substantial portion of total assets consists of liquid marketable securities and short-term receivables arising principally from sales and trading activities in the Institutional Securities business segment. Total assets increased to $853.7$956 billion at September 30, 20172020 from $814.9$895 billion at December 31, 2016, primarily2019.
Securities Repurchase Agreementscash equivalents, and Securities Lending
Securities borrowed or securities purchased under agreements to resell, as a result of significantly higher deposits in this segment.
Collateralized Financing Transactions
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Securities purchased under agreements to resell and Securities borrowed | $ | 222,998 | $ | 227,191 | ||||
Securities sold under agreements | $ | 69,613 | $ | 70,472 | ||||
Securities received as collateral1 | $ | 12,995 | $ | 13,737 |
Daily Average Balance Three Months Ended | ||||||||
$ in millions | September 30, 2017 | December 31, 2016 | ||||||
Securities purchased under agreements | $ | 227,146 | $ | 224,355 | ||||
Securities sold under agreements | $ | 68,563 | $ | 68,908 |
|
Customer Securities Financing
The customer receivable portion of the securities financing transactions primarily includes customer margin loans, collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. The customer payable portion of the securities financing transactions primarily includes payables to our prime brokerage customers. Our risk exposure on these transactions is mitigated by collateral maintenance policies that limit our credit exposure to customers and liquidity reserves held against this risk exposure.
Liquidity Risk Management Framework
The primary goal of our Liquidity Risk Management Framework is to ensure that we have access to adequate funding across a wide range of market conditions and time horizons. The framework is designed to enable us to fulfill our financial obligations and support the execution of our business strategies.
21 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
Global
Resources
GLRResources by Type of Investment
$ in millions | At September 30, 2017 | At December 31, | ||||||
Cash deposits with banks | $ | 9,684 | $ | 8,679 | ||||
Cash deposits with central banks | 33,566 | 30,568 | ||||||
Unencumbered highly liquid securities: | ||||||||
U.S. government obligations | 67,677 | 78,615 | ||||||
U.S. agency and agency mortgage-backed securities | 51,676 | 46,360 | ||||||
Non-U.S. sovereign obligations1 | 24,110 | 30,884 | ||||||
Investments in money market funds | 2 | — | ||||||
Other investment grade securities | 3,251 | 7,191 | ||||||
Total | $ | 189,966 | $ | 202,297 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Cash deposits with central banks | $ | 41,639 | $ | 35,025 | ||
Unencumbered HQLA Securities2: | ||||||
U.S. government obligations | 113,058 | 88,754 | ||||
U.S. agency and agency mortgage-backed securities | 63,961 | 50,732 | ||||
Non-U.S. sovereign obligations3 | 37,470 | 29,909 | ||||
Other investment grade securities | 1,398 | 1,591 | ||||
Total HQLA2 | $ | 257,526 | $ | 206,011 | ||
Cash deposits with banks (non-HQLA) | 9,766 | 9,857 | ||||
Total Liquidity Resources | $ | 267,292 | $ | 215,868 |
1. |
In the first quarter of 2020, we changed our internal measure of liquidity from the Global Liquidity Reserve to Liquidity Resources, which is more closely aligned with the regulatory definition of HQLA. Prior periods have been recast to conform to the current presentation. |
2. | HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries. |
3. | Primarily composed of unencumbered Japanese, UK, French, German |
4. |
GLR Managed
At September 30, | At December 31, | Daily Average Three Months | ||||||||||
$ in millions | September 30, 2017 | |||||||||||
Bank legal entities |
| |||||||||||
Domestic | $ | 72,567 | $ | 74,411 | $ | 68,746 | ||||||
Foreign | 4,248 | 4,238 | 4,297 | |||||||||
Total Bank legal entities | 76,815 | 78,649 | 73,043 | |||||||||
Non-Bank legal entities |
| |||||||||||
Domestic: | ||||||||||||
Parent Company | 39,747 | 66,514 | 50,893 | |||||||||
Non-Parent Company | 31,754 | 18,801 | 33,934 | |||||||||
Total Domestic | 71,501 | 85,315 | 84,827 | |||||||||
Foreign | 41,650 | 38,333 | 44,244 | |||||||||
TotalNon-Bank legal entities | 113,151 | 123,648 | 129,071 | |||||||||
Total | $ | 189,966 | $ | 202,297 | $ | 202,114 |
$ in millions | At September 30, 2020 | At December 31, 2019 | Average Daily Balance Three Months Ended September 30, 2020 | ||||||
Bank legal entities | |||||||||
Domestic | $ | 115,821 | $ | 75,894 | $ | 113,991 | |||
Foreign | 5,384 | 4,049 | 5,624 | ||||||
Total Bank legal entities | 121,205 | 79,943 | 119,615 | ||||||
Non-Bank legal entities | |||||||||
Domestic: | |||||||||
Parent Company | 62,561 | 53,128 | 74,587 | ||||||
Non-Parent Company | 30,215 | 28,905 | 34,341 | ||||||
Total Domestic | 92,776 | 82,033 | 108,928 | ||||||
Foreign | 53,311 | 53,892 | 55,933 | ||||||
Total Non-Bank legal entities | 146,087 | 135,925 | 164,861 | ||||||
Total Liquidity Resources | $ | 267,292 | $ | 215,868 | $ | 284,476 |
1. | In the first quarter of 2020, we changed our internal measure of liquidity from the Global Liquidity Reserve to Liquidity Resources, which is more closely aligned with the regulatory definition of HQLA. Prior periods have been recast to conform to the current presentation. |
HQLA by Type of Asset and LCR
At September 30, | At December 31, | Daily Average Balance Three Months Ended | ||||||||||
$ in millions | September 30, 2017 | |||||||||||
HQLA | ||||||||||||
Cash deposits with central banks | $ | 33,614 | $ | 30,569 | $ | 40,841 | ||||||
Securities1 | 125,426 | 129,524 | 134,363 | |||||||||
Total | $ | 159,040 | $ | 160,093 | $ | 175,204 | ||||||
LCR | 130% |
|
September 2020 Form 10-Q | 22 |
Management’s Discussion and Analysis |
Average Daily Balance Three Months Ended | ||||||
$ in millions | September 30, 2020 | June 30, 2020 | ||||
Eligible HQLA1 | ||||||
Cash deposits with central banks | $ | 36,481 | $ | 52,369 | ||
Securities2 | 170,817 | 155,251 | ||||
Total Eligible HQLA1 | $ | 207,298 | $ | 207,620 | ||
LCR | 136 | % | 147 | % |
1. | Under the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries. |
2. | Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds. |
30 days.
The Basel Committee finalized the NSFR framework in 2014. In May 2016, the U.S. banking regulators issuedover a proposal to implement the NSFR in the U.S., which wouldone-year time horizon, and will apply to us and our U.S. Bank Subsidiaries. Our preliminary estimates, basedThese requirements become effective on the current proposal, indicate that actionsJuly 1, 2021 and we will be necessary to meetin compliance with the requirement, which we expect to accomplishfinal rule by the effective date of any final rule. For an additional discussion of NSFR, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Liquidity Framework—Net Stable Funding Ratio” in Part II, Item 7 of the 2016 Form10-K.
date.
At
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Securities purchased under agreements to resell and Securities borrowed | $ | 189,086 | $ | 194,773 | ||
Securities sold under agreements to repurchase and Securities loaned | $ | 49,300 | $ | 62,706 | ||
Securities received as collateral1 | $ | 8,799 | $ | 13,022 |
Average Daily Balance Three Months Ended | ||||||
$ in millions | September 30, 2020 | December 31, 2019 | ||||
Securities purchased under agreements to resell and Securities borrowed | $ | 182,181 | $ | 210,257 | ||
Securities sold under agreements to repurchase and Securities loaned | $ | 58,474 | $ | 64,870 |
1. | Included within Trading assets in the balance sheets. |
In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheets, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheets. Our risk exposure on these transactions is mitigated by collateral maintenance policies. We also hold related liquidity reserves.
10-K.
23 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Savings and demand deposits: Brokerage sweep deposits1 | $ | 135,152 |
| $ | 153,042 |
| ||
Savings and other | 5,555 | 1,517 | ||||||
Total Savings and demand deposits | 140,707 | 154,559 | ||||||
Time deposits2 | 13,932 | 1,304 | ||||||
Total | $ | 154,639 | $ | 155,863 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Savings and demand deposits: | ||||||
Brokerage sweep deposits1 | $ | 164,146 | $ | 121,077 | ||
Savings and other | 38,431 | 28,388 | ||||
Total Savings and demand deposits | 202,577 | 149,465 | ||||
Time deposits | 36,676 | 40,891 | ||||
Total | $ | 239,253 | $ | 190,356 |
1. |
|
|
$ in millions | Parent Company | Subsidiaries | Total | ||||||
Original maturities of one year or less | $ | — | $ | 4,553 | $ | 4,553 | |||
Original maturities greater than one year | |||||||||
2020 | $ | 641 | $ | 828 | $ | 1,469 | |||
2021 | 19,964 | 6,186 | 26,150 | ||||||
2022 | 16,418 | 4,011 | 20,429 | ||||||
2023 | 15,316 | 4,657 | 19,973 | ||||||
2024 | 15,938 | 5,436 | 21,374 | ||||||
Thereafter | 83,172 | 26,324 | 109,496 | ||||||
Total | $ | 151,449 | $ | 47,442 | $ | 198,891 | |||
Total Borrowings | $ | 151,449 | $ | 51,995 | $ | 203,444 | |||
Maturities over next 12 months2 | $ | 20,247 |
1. | Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, remaining maturity represents the earliest put date. |
2. | Includes only borrowings with original maturities greater than one year. |
Short-Term Borrowings
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Short-term borrowings | $ | 1,087 | $ | 941 |
Our unsecured short-term borrowings primarily consist of structured notes, bank loans and bank notes with original maturities of 12 months or less.
Long-Term Borrowings
2019.
We may engage in various transactions in the credit markets (including, for example, debt retirements) that we believe are in our investors’ best interests.
Long-term Borrowings by Maturity at September 30, 2017
$ in millions | Parent Company | Subsidiaries | Total | |||||||||
2017 | $ | 4,605 | $ | 3,685 | $ | 8,290 | ||||||
2018 | 18,816 | 2,244 | 21,060 | |||||||||
2019 | 21,841 | 2,033 | 23,874 | |||||||||
2020 | 19,362 | 2,075 | 21,437 | |||||||||
2021 | 15,862 | 1,449 | 17,311 | |||||||||
Thereafter | 88,786 | 10,919 | 99,705 | |||||||||
Total | $ | 169,272 | $ | 22,405 | $ | 191,677 | ||||||
Maturities over next 12 months |
| $ | 25,792 |
Long-term Borrowings increased to $191,677 million as of September 30, 2017, compared with $164,775 million at December 31, 2016. This increase is a result of issuances, partially offset by maturities and retirements, presented in the table below.
$ in millions | Nine Months Ended September 30, 2017 | |||
Issued | $ | 45,334 | ||
Matured or retired | 24,480 |
For further information on long-term borrowings,Borrowings, see Note 1013 to the financial statements.
Our credit ratings do not include any uplift from perceived government support from any rating agency given See also “Risk Factors— Liquidity Risk” in the significant progress of the U.S. financial reform legislation and regulations. Some rating agencies have stated that they currently incorporate various degrees of credit rating uplift fromnon-governmental third-party sources of potential support.
Parent Company and MSBNA’s Senior UnsecuredU.S. Bank Subsidiaries' Issuer Ratings at October 31, 2017
Parent Company | ||||||||
Short-Term Debt | Long-Term Debt | Rating Outlook | ||||||
DBRS, Inc. | R-1 (middle) | A (high) | Stable | |||||
Fitch Ratings, Inc. | F1 | A | ||||||
Moody’s Investors Service, Inc. | P-1 | |||||||
Rating and Investment Information, Inc. | a-1 | A | Stable | |||||
| A-2 | BBB+ | Stable |
MSBNA | |||
Short-Term Debt | Long-Term Debt | Rating Outlook | |
Fitch Ratings, Inc. | F1 | A+ | Negative |
Moody’s Investors Service, Inc. | P-1 | Aa3 | Stable |
S&P Global Ratings | A-1 | A+ | Stable |
MSPBNA | |||
Short-Term Debt | Long-Term Debt | Rating Outlook | |
Moody’s Investors Service, Inc. | P-1 | Aa3 | Stable |
S&P Global Ratings | A-1 | A+ | Stable |
September 2020 Form 10-Q | 24 |
Management’s Discussion and Analysis | ||||||
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| ||||||
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The See Note 7 to the financial statements for additional collateral or termination paymentsinformation on OTC derivatives that may be called in the event of a future credit rating downgrade vary by contract andcan be based on ratings by either or both of Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Global Ratings (“S&P”). The following table shows the future potential collateral amounts and termination payments that could be called or required by counterparties or exchanges and clearing organizations in the event ofone-notch ortwo-notch downgrade scenarios, from the lowest of Moody’s or S&P ratings, based on the relevant contractual downgrade triggers.
Incremental Collateral or Terminating Payments upon Potential Future Rating Downgrade
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
One-notch downgrade | $ | 856 | $ | 1,292 | ||||
Two-notch downgrade | 635 | 875 |
contain such contingent features.
Capital Management
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
in millions, except for per share data | 2020 | 2019 | 2020 | 2019 | ||||||||
Number of shares | — | 36 | 29 | 90 | ||||||||
Average price per share | $ | — | $ | 41.92 | $ | 46.01 | $ | 42.77 | ||||
Total | $ | — | $ | 1,500 | $ | 1,347 | $ | 3,860 |
Common Stock
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Repurchases of | $ | 1,250 | $ | 1,250 | $ | 2,500 | $ | 2,500 |
From time to time we repurchase our outstanding common stock which includes ourFinancial Services Forum announced that its eight U.S. Bank members, including us, had voluntarily suspended their share repurchase program. For a descriptionprograms. On June 25, 2020, the Federal Reserve published summary results of our share repurchase program, see “Unregistered Sales of Equity SecuritiesCCAR and Use of Proceeds.”
The Board determines the declaration and payment of dividends on a quarterly basis. On October 17, 2017, we announced that large BHCs generally would be restricted in making share repurchases during the Board declared a quarterly dividend per common sharecurrent quarter, and on September 30, 2020, the restrictions were extended through the fourth quarter of $0.25. The dividend is payable2020. For more information on November 15, 2017 to common shareholders of record on October 31, 2017.
For a description of our 2017 capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans and Stress Tests.”
PreferredTests” herein.
Dividend Announcement
Announcement date | October 15, 2020 | ||
Amount per share | $0.35 | ||
Date to be paid | November 13, 2020 | ||
Shareholders of record as of | October 30, 2020 |
extended through the fourth quarter of 2020. For additional information, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans and Stress Tests” herein.
Announcement date | September 15, 2020 |
Date paid | October 15, 2020 |
Shareholders of record as of | September 30, 2020 |
For a further discussion of our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending Commitments.”
25 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
including well-capitalized“well-capitalized” standards, and evaluates our compliance with such capital requirements. The Office of the Comptroller of the Currency (“OCC”) establishes similarRegulatory capital requirements and standards for our U.S. Bank Subsidiaries. The regulatory capital requirementsestablished by the Federal Reserve are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank(“Dodd-Frank Act”).
The Basel Committee has published revisionsOCC establishes similar capital requirements and standards for our U.S. Bank Subsidiaries. For us to certainremain an FHC, we must remain well-capitalized in accordance with standards in its capital framework, and is actively considering potential revisions to other capital standards, that, if adoptedestablished by the Federal Reserve and our U.S. banking agencies, could substantially changeBank Subsidiaries must remain well-capitalized in accordance with standards established by the U.S.OCC. For additional information on regulatory capital framework.requirements for our U.S. Bank Subsidiaries, see Note 16 to the financial statements.
Regulatory Capital Requirements
We are required to maintain minimum risk-based For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and leverage capital ratios under the regulatory capital requirements. A summary of the calculations of regulatory capital, risk-weighted assets (“RWAs”) and transition provisions follows.
Clean Holding Company Requirements” herein.
In addition to the minimum risk-based capital ratio requirements, on a fullyphased-in basis by 2019, we will be subject to:
A greater than 2.5% Common Equity Tier 1 capital conservation buffer;
The Common Equity Tier 1 global systemically important bank(“G-SIB”) capital surcharge, currently at 3%; and
Up to a 2.5% Common Equity Tier 1 countercyclical capital buffer (“CCyB”), currently set by U.S. banking regulators at zero (collectively, the “buffers”).
In 2017, thephase-in amount for each of the buffers is 50% of the fullyphased-in buffer requirement. Failure to main-
At September 30, 2020 | Beginning October 1, 2020 | |||||||
Standardized and Advanced | Standardized | Advanced | ||||||
Capital buffers | ||||||||
Capital conservation buffer | 2.5 | % | — | 2.5 | % | |||
Stress capital buffer (“SCB”)1 | N/A | 5.7 | % | N/A | ||||
G-SIB capital surcharge2 | 3 | % | 3 | % | 3 | % | ||
CCyB3 | 0 | % | 0 | % | 0 | % | ||
Capital buffer requirement4 | 5.5 | % | 8.7 | % | 5.5 | % | ||
At September 30, 2020 | Beginning October 1, 2020 | |||||||
Regulatory Minimum | Standardized and Advanced | Standardized | Advanced | |||||
Required ratios5 | ||||||||
Common Equity Tier 1 capital ratio | 4.5 | % | 10.0 | % | 13.2 | % | 10.0 | % |
Tier 1 capital ratio | 6.0 | % | 11.5 | % | 14.7 | % | 11.5 | % |
Total capital ratio | 8.0 | % | 13.5 | % | 16.7 | % | 13.5 | % |
For additional information on the SCB, see “Capital Plans and Stress Tests” and “Regulatory Developments—Stress Capital Buffer Final Rule” herein. |
For a further discussion of the G-SIB capital surcharge, see “Management’s Discussion and Analysis |
tain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. For a further discussion of theG-SIB capital surcharge, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—RegulatoryRequirements—G-SIB Capital Surcharge” in Part II, Item 7 of the 2016 Form10-K.
See “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein for additional capital requirements effective January 1, 2019.
Risk-Weighted Assets.RWAs reflect both ouron- andoff-balance sheet risk as well as capital charges attributable to the risk of loss arising from the following:
Credit risk: The failure of a borrower, counterparty or issuer to meet its financial obligations to us;
Market risk: Adverse changes in the level of one or more market prices, rates, indices, volatilities, correlations or other market factors, such as market liquidity; and
3. |
|
For a further discussion of our market, credit and operational risks, see “Quantitative and Qualitative Disclosures about Market Risk.”
4. | The capital buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Beginning October 1, 2020, our Standardized Approach capital buffer requirement is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our Advanced Approach capital buffer requirement is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB. |
5. | Required ratios represent the regulatory minimum plus the capital buffer requirement. |
The methods for calculating eachand the Standardized Approach rules, respectively.
September 2020 Form 10-Q | 26 |
Management’s Discussion and Analysis |
Minimum Risk-BasedRegulatory Capital Ratios: Transitional Provisions
At September 30, 2020 | ||||||||
$ in millions | Required Ratio1 | Standardized | Advanced | |||||
Risk-based capital | ||||||||
Common Equity Tier 1 capital | $ | 71,157 | $ | 71,157 | ||||
Tier 1 capital | 79,905 | 79,905 | ||||||
Total capital | 90,018 | 89,763 | ||||||
Total RWA | 408,850 | 420,081 | ||||||
Common Equity Tier 1 capital ratio | 10.0 | % | 17.4 | % | 16.9 | % | ||
Tier 1 capital ratio | 11.5 | % | 19.5 | % | 19.0 | % | ||
Total capital ratio | 13.5 | % | 22.0 | % | 21.4 | % | ||
$ in millions | Required Ratio1 | At September 30, 2020 | ||||||
Leverage-based capital | ||||||||
Adjusted average assets2 | $ | 962,435 | ||||||
Tier 1 leverage ratio | 4.0 | % | 8.3 | % | ||||
Supplementary leverage exposure3,4 | $ | 1,084,348 | ||||||
SLR4 | 5.0 | % | 7.4 | % |
At December 31, 2019 | ||||||||
$ in millions | Required Ratio1 | Standardized | Advanced | |||||
Risk-based capital | ||||||||
Common Equity Tier 1 capital | $ | 64,751 | $ | 64,751 | ||||
Tier 1 capital | 73,443 | 73,443 | ||||||
Total capital | 82,708 | 82,423 | ||||||
Total RWA | 394,177 | 382,496 | ||||||
Common Equity Tier 1 capital ratio | 10.0 | % | 16.4 | % | 16.9 | % | ||
Tier 1 capital ratio | 11.5 | % | 18.6 | % | 19.2 | % | ||
Total capital ratio | 13.5 | % | 21.0 | % | 21.5 | % | ||
$ in millions | Required Ratio1 | At December 31, 2019 | ||||||
Leverage-based capital | ||||||||
Adjusted average assets2 | $ | 889,195 | ||||||
Tier 1 leverage ratio | 4.0 | % | 8.3 | % | ||||
Supplementary leverage exposure3 | $ | 1,155,177 | ||||||
SLR | 5.0 | % | 6.4 | % |
1. |
Required ratios |
Transitional and FullyPhased-In Regulatory Capital Ratios
At September 30, 2017 | ||||||||||||||||
Transitional | Pro Forma Fully Phased-In | |||||||||||||||
$ in millions | Standardized | Advanced | Standardized | Advanced | ||||||||||||
Risk-based capital | ||||||||||||||||
Common Equity Tier 1 | $ | 62,214 | $ | 62,214 | $ | 61,603 | $ | 61,603 | ||||||||
Tier 1 capital | 71,006 | 71,006 | 70,276 | 70,276 | ||||||||||||
Total capital | 81,861 | 81,652 | 81,148 | 80,939 | ||||||||||||
Total RWAs | 368,629 | 358,219 | 378,334 | 368,507 | ||||||||||||
Common Equity Tier 1 | 16.9% | 17.4% | 16.3% | 16.7% | ||||||||||||
Tier 1 capital ratio | 19.3% | 19.8% | 18.6% | 19.1% | ||||||||||||
Total capital ratio | 22.2% | 22.8% | 21.4% | 22.0% | ||||||||||||
Leverage-based capital | ||||||||||||||||
Adjusted average assets1 | $ | 841,360 | N/A | $ | 840,845 | N/A | ||||||||||
Tier 1 leverage ratio2 | 8.4% | N/A | 8.4% | N/A |
At December 31, 2016 | ||||||||||||||||
Transitional | Pro Forma Fully Phased-In | |||||||||||||||
$ in millions | Standardized | Advanced | Standardized | Advanced | ||||||||||||
Risk-based capital | ||||||||||||||||
Common Equity | $ | 60,398 | $ | 60,398 | $ | 58,616 | $ | 58,616 | ||||||||
Tier 1 capital | 68,097 | 68,097 | 66,315 | 66,315 | ||||||||||||
Total capital | 78,917 | 78,642 | 77,155 | 76,881 | ||||||||||||
Total RWAs | 340,191 | 358,141 | 351,101 | 369,709 | ||||||||||||
Common Equity | 17.8% | 16.9% | 16.7% | 15.9% | ||||||||||||
Tier 1 capital ratio | 20.0% | 19.0% | 18.9% | 17.9% | ||||||||||||
Total capital ratio | 23.2% | 22.0% | 22.0% | 20.8% | ||||||||||||
Leverage-based capital | ||||||||||||||||
Adjusted average assets1 | $ | 811,402 | N/A | $ | 810,288 | N/A | ||||||||||
Tier 1 leverage ratio2 | 8.4% | N/A | 8.2% | N/A |
N/A—Not Applicable
2. | Adjusted average assets |
| |
3. | Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio |
The fullyphased-in pro forma estimates in the previous tables are based on our current understanding of the capital rules and other factors, which may be subject to change as we receive additional clarification and implementation guidance from the Federal Reserve and as the interpretation of the regulations evolves over time. These fullyphased-in pro forma estimates arenon-GAAP financial measures because they were not yet effective at September 30, 2017. These preliminary estimates are subject to risks and uncertainties that may cause actual results to differ materially and should not be taken as a projection of what our capital, capital ratios, RWAs, earnings or other results will actually be at future dates. For a discussion of risks and uncertainties that may affect our future results, see “Risk Factors” in Part I, Item 1A of the 2016 Form10-K.
Well-Capitalized Minimum Regulatory Capital Ratios for U.S. Bank Subsidiaries
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For us to remain a financial holding company, our U.S. Bank Subsidiaries must qualify as well-capitalized by maintaining the minimum ratio requirements set forth in the previous table. The Federal Reserve has not yet revised the well-capitalized standard for financial holding companies to reflect the higher capital standards required for us under the capital rules. Assuming that the Federal Reserve would apply the same or very similar well-capitalized standards to financial holding companies, each of our risk-based capital ratios and Tier 1 leverage ratio at September 30, 2017 would have exceeded the revised well-capitalized standard. The Federal Reserve may require us to maintain risk- and leverage-based capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a financial holding company’s particular condition, risk profile and growth plans.
Regulatory Capital Calculated under Transitional Rules
$ in millions | At September 30, 2017 | At 2016 | ||||||
Common Equity Tier 1 capital | ||||||||
Common stock and surplus | $ | 15,448 | $ | 17,494 | ||||
Retained earnings | 57,554 | 53,679 | ||||||
AOCI | (2,544 | ) | (2,643) | |||||
Regulatory adjustments and deductions: |
| |||||||
Net goodwill | (6,519 | ) | (6,526) | |||||
Net intangible assets (other than goodwill and mortgage servicing assets) | (1,991 | ) | (1,631) | |||||
Other adjustments and deductions1 | 266 | 25 | ||||||
Total Common Equity Tier 1 capital | $ | 62,214 | $ | 60,398 | ||||
Additional Tier 1 capital | ||||||||
Preferred stock | $ | 8,520 | $ | 7,520 | ||||
Noncontrolling interests | 544 | 613 | ||||||
Other adjustments and deductions2 | 33 | (246) | ||||||
Additional Tier 1 capital | $ | 9,097 | $ | 7,887 | ||||
Deduction for investments in covered funds | (305 | ) | (188) | |||||
Total Tier 1 capital | $ | 71,006 | $ | 68,097 | ||||
Standardized Tier 2 capital | ||||||||
Subordinated debt | $ | 10,341 | $ | 10,303 | ||||
Noncontrolling interests | 95 | 62 | ||||||
Eligible allowance for credit losses | 426 | 464 | ||||||
Other adjustments and deductions | (7 | ) | (9) | |||||
Total Standardized Tier 2 capital | $ | 10,855 | $ | 10,820 | ||||
Total Standardized capital | $ | 81,861 | $ | 78,917 | ||||
Advanced Tier 2 capital | ||||||||
Subordinated debt | $ | 10,341 | $ | 10,303 | ||||
Noncontrolling interests | 95 | 62 | ||||||
Eligible credit reserves | 217 | 189 | ||||||
Other adjustments and deductions | (7 | ) | (9) | |||||
Total Advanced Tier 2 capital | $ | 10,646 | $ | 10,545 | ||||
Total Advanced capital | $ | 81,652 | $ | 78,642 |
Regulatory Capital Rollforward Calculated under Transitional Rules
$ in millions | Nine Months Ended September 30, 2017 | |||
Common Equity Tier 1 capital | ||||
Common Equity Tier 1 capital at December 31, 2016 | $ | 60,398 | ||
Change related to the following items: | ||||
Value of shareholders’ common equity | 1,928 | |||
Net goodwill | 7 | |||
Net intangible assets (other than goodwill and mortgage servicing assets) | (360) | |||
Other adjustments and deductions1 | 241 | |||
Common Equity Tier 1 capital at September 30, 2017 | $ | 62,214 | ||
Additional Tier 1 capital | ||||
Additional Tier 1 capital at December 31, 2016 | $ | 7,887 | ||
New issuance of qualifying preferred stock | 1,000 | |||
Change related to the following items: | ||||
Noncontrolling interests | (69) | |||
Other adjustments and deductions2 | 279 | |||
Additional Tier 1 capital at September 30, 2017 | 9,097 | |||
Deduction for investments in covered funds at | (188) | |||
Change in deduction for investments in covered funds | (117) | |||
Deduction for investments in covered funds at | (305) | |||
Tier 1 capital at September 30, 2017 | $ | 71,006 | ||
Standardized Tier 2 capital | ||||
Tier 2 capital at December 31, 2016 | $ | 10,820 | ||
Change related to the following items: | ||||
Eligible allowance for credit losses | (38) | |||
Other changes, adjustments and deductions3 | 73 | |||
Standardized Tier 2 capital at September 30, 2017 | $ | 10,855 | ||
Total Standardized capital at September 30, 2017 | $ | 81,861 | ||
Advanced Tier 2 capital | ||||
Tier 2 capital at December 31, 2016 | $ | 10,545 | ||
Change related to the following items: | ||||
Eligible credit reserves | 28 | |||
Other changes, adjustments and deductions3 | 73 | |||
Advanced Tier 2 capital at September 30, 2017 | $ | 10,646 | ||
Total Advanced capital at September 30, 2017 | $ | 81,652 |
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RWAs Rollforward Calculated under Transitional Rules
Nine Months Ended | ||||||||
September 30, 20171 | ||||||||
$ in millions | Standardized | Advanced | ||||||
Credit risk RWAs | ||||||||
Balance at December 31, 2016 | $ | 278,874 | $ | 169,231 | ||||
Change related to the following items: | ||||||||
Derivatives | 7,013 | 166 | ||||||
Securities financing transactions | 5,892 | 3,246 | ||||||
Securitizations | 1,559 | 1,224 | ||||||
Investment securities | (3,044) | (1,467) | ||||||
Commitments, guarantees and loans | 213 | (4,317) | ||||||
Cash | (103) | (592) | ||||||
Equity investments | (889) | (946) | ||||||
Other credit risk2 | 1,795 | 1,650 | ||||||
Total change in credit risk RWAs | $ | 12,436 | $ | (1,036) | ||||
Balance at September 30, 2017 | $ | 291,310 | $ | 168,195 | ||||
Market risk RWAs | ||||||||
Balance at December 31, 2016 | $ | 61,317 | $ | 60,872 | ||||
Change related to the following items: | ||||||||
Regulatory VaR | 523 | 523 | ||||||
Regulatory stressed VaR | 11,304 | 11,304 | ||||||
Incremental risk charge | 2,662 | 2,662 | ||||||
Comprehensive risk measure | (3,923) | (3,543) | ||||||
Specific risk: | ||||||||
Non-securitizations | 4,065 | 4,065 | ||||||
Securitizations | 1,371 | 1,409 | ||||||
Total change in market risk RWAs | $ | 16,002 | $ | 16,420 | ||||
Balance at September 30, 2017 | $ | 77,319 | $ | 77,292 | ||||
Operational risk RWAs | ||||||||
Balance at December 31, 2016 | $ | N/A | $ | 128,038 | ||||
Change in operational risk RWAs | N/A | (15,306) | ||||||
Balance at September 30, 2017 | $ | N/A | $ | 112,732 | ||||
Total RWAs | $ | 368,629 | $ | 358,219 |
VaR—Value-at-Risk
N/A—Not Applicable
|
|
The decrease of $15,306 million in operational risk RWAs in the current year period under the Advanced Approach reflects a reduction in the internal loss data related to litigation utilized in the operational risk capital model.
Regulatory stressed VaR increased $11,304 million in the current year period under both the Standardized and the Advanced Approaches. These increases were primarily driven by increases in trading inventory across the equities, global macro, and credit businesses within Institutional Securities, in response to client demand.
Supplementary Leverage Ratio
We and our U.S. Bank Subsidiaries are required to publicly disclose our supplementary leverage ratios, which will become effective as a capital standard on January 1, 2018. By January 1, 2018, we must also maintain a Tier 1 supplementary leverage capital buffer of at least 2% in addition to the 3% minimum supplementary leverage ratio (for a total of at least 5%), in order to avoid limitations on capital distributions, including dividends and stock repurchases, and discretionary bonus payments to executive officers. In addition, beginning in 2018, our U.S. Bank Subsidiaries must maintain a supplementary leverage ratio of 6% to be considered well-capitalized.
Pro Forma Supplementary Leverage Exposure and Ratio
At September 30, 2017 | At December 31, 2016 | |||||||||||||||
$ in millions | Transitional basis | Fully phased-in1 | Transitional basis | Fully phased-in1 | ||||||||||||
Average total assets2 | $ | 850,616 | $ | 850,616 | $ | 820,536 | $ | 820,536 | ||||||||
Adjustments3, 4 | 237,305 | 236,789 | 242,113 | 240,999 | ||||||||||||
Pro forma supplementary leverage exposure | $ | 1,087,921 | $ | 1,087,405 | $ | 1,062,649 | $ | 1,061,535 | ||||||||
Pro forma supplementary leverage ratio | 6.5% | 6.5% | 6.4% | 6.2% |
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4. | Based on a Federal Reserve interim final rule in effect until March 31, 2021, our SLR and |
27 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
$ in millions | At September 30, 2020 | At December 31, 2019 | Change | ||||||
Common Equity Tier 1 capital | |||||||||
Common stock and surplus | $ | 4,350 | $ | 5,228 | $ | (878 | ) | ||
Retained earnings | 76,353 | 70,589 | 5,764 | ||||||
AOCI | (537 | ) | (2,788 | ) | 2,251 | ||||
Regulatory adjustments and deductions: | |||||||||
Net goodwill | (7,242 | ) | (7,081 | ) | (161 | ) | |||
Net intangible assets | (1,776 | ) | (2,012 | ) | 236 | ||||
Other adjustments and deductions1 | 9 | 815 | (806 | ) | |||||
Total Common Equity Tier 1 capital | $ | 71,157 | $ | 64,751 | $ | 6,406 | |||
Additional Tier 1 capital | |||||||||
Preferred stock | $ | 8,520 | $ | 8,520 | $ | — | |||
Noncontrolling interests | 625 | 607 | 18 | ||||||
Additional Tier 1 capital | $ | 9,145 | $ | 9,127 | $ | 18 | |||
Deduction for investments in covered funds | (397 | ) | (435 | ) | 38 | ||||
Total Tier 1 capital | $ | 79,905 | $ | 73,443 | $ | 6,462 | |||
Standardized Tier 2 capital | |||||||||
Subordinated debt | $ | 8,681 | $ | 8,538 | $ | 143 | |||
Noncontrolling interests | 147 | 143 | 4 | ||||||
Eligible ACL | 1,287 | 590 | 697 | ||||||
Other adjustments and deductions | (2 | ) | (6 | ) | 4 | ||||
Total Standardized Tier 2 capital | $ | 10,113 | $ | 9,265 | $ | 848 | |||
Total Standardized capital | $ | 90,018 | $ | 82,708 | $ | 7,310 | |||
Advanced Tier 2 capital | |||||||||
Subordinated debt | $ | 8,681 | $ | 8,538 | $ | 143 | |||
Noncontrolling interests | 147 | 143 | 4 | ||||||
Eligible credit reserves | 1,032 | 305 | 727 | ||||||
Other adjustments and deductions | (2 | ) | (6 | ) | 4 | ||||
Total Advanced Tier 2 capital | $ | 9,858 | $ | 8,980 | $ | 878 | |||
Total Advanced capital | $ | 89,763 | $ | 82,423 | $ | 7,340 |
1. | Other adjustments |
The pro forma fullyphased-in supplementary leverage
Nine Months Ended September 30, 2020 | ||||||
$ in millions | Standardized | Advanced | ||||
Credit risk RWA | ||||||
Balance at December 31, 2019 | $ | 342,684 | $ | 228,927 | ||
Change related to the following items: | ||||||
Derivatives | 4,622 | 24,322 | ||||
Securities financing transactions | (9,314 | ) | 514 | |||
Securitizations | (1,595 | ) | (3,016 | ) | ||
Investment securities | 2,468 | 3,904 | ||||
Commitments, guarantees and loans | 5,017 | 1,776 | ||||
Cash | 718 | 1,838 | ||||
Equity investments | 3,027 | 3,207 | ||||
Other credit risk1 | (601 | ) | (762 | ) | ||
Total change in credit risk RWA | $ | 4,342 | $ | 31,783 | ||
Balance at September 30, 2020 | $ | 347,026 | $ | 260,710 | ||
Market risk RWA | ||||||
Balance at December 31, 2019 | $ | 51,493 | $ | 51,597 | ||
Change related to the following items: | ||||||
Regulatory VaR | 9,673 | 9,673 | ||||
Regulatory stressed VaR | 1,987 | 1,987 | ||||
Incremental risk charge | 180 | 180 | ||||
Comprehensive risk measure | 210 | 106 | ||||
Specific risk: | ||||||
Non-securitization | (99 | ) | (99 | ) | ||
Securitization | (1,620 | ) | (1,620 | ) | ||
Total change in market risk RWA | $ | 10,331 | $ | 10,227 | ||
Balance at September 30, 2020 | $ | 61,824 | $ | 61,824 | ||
Operational risk RWA | ||||||
Balance at December 31, 2019 | N/A | $ | 101,972 | |||
Change in operational risk RWA | N/A | (4,425 | ) | |||
Balance at September 30, 2020 | N/A | $ | 97,547 | |||
Total RWA | $ | 408,850 | $ | 420,081 |
1. | Amounts reflect assets not in a defined category, non-material portfolios of exposures and unsettled transactions, as applicable. |
U.S. Subsidiary Banks’ Pro Forma Supplementary Leverage Ratios on a Transitional Basis
At September 30, 2017 | At December 31, 2016 | |||||||
MSBNA | 8.9% | 7.7% | ||||||
MSPBNA | 9.4% | 10.2% |
The pro forma transitional and fullyphased-in supplementary leverage exposures and ratios arenon-GAAP financial measures because they have not yet become effective. Our estimates are subject to risks and uncertainties that may cause actual results to differ materially from estimates based on these regulations. Further, these expectations should not be
taken as projections of what our supplementary leverage ratios, earnings, assets or exposures will actually be at future dates. For a discussion of risks and uncertainties that may affect our future results, see “Risk Factors” in Part I, Item 1A of the 2016 Form10-K.
September 2020 Form 10-Q | 28 |
Management’s Discussion and Analysis |
On December 15, 2016, the
Actual Amount/Ratio | ||||||||||
$ in millions | Regulatory Minimum | Required Ratio1 | At September 30, 2020 | At December 31, 2019 | ||||||
External TLAC2 | $ | 202,472 | $ | 196,888 | ||||||
External TLAC as a % of RWA | 18.0 | % | 21.5 | % | 48.2 | % | 49.9 | % | ||
External TLAC as a % of leverage exposure | 7.5 | % | 9.5 | % | 18.7 | % | 17.0 | % | ||
Eligible LTD3 | $ | 114,952 | $ | 113,624 | ||||||
Eligible LTD as a % of RWA | 9.0 | % | 9.0 | % | 27.4 | % | 28.8 | % | ||
Eligible LTD as a % of leverage exposure | 4.5 | % | 4.5 | % | 10.6 | % | 9.8 | % |
1. | Required ratios are inclusive of applicable buffers.The final rule imposes TLAC buffer requirements on top of both the risk-based and leverage exposure-based external TLAC minimum requirements. The risk-based TLAC buffer is equal to the sum of 2.5%, our Method 1 G-SIB surcharge and the CCyB, if any, as a percentage of total RWA. The leverage exposure-based TLAC buffer is equal to 2% of our total leverage exposure. Failure to maintain the buffers would result in restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. |
2. | External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as eligible LTD. |
3. | Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date. |
September 30, 2020 and December 31, 2019. For a further discussion of TLAC and LTDrelated requirements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Regulatory Capital Requirements—Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” in Part II, Item 7 of the 20162019 Form10-K. For discussions about the interaction between the single point of entry resolution strategy and the TLAC and LTD requirements, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” in Part I, Item 1 and “Risk Factors—Legal, Regulatory and Compliance Risk” in Part I, Item 1A of the 2016 Form10-K.
from $3.5 billion in the 2016 Capital Plan. Additionally, the Capital Plan includes an increase in our quarterly common stock dividend to $0.25 per share from $0.20 per share, beginning with the common stock dividend declared on July 19, 2017. We29, 2020, we disclosed a summary of the results of ourcompany-run stress tests on June 23, 2017 on our Investor Relations website. In addition,On September 4, 2020, we submittedannounced we will be subject to an SCB of 5.7% beginning October 1, 2020, which reflects the Federal Reserve’s corrected 2020 supervisory stress test results. We had previously announced that we would be subject to an SCB of 5.9%, which reflected the Federal Reserve’s original 2020 supervisory stress test results released in June 2020.Together with other features of the regulatory capital framework, this revised SCB results in an aggregate Standardized Approach Common Equity Tier 1 required ratio of 13.2%. Generally, our SCB will be updated annually based on the results of the supervisory stress test. See “Liquidity and Capital Resources—Regulatory Requirements—Regulatory Developments—Stress Capital Buffer Final Rule” herein for additional information on the SCB.
The Dodd-Frank Act also requires eachsecond round of our U.S. Bank Subsidiaries to conduct an annual stress test. MSBNA and MSPBNA submitted their 2017 annualcompany-runsupervisory stress tests for each large BHC, including us, by the end of this year.
2020. For a further discussion of our capital plans, and stress tests, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Balance Sheet—Capital PlansManagement” herein and Stress Tests” in Part II, Item 7 of the 20162019 Form10-K.
29 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
Common equity estimation and attribution
allocated to the business segments is set at the beginning of each year and remains fixed throughout the year until the next annual reset. Differences between available and Required Capital are attributed to Parent Company equity during the year.
The Required Capital framework is expected to evolve over time in responsetake into account changes to changes inour risk-based capital requirements resulting from the businessSCB and regulatory environment. Wewe will continue to evaluate the framework with respect to the impact of other future regulatory requirements, as appropriate.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in billions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Institutional Securities | $ | 40.2 | $ | 43.2 | $ | 40.2 | $ | 43.2 | ||||||||
Wealth Management | 17.2 | 15.3 | 17.2 | 15.3 | ||||||||||||
Investment Management | 2.4 | 2.8 | 2.4 | 2.8 | ||||||||||||
Parent Company | 10.7 | 8.2 | 10.0 | 7.6 | ||||||||||||
Total1 | $ | 70.5 | $ | 69.5 | $ | 69.8 | $ | 68.9 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in billions | 2020 | 2019 | 2020 | 2019 | ||||||||
Institutional Securities | $ | 42.8 | $ | 40.4 | $ | 42.8 | $ | 40.4 | ||||
Wealth Management | 18.2 | 18.2 | 18.2 | 18.2 | ||||||||
Investment Management | 2.6 | 2.5 | 2.6 | 2.5 | ||||||||
Parent | 15.1 | 12.3 | 13.3 | 11.4 | ||||||||
Total | $ | 78.7 | $ | 73.4 | $ | 76.9 | $ | 72.5 |
1. |
The attribution of average common equity to the business segments is anon-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein. |
Regulatory Developments
Our next resolution plan submission will be a targeted resolution plan in July 2021.Federal Deposit Insurance Corporation (“FDIC”) an annualFDIC a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure.which is set out inan SPOE strategy. In line with our 2017 resolution plan, is a single point of entry strategy. We submitted our full 2017 resolution plan on June 30, 2017. We previously submitted a status report in respect of certain shortcomings identified in our 2015 resolution plan on September 30, 2016. As indicated in our 2017 resolution plan,SPOE strategy, the Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”). In addition, the Parent Company has entered into an amended and restated its support agreement with its material entities (including the Funding IHC) and certain other subsidiaries. UnderIn the amended and restated support agreement, upon the occurrenceevent of a resolution scenario, the Parent Company would be obligated to contribute or loan on a subordinated basis all of its Contributable Assets to our
In September 2017, the Federal Reserve and the FDIC extended the next resolution plan filing deadline for eight large domestic banks, including us, by one year to July 1, 2019.
In September 2016, the OCC issued final guidelines that establish enforceable standards for recovery planning by national banks and certain other institutions with total consolidated assets of $50 billion or more, calculated on a rolling four-quarter average basis, including MSBNA and MSPBNA. The guidelines were effective on January 1, 2017; MSBNA must be in compliance by January 1, 2018 and MSPBNA must be in compliance by October 1, 2018.
In September 2017, the Federal Reserve issued a final rule that would impose contractual requirements on certain “qualified financial contracts” (“covered QFCs”) to which U.S.G-SIBs, including us, and their subsidiaries (“covered entities”) are parties. While national banks and savings associations are not “covered entities” under the final Federal Reserve rule, the OCC is expected to issue a final rule that would subject national banks that are subsidiaries of U.S.G-SIBs, including our U.S. Bank Subsidiaries, as well as certain other institutions, to substantively identical requirements. Under the Federal Reserve’s final rule, covered QFCs must generally expressly provide that transfer restrictions and default rights against a covered entity are limited to the same extent as they would be under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Act and their implementing regulations. In addition, covered QFCs may not, among other things, permit the exercise of any cross-default right against a covered entity based on an affiliate’s entry into insolvency, resolution or similar proceedings, subject to certain creditor protections. There is aphased-in compliance schedule based on counterparty type, with the first compliance date of January 1, 2019.
For more information about resolution and recovery planning requirements and our activities in these areas, including the implications of such activities in a resolution scenario, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning” in Part I, Item 1,Planning,” “Risk Factors—Legal, Regulatory and Compliance Risk” in Part I, Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Developments—Requirements—Resolution and Recovery Planning” in Part II, Item 7 of the 20162019 Form10-K.
Legacy Covered Funds under
Regulatory Capital Treatment for Investments in Certain Unsecured Debt Instruments Issued by G-SIBs
exemptionsThe Federal financial regulatory agencies responsible for underwriting, market-making-related activities, risk-mitigating hedging and certain other activities. Thethe Volcker Rule also prohibitsRule’s implementing regulations have finalized a rule that revises the prohibition on certain investments and relationships by banking entities with “covereddefined covered funds. The final rule adds certain new exclusions from the definition of covered fund, while streamlining others. It also simplifies certain restrictions on
September 2020 Form 10-Q | 30 |
Management’s Discussion and Analysis |
• | Supplementary Leverage Ratio Interim Final Rules. The Federal Reserve has adopted an interim final rule that excludes, on a temporary basis, U.S. Treasury securities and deposits at Federal Reserve Banks from our supplementary leverage exposure from April 1, 2020 to March 31, 2021. |
31 | September 2020 Form 10-Q |
Management’s Discussion and Analysis |
• | Revisions to Definition of Eligible Retained Income. The U.S. banking agencies have adopted as final an interim final rule, which was effective March 20, 2020, amending the definition of eligible retained income in their respective capital rules. As amended, eligible retained income is defined by the U.S. banking agencies as the greater of (i) net income for the four preceding calendar quarters, net of any distributions and associated tax effects not already reflected in net income, and (ii) the average of net income over the preceding four quarters. This definition applies with respect to any payout restrictions applicable in the event of a breach of any regulatory capital buffers, including any applicable CCyB, G-SIB capital surcharge, capital conservation buffer, the enhanced SLR and, once effective, SCB, which replaces the capital conservation buffer under the Standardized Approach. |
• | Regulatory Capital and Stress Testing Developments Related to Implementation of CECL. The U.S. banking agencies have adopted a final rule, consistent with an interim final rule which was effective March 31, 2020, altering, for purposes of the regulatory capital and TLAC requirements, the required adoption time period for CECL. We have elected to apply a transition method provided by the rule, under which the effects of CECL on our regulatory capital and TLAC requirements are deferred for two years, followed by a three-year phase-in of the aggregate capital effects of the two-year deferral. |
be able to continue to serve our clients and customers under each of these potential outcomes.
U.S. Department of Labor Conflict of Interest Rule
The U.S. Department of Labor’s final Conflict of Interest Rule went into effect on June 9, 2017, with certain aspects subject tophased-in compliance. Full compliance is currently scheduled to be required by January 1, 2018, but the U.S. Department of Labor recently proposed to delay the full compliance date to July 1, 2019. In addition, the U.S. Department of Labor is undertaking an examination of the rule which may result in changes to the rule or related exemptions or a further change in the full compliance date. For a discussion of the U.S. Department of Labor Conflict of Interest Rule, see “Business—Supervision and Regulation—Institutional Securities and Wealth Management” in Part I, Item 1 of the 2016 Form10-K.
U.K. Referendum
Following the U.K. electorate vote to leave the European Union, the U.K. invoked Article 50 of the Lisbon Treaty on March 29, 2017. For further discussion of U.K. referendum’s potential impact on our operations, see “Risk Factors—International Risk” in Part I, Item 1A of the 20162019 Form10-K. For further information regarding our exposure to the U.K., see also “Quantitative and Qualitative Disclosures about Market Risk—Risk Management—Credit Risk—Country Risk Exposure.”
ExpectedPlanned Replacement of LIBOR
London Interbank Offered Rate and Replacement or Reform of Other Interest Rates
September 2020 Form 10-Q | 32 |
Management’s Discussion and Analysis |
Effects of Inflation and Changes in Interest and Foreign Exchange Rates
beyond 2021.
Off-Balance Sheet Arrangements
We enter into variousoff-balance sheet arrangements, including through unconsolidated special purpose entities (“SPEs”) and lending-related financial instruments (e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments.
We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 12 to the financial statements.
For information on our commitments, obligations under certain guarantee arrangements and indemnities, see Note 11 to the financial statements. For further information on our lending commitments, see “Quantitative and Qualitative Disclosures about Market Risk—Risk Management—Credit Risk—Lending Activities.”
33 | September 2020 Form 10-Q |
Table of Contents | |
VaR
associated implied volatilities and spreads, related to the global markets in which we conduct our trading activities.
VaR Methodology, Assumptions and Limitations.
We utilize the same VaR model for risk management purposes and for regulatory capital calculations. Our regulators have approved our VaR model for use in regulatory calculations.
The portfolio of positions used for our VaR for risk management purposes (“Management VaR”) differs from that used for regulatory capital requirements (“Regulatory VaR”).
Management VaR contains certain positions that are excluded from Regulatory VaR. Examples include counterparty credit valuation adjustment (“CVA”) and related hedges, as well as loans that are carried at fair value and associated hedges.
The following table presents the
Trading Risks
95% /One-Day Management VaR
95%/One-Day VaR for the Three Months Ended | ||||||||||||||||
September 30, 2017 | ||||||||||||||||
$ in millions | Period End | Average | High | Low | ||||||||||||
Interest rate and credit spread | $ | 28 | $ | 31 | $ | 42 | $ | 25 | ||||||||
Equity price | 13 | 14 | 18 | 12 | ||||||||||||
Foreign exchange rate | 9 | 9 | 13 | 6 | ||||||||||||
Commodity price | 9 | 9 | 10 | 7 | ||||||||||||
Less: Diversification benefit1, 2 | (26 | ) | (25 | ) | N/A | N/A | ||||||||||
Primary Risk Categories | $ | 33 | $ | 38 | $ | 47 | $ | 32 | ||||||||
Credit Portfolio | 10 | 11 | 11 | 10 | ||||||||||||
Less: Diversification benefit1, 2 | (6 | ) | (6 | ) | N/A | N/A | ||||||||||
Total Management VaR | $ | 37 | $ | 43 | $ | 50 | $ | 36 | ||||||||
95%/One-Day VaR for the Three Months Ended | ||||||||||||||||
June 30, 2017 | ||||||||||||||||
$ in millions | Period End | Average | High | Low | ||||||||||||
Interest rate and credit spread | $ | 35 | $ | 35 | $ | 44 | $ | 27 | ||||||||
Equity price | 15 | 18 | 26 | 15 | ||||||||||||
Foreign exchange rate | 10 | 11 | 15 | 8 | ||||||||||||
Commodity price | 9 | 9 | 10 | 8 | ||||||||||||
Less: Diversification benefit1, 2 | (27 | ) | (27 | ) | N/A | N/A | ||||||||||
Primary Risk Categories | $ | 42 | $ | 46 | $ | 60 | $ | 36 | ||||||||
Credit Portfolio | 11 | 12 | 14 | 11 | ||||||||||||
Less: Diversification benefit1, 2 | (7 | ) | (7 | ) | N/A | N/A | ||||||||||
Total Management VaR | $ | 46 | $ | 51 | $ | 64 | $ | 41 |
N/A—Not Applicable
Three Months Ended | ||||||||||||
September 30, 2020 | ||||||||||||
$ in millions | Period End | Average | High2 | Low2 | ||||||||
Interest rate and credit spread | $ | 32 | $ | 38 | $ | 49 | $ | 29 | ||||
Equity price | 27 | 30 | 39 | 19 | ||||||||
Foreign exchange rate | 11 | 9 | 12 | 7 | ||||||||
Commodity price | 17 | 22 | 29 | 16 | ||||||||
Less: Diversification benefit1 | (38 | ) | (53 | ) | N/A | N/A | ||||||
Primary Risk Categories | $ | 49 | $ | 46 | $ | 57 | $ | 37 | ||||
Credit Portfolio | 21 | 25 | 31 | 20 | ||||||||
Less: Diversification benefit1 | (8 | ) | (13 | ) | N/A | N/A | ||||||
Total Management VaR | $ | 62 | $ | 58 | $ | 78 | $ | 45 |
Three Months Ended | ||||||||||||
June 30, 2020 | ||||||||||||
$ in millions | Period End | Average | High2 | Low2 | ||||||||
Interest rate and credit spread | $ | 42 | $ | 47 | $ | 59 | $ | 36 | ||||
Equity price | 38 | 25 | 38 | 20 | ||||||||
Foreign exchange rate | 10 | 11 | 15 | 8 | ||||||||
Commodity price | 25 | 16 | 25 | 11 | ||||||||
Less: Diversification benefit1 | (68 | ) | (49 | ) | N/A | N/A | ||||||
Primary Risk Categories | $ | 47 | $ | 50 | $ | 62 | $ | 44 | ||||
Credit Portfolio | 26 | 25 | 30 | 23 | ||||||||
Less: Diversification benefit1 | (1 | ) | (15 | ) | N/A | N/A | ||||||
Total Management VaR | $ | 72 | $ | 60 | $ | 78 | $ | 47 |
1. | Diversification benefit equals the difference between the total Management VaR and the sum of the component VaRs. This benefit arises because the simulatedone-day losses for each of the components occur on different days; similar diversification benefits also are taken into account within each component. |
2. | The high and low VaR values for the total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and therefore, the diversification benefit is not an applicable measure. |
The averageAverage total Management VaR for the three months ended September 30, 2017 (“current quarter”) was $43 million compared with $51 million for the three months ended June 30, 2017 (“last quarter”). The averageand Management VaR for the Primary Risk Categories fordecreased from the current quarter was $38 million compared with $46 million last quarter. These decreases werethree months ended June 30, 2020 primarily drivenas a result of reduced credit spread risk partially offset by reduced market volatility and decreases in trading inventory across the equities and credit businesses within Institutional Securities.
increased equity risk.
September 2020 Form 10-Q | 34 |
Risk Disclosures |
The distribution of VaR Statistics and Net Revenues is presented There were no loss days in the following histograms for the Total Trading populations.
Total Trading.As shown in thecurrent quarter.
Daily 95% /One-day Total Management VaR for the Three Months Ended September 30, 2017
Current Quarter
Daily Net Trading Revenues for the Three Months Ended September 30, 2017
($ in millions)
Counterparty Exposure Related to Our Own
$ in millions | At September 30, 2020 | At June 30, 2020 | ||||
Derivatives | $ | 7 | $ | 7 | ||
Funding liabilities2 | 46 | 45 |
1. | Amounts represent the potential gain for each 1 bps widening of our credit spread. |
2. | Relates to Borrowings carried at fair value. |
$ in millions | At September 30, 2020 | At June 30, 2020 | ||||
Basis point change | ||||||
+100 | $ | 1,014 | $ | 599 | ||
-100 | (338 | ) | (351 | ) |
Funding Liabilities.The credit spread risk sensitivity of ourmark-to-market structured note liabilities corresponded to an increase in value of approximately $28 million and $26 million for each 1 basis point widening in our credit spread level at September 30, 2017 and June 30, 2017, respectively.
Interest Rate Risk Sensitivity.The followingprevious table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our U.S. Bank Subsidiaries. These shocks
are applied to our12-month forecast for our U.S. Bank Subsidiaries, which incorporates market expectations of interest rates and our forecasted business activity, including our deposit deployment strategy and asset-liability management hedges.
U.S. Bank Subsidiaries’ Net Interest Income Sensitivity Analysis
$ in millions | At September 30, 2017 | At June 30, 2017 | ||||||
Basis point change | ||||||||
+200 | $ | 566 | $ | 716 | ||||
+100 | 433 | 413 | ||||||
-100 | (647 | ) | (577) |
activity.
Investments.assumptions as a result of an analysis of deposit pricing through a full interest rate cycle.
35 | September 2020 Form 10-Q |
Risk Disclosures |
Loss from 10% Decline | ||||||
$ in millions | At September 30, 2020 | At June 30, 2020 | ||||
Investments related to Investment Management activities | $ | 349 | $ | 329 | ||
Other investments: | ||||||
MUMSS | 176 | 170 | ||||
Other Firm investments | 203 | 188 |
Investmentsperformance-based fees, as applicable.
10% Sensitivity | ||||||||
$ in millions | At September 30, 2017 | At June 30, 2017 | ||||||
Investments related to Investment Management activities | $ | 321 | $ | 326 | ||||
Other investments: | ||||||||
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. | 174 | 171 | ||||||
Other Firm investments | 155 | 151 |
Equity Market Sensitivity. InCertain asset management revenues in the Wealth Management and Investment Management business segments certainfee-based revenue streams are driven by the valuederived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, “client holdings”). The assets underlying client holdings are primarily composed of clients’ equity, holdings.fixed income and alternative investments, and are sensitive to changes in related markets. The overall level of revenues for these streams alsorevenues depends on multiple additional factors that include, but are not limited to, the level and duration of the equitya market increase or decline, price volatility, the geographic and industry mix of client assets, and client behavior such as the rate and magnitude of client investments and redemptions, and the impact of such market increase or decline and price volatility on client behavior.redemptions. Therefore, overall revenues do not correlate completely with changes in the equityrelated markets.
Lending Activities included in
We provideLending Commitments
At September 30, 2020 | ||||||||||||
$ in millions | HFI | HFS | FVO | Total | ||||||||
Institutional Securities: | ||||||||||||
Corporate | $ | 7,628 | $ | 8,552 | $ | 14 | $ | 16,194 | ||||
Secured lending facilities | 26,496 | 3,521 | 445 | 30,462 | ||||||||
Commercial and Residential real estate | 7,265 | 928 | 1,593 | 9,786 | ||||||||
Securities-based lending and Other | 1,277 | 57 | 5,729 | 7,063 | ||||||||
Total Institutional Securities | 42,666 | 13,058 | 7,781 | 63,505 | ||||||||
Wealth Management: | ||||||||||||
Residential real estate | 33,674 | 12 | — | 33,686 | ||||||||
Securities-based lending and Other | 57,723 | — | — | 57,723 | ||||||||
Total Wealth Management | 91,397 | 12 | — | 91,409 | ||||||||
Total Investment Management1 | 6 | 11 | 552 | 569 | ||||||||
Total loans | 134,069 | 13,081 | 8,333 | 155,483 | ||||||||
ACL | (913 | ) | (913 | ) | ||||||||
Total loans, net of ACL | $ | 133,156 | $ | 13,081 | $ | 8,333 | $ | 154,570 | ||||
Lending commitments2 | $ | 120,098 | ||||||||||
Total exposure | $ | 274,668 |
At December 31, 2019 | ||||||||||||
$ in millions | HFI | HFS | FVO | Total | ||||||||
Institutional Securities: | ||||||||||||
Corporate | $ | 5,426 | $ | 6,192 | $ | 20 | $ | 11,638 | ||||
Secured lending facilities | 24,502 | 4,200 | 951 | 29,653 | ||||||||
Commercial and Residential real estate | 7,859 | 2,049 | 3,290 | 13,198 | ||||||||
Securities-based lending and Other | 503 | 123 | 6,814 | 7,440 | ||||||||
Total Institutional Securities | 38,290 | 12,564 | 11,075 | 61,929 | ||||||||
Wealth Management: | ||||||||||||
Residential real estate | 30,184 | 13 | — | 30,197 | ||||||||
Securities-based lending and Other | 49,930 | — | — | 49,930 | ||||||||
Total Wealth Management | 80,114 | 13 | — | 80,127 | ||||||||
Total Investment Management1 | 5 | — | 251 | 256 | ||||||||
Total loans | 118,409 | 12,577 | 11,326 | 142,312 | ||||||||
ACL | (349 | ) | (349 | ) | ||||||||
Total loans, net of ACL | $ | 118,060 | $ | 12,577 | $ | 11,326 | $ | 141,963 | ||||
Lending commitments2 | $ | 120,068 | ||||||||||
Total exposure | $ | 262,031 |
1. | Investment Management business segment loans are related to certain of our activities as an investment advisor and manager. At September | 30, 2020 and December 31, 2019, loans held at fair value are predominantly the result of the consolidation of CLO vehicles, managed by Investment Management, composed primarily of senior secured loans to corporations. |
Loans and Lending Commitments
At September 30, 2017 | ||||||||||||||||
$ in millions | IS | WM | IM1 | Total | ||||||||||||
Corporate loans | $ | 16,201 | $ | 13,480 | $ | 5 | $ | 29,686 | ||||||||
Consumer loans | — | 26,616 | — | 26,616 | ||||||||||||
Residential real estate loans | — | 26,150 | — | 26,150 | ||||||||||||
Wholesale real estate loans | 9,000 | — | — | 9,000 | ||||||||||||
Loans held for investment, | 25,201 | 66,246 | 5 | 91,452 | ||||||||||||
Allowance for loan losses | (203 | ) | (42 | ) | — | (245 | ) | |||||||||
Loans held for investment, | 24,998 | 66,204 | 5 | 91,207 | ||||||||||||
Corporate loans | 12,524 | — | — | 12,524 | ||||||||||||
Residential real estate loans | 9 | 51 | — | 60 | ||||||||||||
Wholesale real estate loans | 640 | — | — | 640 | ||||||||||||
Loans held for sale | 13,173 | 51 | — | 13,224 | ||||||||||||
Corporate loans | 6,420 | — | 21 | 6,441 | ||||||||||||
Residential real estate loans | 690 | — | — | 690 | ||||||||||||
Wholesale real estate loans | 1,157 | — | — | 1,157 | ||||||||||||
Loans held at fair value | 8,267 | — | 21 | 8,288 | ||||||||||||
Total loans | 46,438 | 66,255 | 26 | 112,719 | ||||||||||||
Lending commitments2,3 | 89,329 | 9,994 | — | 99,323 | ||||||||||||
Total loans and lending commitments2,3 | $ | 135,767 | $ | 76,249 | $ | 26 | $ | 212,042 |
At December 31, 2016 | ||||||||||||||||
$ in millions | IS | WM | IM1 | Total | ||||||||||||
Corporate loans | $ | 13,858 | $ | 11,162 | $ | 5 | $ | 25,025 | ||||||||
Consumer loans | — | 24,866 | — | 24,866 | ||||||||||||
Residential real estate loans | — | 24,385 | — | 24,385 | ||||||||||||
Wholesale real estate loans | 7,702 | — | — | 7,702 | ||||||||||||
Loans held for investment, | 21,560 | 60,413 | 5 | 81,978 | ||||||||||||
Allowance for loan losses | (238 | ) | (36 | ) | — | (274) | ||||||||||
Loans held for investment, | 21,322 | 60,377 | 5 | 81,704 | ||||||||||||
Corporate loans | 10,710 | — | — | 10,710 | ||||||||||||
Residential real estate loans | 11 | 50 | — | 61 | ||||||||||||
Wholesale real estate loans | 1,773 | — | — | 1,773 | ||||||||||||
Loans held for sale | 12,494 | 50 | — | 12,544 | ||||||||||||
Corporate loans | 7,199 | — | 18 | 7,217 | ||||||||||||
Residential real estate loans | 966 | — | — | 966 | ||||||||||||
Wholesale real estate loans | 519 | — | — | 519 | ||||||||||||
Loans held at fair value | 8,684 | — | 18 | 8,702 | ||||||||||||
Total loans | 42,500 | 60,427 | 23 | 102,950 | ||||||||||||
Lending commitments2,3 | 90,143 | 8,299 | — | 98,442 | ||||||||||||
Total loans and lending commitments2,3 | $ | 132,643 | $ | 68,726 | $ | 23 | $ | 201,392 |
IS—Institutional Securities
WM—Wealth Management
IM—Investment Management
|
2. | Lending commitments represent the notional amount of legally binding obligations to provide funding to clients for lending transactions. Since commitments associated with these business activities may expire unused or may not be utilized to full capacity, they do not necessarily reflect the actual future cash funding requirements. |
September 2020 Form 10-Q | 36 |
Risk Disclosures |
$ in millions | |||
December 31, 20191 | $ | 590 | |
Effect of CECL adoption | (41 | ) | |
Gross charge-offs | (59 | ) | |
Recoveries | 5 | ||
Net (charge-offs) recoveries | (54 | ) | |
Provision2 | 757 | ||
Other | 8 | ||
September 30, 2020 | $ | 1,260 | |
ACL—Loans | $ | 913 | |
ACL—Lending commitments | 347 |
1. | At December 31, 2019, the ACL for Loans and Lending commitments was $349 million and $241 million, respectively. |
| |
2. | In the current quarter, the provision for loan losses was $63 million and the provision for losses on lending commitments |
|
Our creditCredit 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, seniority of the loan, collateral type, volatility of collateral value, debt cushion,industry, facility structure, loan-to-value ratio, debt service ratio, covenantscollateral and counterparty type.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.
Allowance for Loans and Lending Commitments Held for Investment
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Loans | $ | 245 | $ | 274 | ||||
Commitments | 181 | 190 |
37 | September 2020 Form 10-Q |
Risk Disclosures |
a discussion of the Firm’s ACL methodology under CECL.
At September 30, 2017 | At December 31, 2016 | |||||||||||||||
IS | WM | IS | WM | |||||||||||||
Current | 99.4 | % | 99.9 | % | 98.6 | % | 99.9% | |||||||||
Non-accrual1 | 0.6 | % | 0.1 | % | 1.4 | % | 0.1% |
At September 30, 2020 | At December 31, 2019 | |||||||
IS | WM | IS | WM | |||||
Accrual | 99.1 | % | 99.8 | % | 99.0 | % | 99.9 | % |
Nonaccrual1 | 0.9 | % | 0.2 | % | 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. |
In connection with certain Loans and Lending Commitments At September 30, 2020 Contractual Years to Maturity $ in millions Less than 1 1-3 3-5 Over 5 Total Loans AA $ 274 $ — $ — $ — $ 274 A 874 1,062 39 229 2,204 BBB 3,958 5,726 3,314 295 13,293 BB 12,683 7,920 6,273 491 27,367 Other NIG 5,403 6,519 3,791 2,423 18,136 63 151 155 1,056 1,425 Total loans, net of ACL 23,255 21,378 13,572 4,494 62,699 Lending commitments AAA — 50 — — 50 AA 4,157 1,267 1,878 — 7,302 A 6,310 8,290 7,901 564 23,065 BBB 5,422 15,408 15,761 310 36,901 BB 4,150 7,154 7,291 1,311 19,906 Other NIG 979 8,491 5,533 3,193 18,196 4 1 21 20 46 Total lending commitments 21,022 40,661 38,385 5,398 105,466 Total exposure $ 44,277 $ 62,039 $ 51,957 $ 9,892 $ 168,165
At December 31, 2019 | |||||||||||||||
Contractual Years to Maturity | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Loans | |||||||||||||||
AA | $ | 7 | $ | 50 | $ | — | $ | 5 | $ | 62 | |||||
A | 955 | 923 | 516 | 277 | 2,671 | ||||||||||
BBB | 2,297 | 5,589 | 3,592 | 949 | 12,427 | ||||||||||
BB | 9,031 | 11,189 | 9,452 | 1,449 | 31,121 | ||||||||||
Other NIG | 4,020 | 5,635 | 2,595 | 1,143 | 13,393 | ||||||||||
Unrated2 | 117 | 82 | 131 | 1,628 | 1,958 | ||||||||||
Total loans, net of ACL | 16,427 | 23,468 | 16,286 | 5,451 | 61,632 | ||||||||||
Lending commitments | |||||||||||||||
AAA | — | 50 | — | — | 50 | ||||||||||
AA | 2,838 | 908 | 2,509 | — | 6,255 | ||||||||||
A | 6,461 | 7,287 | 9,371 | 298 | 23,417 | ||||||||||
BBB | 7,548 | 13,780 | 20,560 | 753 | 42,641 | ||||||||||
BB | 2,464 | 5,610 | 8,333 | 1,526 | 17,933 | ||||||||||
Other NIG | 2,193 | 4,741 | 7,062 | 2,471 | 16,467 | ||||||||||
Unrated2 | — | 9 | 107 | 7 | 123 | ||||||||||
Total lending commitments | 21,504 | 32,385 | 47,942 | 5,055 | 106,886 | ||||||||||
Total exposure | $ | 37,931 | $ | 55,853 | $ | 64,228 | $ | 10,506 | $ | 168,518 |
1. | Counterparty credit ratings are internally determined by the Credit Risk Management Department (“CRM”). |
2. | Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see “Market Risk” herein. |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Industry | ||||||
Financials | $ | 41,916 | $ | 40,992 | ||
Real estate | 24,827 | 28,348 | ||||
Industrials | 15,650 | 13,136 | ||||
Communications services | 12,529 | 12,165 | ||||
Consumer discretionary | 11,253 | 9,589 | ||||
Healthcare | 10,788 | 14,113 | ||||
Energy | 10,088 | 9,461 | ||||
Utilities | 9,994 | 9,905 | ||||
Information technology | 9,808 | 9,201 | ||||
Consumer staples | 8,476 | 9,724 | ||||
Materials | 5,626 | 5,577 | ||||
Insurance | 3,975 | 3,755 | ||||
Other | 3,235 | 2,552 | ||||
Total exposure | $ | 168,165 | $ | 168,518 |
September 2020 Form 10-Q | 38 |
Risk Disclosures |
We also participate in securitization activities whereby we extend short-term or long-term fundinghedged. For additional information on event-driven loans, see “Institutional Securities Event-Driven Loans and Lending Commitments” herein.
which are collateralized by various assets including residential and commercial real estate mortgage loans, corporate loans, and lending commitments that are secured by the assets of the borrower andother assets. These facilities generally provide for over-collateralization, including commercial real estate loans, loans secured by loan pools, commercial company loans, and secured lines of revolving credit.overcollateralization. Credit risk with respect to these loans and lending commitments arises from the failure of a borrower to perform according to the terms of the loan agreement and/or a decline in the underlying collateral value. See Note 12 to the financial statements for information about our securitization activities. In addition, a collateral management groupThe Firm monitors collateral levels against the requirements of lending agreements.
certain of its trading and securitization activities, Institutional Securities may also hold residential real estate loans.
Lending Commitments
At September 30, 2020 | |||||||||||||||
Contractual Years to Maturity | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Loans, net of ACL | $ | 1,891 | $ | 1,185 | $ | 710 | $ | 1,216 | $ | 5,002 | |||||
Lending commitments | 2,346 | 5,088 | 2,257 | 3,697 | 13,388 | ||||||||||
Total exposure | $ | 4,237 | $ | 6,273 | $ | 2,967 | $ | 4,913 | $ | 18,390 |
At December 31, 2019 | |||||||||||||||
Contractual Years to Maturity | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Loans, net of ACL | $ | 1,194 | $ | 1,024 | $ | 839 | $ | 390 | $ | 3,447 | |||||
Lending commitments | 7,921 | 5,012 | 2,285 | 3,090 | 18,308 | ||||||||||
Total exposure | $ | 9,115 | $ | 6,036 | $ | 3,124 | $ | 3,480 | $ | 21,755 |
size from period to period.
At September 30, 2017 | ||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||
Loans | ||||||||||||||||||||
AAA | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
AA | — | — | 32 | 5 | 37 | |||||||||||||||
A | 1,437 | 1,911 | 1,061 | 705 | 5,114 | |||||||||||||||
BBB | 2,186 | 4,537 | 3,105 | 379 | 10,207 | |||||||||||||||
NIG | 5,658 | 13,017 | 4,838 | 5,455 | 28,968 | |||||||||||||||
Unrated2 | 211 | 149 | 244 | 1,508 | 2,112 | |||||||||||||||
Total Loans | 9,492 | 19,614 | 9,280 | 8,052 | 46,438 | |||||||||||||||
Lending Commitments | ||||||||||||||||||||
AAA | — | 165 | — | — | 165 | |||||||||||||||
AA | 3,726 | 473 | 3,731 | — | 7,930 | |||||||||||||||
A | 2,824 | 5,288 | 11,672 | 647 | 20,431 | |||||||||||||||
BBB | 3,321 | 10,245 | 16,935 | 395 | 30,896 | |||||||||||||||
NIG | 2,486 | 11,796 | 12,278 | 3,266 | 29,826 | |||||||||||||||
Unrated2 | 17 | 31 | 12 | 21 | 81 | |||||||||||||||
Total Lending Commitments | 12,374 | 27,998 | 44,628 | 4,329 | 89,329 | |||||||||||||||
Total Exposure | $ | 21,866 | $ | 47,612 | $ | 53,908 | $ | 12,381 | $ | 135,767 |
At December 31, 2016 | ||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||
Loans | ||||||||||||||||||||
AAA | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
AA | — | — | 38 | — | 38 | |||||||||||||||
A | 235 | 775 | 1,391 | 552 | 2,953 | |||||||||||||||
BBB | 1,709 | 6,473 | 2,768 | 1,362 | 12,312 | |||||||||||||||
NIG | 4,667 | 12,114 | 5,629 | 2,304 | 24,714 | |||||||||||||||
Unrated2 | 699 | 126 | 175 | 1,483 | 2,483 | |||||||||||||||
Total Loans | 7,310 | 19,488 | 10,001 | 5,701 | 42,500 | |||||||||||||||
Lending Commitments |
| |||||||||||||||||||
AAA | 50 | 105 | 50 | — | 205 | |||||||||||||||
AA | 3,724 | 451 | 3,989 | — | 8,164 | |||||||||||||||
A | 1,994 | 4,610 | 11,135 | 392 | 18,131 | |||||||||||||||
BBB | 6,261 | 9,006 | 18,148 | 653 | 34,068 | |||||||||||||||
NIG | 2,839 | 8,934 | 14,267 | 3,418 | 29,458 | |||||||||||||||
Unrated2 | 107 | 6 | — | 4 | 117 | |||||||||||||||
Total Lending Commitments | 14,975 | 23,112 | 47,589 | 4,467 | 90,143 | |||||||||||||||
Total Exposure | $ | 22,285 | $ | 42,600 | $ | 57,590 | $ | 10,168 | $ | 132,643 |
At September 30, 2020 | |||||||||
$ in millions | Loans | Lending Commitments | Total | ||||||
Corporate | $ | 7,628 | $ | 65,358 | $ | 72,986 | |||
Secured lending facilities | 26,496 | 8,122 | 34,618 | ||||||
Commercial real estate | 7,265 | 286 | 7,551 | ||||||
Other | 1,277 | 1,178 | 2,455 | ||||||
Total, before ACL | $ | 42,666 | $ | 74,944 | $ | 117,610 | |||
ACL | $ | (806 | ) | $ | (342 | ) | $ | (1,148 | ) |
At December 31, 2019 | |||||||||
$ in millions | Loans | Lending Commitments | Total | ||||||
Corporate | $ | 5,426 | $ | 61,716 | $ | 67,142 | |||
Secured lending facilities | 24,502 | 6,105 | 30,607 | ||||||
Commercial real estate | 7,859 | 425 | 8,284 | ||||||
Other | 503 | 832 | 1,335 | ||||||
Total, before ACL | $ | 38,290 | $ | 69,078 | $ | 107,368 | |||
ACL | $ | (297 | ) | $ | (236 | ) | $ | (533 | ) |
| ||
39 | September 2020 Form 10-Q |
| |
Risk |
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Industry1 | ||||||||
Real estate | $ | 23,235 | $ | 19,807 | ||||
Information technology | 13,907 | 8,602 | ||||||
Consumer discretionary | 12,129 | 12,059 | ||||||
Industrials | 12,110 | 11,465 | ||||||
Energy | 11,074 | 11,757 | ||||||
Funds, exchanges and | 10,639 | 11,481 | ||||||
Healthcare | 10,014 | 11,534 | ||||||
Utilities | 9,407 | 9,216 | ||||||
Consumer staples | 7,282 | 7,329 | ||||||
Materials | 6,129 | 7,630 | ||||||
Mortgage finance | 5,826 | 6,296 | ||||||
Telecommunications services | 4,722 | 6,156 | ||||||
Insurance | 3,986 | 4,190 | ||||||
Consumer finance | 2,949 | 2,847 | ||||||
Other | 2,358 | 2,274 | ||||||
Total | $ | 135,767 | $ | 132,643 |
$ in millions | Corporate | Secured lending facilities | Commercial real estate | Other | Total | ||||||||||
At December 31, 2019 | |||||||||||||||
ACL—Loans | $ | 115 | $ | 101 | $ | 75 | $ | 6 | $ | 297 | |||||
ACL—Lending commitments | $ | 201 | $ | 27 | $ | 7 | $ | 1 | $ | 236 | |||||
Total | $ | 316 | $ | 128 | $ | 82 | $ | 7 | $ | 533 | |||||
Effect of CECL adoption | (43 | ) | (53 | ) | 35 | 3 | (58 | ) | |||||||
Gross charge-offs | (33 | ) | — | (26 | ) | — | (59 | ) | |||||||
Recoveries | 3 | — | — | 2 | 5 | ||||||||||
Net (charge-offs) recoveries | (30 | ) | — | (26 | ) | 2 | (54 | ) | |||||||
Provision (release)1 | 400 | 155 | 180 | (16 | ) | 719 | |||||||||
Other | 3 | 1 | (38 | ) | 42 | 8 | |||||||||
Total at September 30, 2020 | $ | 646 | $ | 231 | $ | 233 | $ | 38 | $ | 1,148 | |||||
ACL—Loans | $ | 367 | $ | 191 | $ | 222 | $ | 26 | $ | 806 | |||||
ACL—Lending commitments | 279 | 40 | 11 | 12 | 342 |
1. |
|
|
Event-DrivenInstitutional Securities HFI Loans—Ratios of Allowance for Credit Losses to Balance Before Allowance
At September 30, 2020 | At December 31, 2019 | |||
Corporate | 4.8 | % | 2.1 | % |
Secured lending facilities | 0.7 | % | 0.4 | % |
Commercial real estate | 3.1 | % | 1.0 | % |
Other | 2.0 | % | 1.2 | % |
Total Institutional Securities loans | 1.9 | % | 0.8 | % |
At September 30, 2017 | ||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||
Loans | $ | 996 | $ | 1,738 | $ | 749 | $ | 4,568 | $ | 8,051 | ||||||||||
Lending commitments | 3,001 | 1,559 | 2,601 | 2,304 | 9,465 | |||||||||||||||
Total loans and lending commitments | $ | 3,997 | $ | 3,297 | $ | 3,350 | $ | 6,872 | $ | 17,516 | ||||||||||
At December 31, 2016 | ||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||
Loans | $ | 666 | $ | 1,593 | $ | 1,216 | $ | 1,622 | $ | 5,097 | ||||||||||
Lending commitments | 6,594 | 1,460 | 4,807 | 3,391 | 16,252 | |||||||||||||||
Total loans and lending commitments | $ | 7,260 | $ | 3,053 | $ | 6,023 | $ | 5,013 | $ | 21,349 |
Institutional Securities Lending Exposures Related to the Energy Industry.At September 30, 2017, Institutional Securities’ loans and lending commitments related to the energy industry were $11.1 billion, of which approximately 68% are accounted for as held for investment and 32% are accounted for as either held for sale or at fair value. Additionally, approximately 55% of the total energy industry loans and lending commitments were to investment grade counterparties.
At September 30, 2017, the energy industry portfolio included $1.1 billion in loans and $2.1 billion in lending commitments to Oil and Gas Exploration and Production (“E&P”) companies. The E&P loans were tonon-investment grade counterparties, which are generally subject to periodic borrowing base reassessments based on the value of the underlying oil and gas reserves pledged as collateral. In limited situations, we may extend the period related to borrowing base reassessments typically in conjunction with taking certain risk mitigating actions with the borrower. Approximately 51% of the E&P lending commitments were to investment grade counterparties. To the extent oil and natural gas prices deteriorate, we may incur lending losses.
Wealth Management
At September 30, 2020 | |||||||||||||||
Contractual Years to Maturity | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Securities-based lending and Other | $ | 49,714 | $ | 4,411 | $ | 1,869 | $ | 1,680 | $ | 57,674 | |||||
Residential real estate | 11 | 4 | 1 | 33,612 | 33,628 | ||||||||||
Total loans, net of ACL | $ | 49,725 | $ | 4,415 | $ | 1,870 | $ | 35,292 | $ | 91,302 | |||||
Lending commitments | 11,797 | 2,240 | 326 | 269 | 14,632 | ||||||||||
Total exposure | $ | 61,522 | $ | 6,655 | $ | 2,196 | $ | 35,561 | $ | 105,934 |
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 | $ | 41,863 | $ | 3,972 | $ | 2,783 | $ | 1,284 | $ | 49,902 | |||||
Residential real estate | 13 | 11 | — | 30,149 | 30,173 | ||||||||||
Total loans, net of ACL | $ | 41,876 | $ | 3,983 | $ | 2,783 | $ | 31,433 | $ | 80,075 | |||||
Lending commitments | 10,219 | 2,564 | 71 | 307 | 13,161 | ||||||||||
Total exposure | $ | 52,095 | $ | 6,547 | $ | 2,854 | $ | 31,740 | $ | 93,236 |
For the current quarter, loansyear period, Loans and lendingLending commitments associated with the Wealth Management business segment lending activities increased, driven by approximately 3%, primarily due to growth in securities-based lendingloans and otherresidential real estate loans.
At September 30, 2017 | ||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||
Securities-based lending | $ | 33,947 | $ | 3,303 | $ | 1,713 | $ | 1,114 | $ | 40,077 | ||||||||||
Residential real estate loans | — | 16 | 27 | 26,135 | 26,178 | |||||||||||||||
Total Loans | $ | 33,947 | $ | 3,319 | $ | 1,740 | $ | 27,249 | $ | 66,255 | ||||||||||
Lending commitments | 6,950 | 2,515 | 228 | 301 | 9,994 | |||||||||||||||
Total loans and lending commitments | $ | 40,897 | $ | 5,834 | $ | 1,968 | $ | 27,550 | $ | 76,249 | ||||||||||
At December 31, 2016 | ||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||
Securities-based lending | $ | 30,547 | $ | 2,983 | $ | 1,304 | $ | 1,179 | $ | 36,013 | ||||||||||
Residential real estate loans | — | — | 45 | 24,369 | 24,414 | |||||||||||||||
Total Loans | $ | 30,547 | $ | 2,983 | $ | 1,349 | $ | 25,548 | $ | 60,427 | ||||||||||
Lending commitments | 6,372 | 1,413 | 268 | 246 | 8,299 | |||||||||||||||
Total loans and lending commitments | $ | 36,919 | $ | 4,396 | $ | 1,617 | $ | 25,794 | $ | 68,726 |
$ in millions | |||
December 31, 20191 | $ | 57 | |
Effect of CECL adoption | 17 | ||
Provision2 | 38 | ||
September 30, 2020 | $ | 112 | |
ACL—Loans | $ | 107 | |
ACL—Lending commitments | 5 |
1. |
|
Net customer receivables representing margin loans Net customer receivables representing margin loansLending Activities included in 2. In the current quarter, the release for loan losses was $3 million and the provision for losses on lending commitments was $1 million. In the current year period the provision for loan losses was $39 million and the release for losses on lending commitments was $1 million. At September 30, 2017 $ in millions Institutional
Securities Wealth
Management Total $ 16,613 $ 11,996 $ 28,609 At December 31, 2016 $ in millions Institutional
Securities Wealth
Management Total $ 11,876 $ 12,483 $ 24,359 At September 30, 2020 $ in millions IS WM Total Customer receivables representing margin loans $ 35,604 $ 9,054 $ 44,658 At December 31, 2019 $ in millions IS WM Total Customer receivables representing margin loans $ 22,216 $ 9,700 $ 31,916 the clientcustomers to borrow against the value of qualifying securities.securities, primarily for the purpose of purchasing additional securities, as
September 2020 Form 10-Q | 40 |
Risk Disclosures |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Currently employed by the Firm | $ | 2,940 | N/A | |||
No longer employed by the Firm | 142 | N/A | ||||
Employee loans | $ | 3,082 | $ | 2,980 | ||
ACL1 | (165 | ) | (61 | ) | ||
Employee loans, net of ACL | $ | 2,917 | $ | 2,919 | ||
Remaining repayment term, weighted average in years | 5.1 | 4.8 |
1. |
Employee Loans
$ in millions (except repayment terms) | At September 30, 2017 | At December 31, 2016 | ||||||
Employee loans: | ||||||||
Balance | $ | 4,317 | $ | 4,804 | ||||
Allowance for loan losses | (79 | ) | (89) | |||||
Balance, net | $ | 4,238 | $ | 4,715 | ||||
Repayment term range, in years | 1 to 20 | 1 to 12 |
Employee loans are generally granted in conjunction with a program established primarily to retain and recruit certain employees,Wealth Management representatives and are full recourse and generally require periodic repayments. We establish an allowance for loan amounts to terminated employees that we do not consider recoverable, whichThe ACL as of September 30, 2020 was calculated under CECL, while the ACL at December 31, 2019 was calculated under the prior incurred loss model. The related provision is recorded in Compensation and benefits expense.expense in the income statements. See Note 72 to the financial statements for a further description of ourthe CECL allowance methodology, including credit quality indicators, for employee loans.
Credit Exposure— For additional information on employee loans, see Note 10 to the financial statements.
Counterparty Credit Rating1 | ||||||||||||||||||
$ in millions | AAA | AA | A | BBB | NIG | Total | ||||||||||||
At September 30, 2020 | ||||||||||||||||||
Less than 1 year | $ | 667 | $ | 10,653 | $ | 36,327 | $ | 23,017 | $ | 10,481 | $ | 81,145 | ||||||
1-3 years | 641 | 5,332 | 17,817 | 13,616 | 7,196 | 44,602 | ||||||||||||
3-5 years | 389 | 5,091 | 11,562 | 8,447 | 3,648 | 29,137 | ||||||||||||
Over 5 years | 4,496 | 34,274 | 87,181 | 64,958 | 16,119 | 207,028 | ||||||||||||
Total, gross | $ | 6,193 | $ | 55,350 | $ | 152,887 | $ | 110,038 | $ | 37,444 | $ | 361,912 | ||||||
Counterparty netting | (3,107 | ) | (42,447 | ) | (122,838 | ) | (83,836 | ) | (22,686 | ) | (274,914 | ) | ||||||
Cash and securities collateral | (2,897 | ) | (10,830 | ) | (25,423 | ) | (20,621 | ) | (8,865 | ) | (68,636 | ) | ||||||
Total, net | $ | 189 | $ | 2,073 | $ | 4,626 | $ | 5,581 | $ | 5,893 | $ | 18,362 |
Counterparty Credit Rating1 | ||||||||||||||||||
$ in millions | AAA | AA | A | BBB | NIG | Total | ||||||||||||
At December 31, 2019 | ||||||||||||||||||
Less than 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 September 30, 2020 | At December 31, 2019 | ||||
Industry | ||||||
Utilities | $ | 4,407 | $ | 4,275 | ||
Financials | 4,394 | 3,448 | ||||
Industrials | 1,796 | 914 | ||||
Healthcare | 1,442 | 991 | ||||
Regional governments | 966 | 791 | ||||
Information technology | 901 | 659 | ||||
Not-for-profit organizations | 796 | 657 | ||||
Energy | 775 | 524 | ||||
Materials | 590 | 325 | ||||
Sovereign governments | 549 | 403 | ||||
Consumer staples | 385 | 129 | ||||
Consumer discretionary | 371 | 370 | ||||
Communications services | 325 | 381 | ||||
Insurance | 302 | 214 | ||||
Real estate | 287 | 315 | ||||
Other | 76 | 60 | ||||
Total | $ | 18,362 | $ | 14,456 |
1. | Counterparty credit ratings are determined internally by CRM. |
Fair values as shown below represent the Firm’s net exposure to counterparties related to itscredit risk arising from OTC derivative products. Obligor credit ratings are determined internally byderivatives has increased, primarily as a function of the Credit Risk Management Department.
Counterparty Credit Rating and Remaining Contractual Maturity of OTC Derivative Assets
Fair Value at September 30, 2017 | ||||||||||||||||||||
Contractual Years to Maturity | Total Derivative Assets | |||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | ||||||||||||||||
Credit Rating | ||||||||||||||||||||
AAA | $ | 129 | $ | 328 | $ | 359 | $ | 3,183 | $ | 3,999 | ||||||||||
AA | 1,666 | 1,716 | 1,987 | 7,822 | 13,191 | |||||||||||||||
A | 6,536 | 5,597 | 3,760 | 19,947 | 35,840 | |||||||||||||||
BBB | 3,554 | 2,718 | 1,712 | 12,806 | 20,790 | |||||||||||||||
Non-investment grade | 2,551 | 2,634 | 3,539 | 2,472 | 11,196 | |||||||||||||||
Total | $ | 14,436 | $ | 12,993 | $ | 11,357 | $ | 46,230 | $ | 85,016 |
Fair Value at September 30, 2017 | ||||||||||||||||
$ in millions | Total Derivative Assets | Cross- and Cash Collateral Netting1 | Net Amounts Post-cash Collateral | Net Amounts Post- | ||||||||||||
Credit Rating | ||||||||||||||||
AAA | $ | 3,999 | $ | (3,011 | ) | $ | 988 | $ | 913 | |||||||
AA | 13,191 | (8,178 | ) | 5,013 | 2,397 | |||||||||||
A | 35,840 | (26,352 | ) | 9,488 | 5,108 | |||||||||||
BBB | 20,790 | (14,388 | ) | 6,402 | 4,609 | |||||||||||
Non-investment grade | 11,196 | (5,277 | ) | 5,919 | 2,542 | |||||||||||
Total | $ | 85,016 | $ | (57,206 | ) | $ | 27,810 | $ | 15,569 |
Fair Value at December 31, 2016 | ||||||||||||||||||||
Contractual Years to Maturity | Total Derivative Assets | |||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | ||||||||||||||||
Credit Rating | ||||||||||||||||||||
AAA | $ | 150 | $ | 428 | $ | 918 | $ | 2,931 | $ | 4,427 | ||||||||||
AA | 3,177 | 2,383 | 2,942 | 10,194 | 18,696 | |||||||||||||||
A | 9,244 | 6,676 | 5,495 | 21,322 | 42,737 | |||||||||||||||
BBB | 4,423 | 3,085 | 2,434 | 13,023 | 22,965 | |||||||||||||||
Non-investment grade | 2,283 | 1,702 | 1,722 | 1,794 | 7,501 | |||||||||||||||
Total | $ | 19,277 | $ | 14,274 | $ | 13,511 | $ | 49,264 | $ | 96,326 |
Fair Value at December 31, 2016 | ||||||||||||||||
$ in millions | Total Derivative Assets | Cross- and Cash Collateral | Net Amounts Post-cash Collateral | Net Amounts Post- collateral2 | ||||||||||||
Credit Rating | ||||||||||||||||
AAA | $ | 4,427 | $ | (3,900 | ) | $ | 527 | $ | 485 | |||||||
AA | 18,696 | (11,813 | ) | 6,883 | 4,114 | |||||||||||
A | 42,737 | (31,425 | ) | 11,312 | 6,769 | |||||||||||
BBB | 22,965 | (16,629 | ) | 6,336 | 4,852 | |||||||||||
Non-investment grade | 7,501 | (4,131 | ) | 3,370 | 1,915 | |||||||||||
Total | $ | 96,326 | $ | (67,898 | ) | $ | 28,428 | $ | 18,135 |
|
|
41 | September 2020 Form 10-Q |
OTC Derivative Products at Fair Value, Net of Collateral, by Industry
$ in millions | At September 30, 2017 | At December 31, 20161 | ||||||
Industry2 | ||||||||
Utilities | $ | 4,020 | $ | 4,184 | ||||
Funds, exchanges and | 2,707 | 2,756 | ||||||
Regional governments | 1,069 | 1,352 | ||||||
Sovereign governments | 1,044 | 709 | ||||||
Industrials | 1,032 | 1,644 | ||||||
Healthcare | 949 | 1,103 | ||||||
Banks and securities firms | 772 | 1,485 | ||||||
Not-for-profit organizations | 717 | 830 | ||||||
Information technology | 542 | 267 | ||||||
Hedge funds | 539 | 233 | ||||||
Energy | 464 | 533 | ||||||
Consumer discretionary | 445 | 590 | ||||||
Insurance | 313 | 570 | ||||||
Materials | 284 | 235 | ||||||
Special purpose vehicles | 228 | 821 | ||||||
Consumer staples | 176 | 567 | ||||||
Other | 268 | 256 | ||||||
Total4 | $ | 15,569 | $ | 18,135 |
|
volatility on |
|
|
We manage our trading positions by employing a variety of risk mitigation strategies. These strategies include diversification of risk exposures and hedging. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). For a discussionvaluation of our creditpositions, although exposure and related credit derivative contracts,has declined since peaking in March 2020. For more information on derivatives, see “Quantitative and Qualitative Disclosures about Market Risk–Risk Management–Risk—Credit Risk–Credit Exposure–Risk—Derivatives” in Part II, Item 7A of the 20162019 Form10-K.
Credit Derivative Portfolio by Counterparty Type
At September 30, 2017 | ||||||||||||||||||||
Fair Values1 | Notionals | |||||||||||||||||||
$ in millions | Receivable | Payable | Net | Protection Purchased | Protection Sold | |||||||||||||||
Banks and | $ | 5,191 | $ | 5,623 | $ | (432 | ) | $ | 208,611 | $ | 178,670 | |||||||||
Insurance and other | 3,679 | 4,358 | (679 | ) | 163,291 | 160,493 | ||||||||||||||
Non-financial | 34 | 52 | (18 | ) | 3,146 | 1,195 | ||||||||||||||
Total | $ | 8,904 | $ | 10,033 | $ | (1,129 | ) | $ | 375,048 | $ | 340,358 |
At December 31, 2016 | ||||||||||||||||||||
Fair Values1 | Notionals | |||||||||||||||||||
$ in millions | Receivable | Payable | Net | Protection Purchased | Protection Sold | |||||||||||||||
Banks and securities firms | $ | 8,516 | $ | 9,397 | $ | (881 | ) | $ | 319,830 | $ | 273,462 | |||||||||
Insurance and other financial institutions | 3,619 | 3,901 | (282 | ) | 144,527 | 151,999 | ||||||||||||||
Non-financial entities | 94 | 127 | (33 | ) | 5,832 | 4,269 | ||||||||||||||
Total | $ | 12,229 | $ | 13,425 | $ | (1,196) | $ | 470,189 | $ | 429,730 |
|
The fair values shown in the previous table are before the application of contractual netting or collateral. For additional credit exposure information on our credit derivative portfolio, see Note 47 to the financial statements.
United Kingdom | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 1,145 | $ | 928 | $ | 2,073 | |||
Net counterparty exposure2 | 69 | 11,183 | 11,252 | ||||||
Loans | — | 2,831 | 2,831 | ||||||
Lending commitments | — | 6,607 | 6,607 | ||||||
Exposure before hedges | 1,214 | 21,549 | 22,763 | ||||||
Hedges3 | (311 | ) | (1,470 | ) | (1,781 | ) | |||
Net exposure | $ | 903 | $ | 20,079 | $ | 20,982 |
Germany | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | (1,168 | ) | $ | (14 | ) | $ | (1,182 | ) |
Net counterparty exposure2 | 214 | 3,280 | 3,494 | ||||||
Loans | — | 2,092 | 2,092 | ||||||
Lending commitments | (1 | ) | 4,428 | 4,427 | |||||
Exposure before hedges | (955 | ) | 9,786 | 8,831 | |||||
Hedges3 | (286 | ) | (867 | ) | (1,153 | ) | |||
Net exposure | $ | (1,241 | ) | $ | 8,919 | $ | 7,678 |
Japan | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 2,182 | $ | 512 | $ | 2,694 | |||
Net counterparty exposure2 | 57 | 4,505 | 4,562 | ||||||
Loans | — | 562 | 562 | ||||||
Exposure before hedges | 2,239 | 5,579 | 7,818 | ||||||
Hedges3 | (96 | ) | (228 | ) | (324 | ) | |||
Net exposure | $ | 2,143 | $ | 5,351 | $ | 7,494 |
France | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 1,214 | $ | (334 | ) | $ | 880 | ||
Net counterparty exposure2 | 18 | 3,444 | 3,462 | ||||||
Loans | — | 525 | 525 | ||||||
Lending commitments | — | 3,047 | 3,047 | ||||||
Exposure before hedges | 1,232 | 6,682 | 7,914 | ||||||
Hedges3 | (6 | ) | (815 | ) | (821 | ) | |||
Net exposure | $ | 1,226 | $ | 5,867 | $ | 7,093 |
Spain | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | (809 | ) | $ | 28 | $ | (781 | ) | |
Net counterparty exposure2 | 7 | 284 | 291 | ||||||
Loans | — | 4,061 | 4,061 | ||||||
Lending commitments | — | 620 | 620 | ||||||
Exposure before hedges | (802 | ) | 4,993 | 4,191 | |||||
Hedges3 | — | (123 | ) | (123 | ) | ||||
Net exposure | $ | (802 | ) | $ | 4,870 | $ | 4,068 |
Australia | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 1,893 | $ | 261 | $ | 2,154 | |||
Net counterparty exposure2 | 6 | 637 | 643 | ||||||
Loans | — | 392 | 392 | ||||||
Lending commitments | — | 798 | 798 | ||||||
Exposure before hedges | 1,899 | 2,088 | 3,987 | ||||||
Hedges3 | — | (174 | ) | (174 | ) | ||||
Net exposure | $ | 1,899 | $ | 1,914 | $ | 3,813 |
India | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | 1,795 | $ | 595 | $ | 2,390 | |||
Net counterparty exposure2 | — | 821 | 821 | ||||||
Loans | — | 205 | 205 | ||||||
Exposure before hedges | 1,795 | 1,621 | 3,416 | ||||||
Net exposure | $ | 1,795 | $ | 1,621 | $ | 3,416 |
42 |
Risk Disclosures |
Top Ten Country Exposures at September 30, 2017
$ in millions | Net Inventory1 | Net Counterparty Exposure2 | Loans | Lending Commitments | Exposure Before Hedges | Hedges3 | Net Exposure | |||||||||||||||||||||
Country | ||||||||||||||||||||||||||||
United Kingdom: | ||||||||||||||||||||||||||||
Sovereigns | $ | 487 | $ | 29 | $ | — | $ | — | $ | 516 | $ | (280 | ) | $ | 236 | |||||||||||||
Non-sovereigns | 306 | 8,516 | 1,843 | 5,976 | 16,641 | (1,916 | ) | 14,725 | ||||||||||||||||||||
Total | $ | 793 | $ | 8,545 | $ | 1,843 | $ | 5,976 | $ | 17,157 | $ | (2,196 | ) | $ | 14,961 | |||||||||||||
Japan: | ||||||||||||||||||||||||||||
Sovereigns | $ | 5,391 | $ | 54 | $ | — | $ | — | $ | 5,445 | $ | (103 | ) | $ | 5,342 | |||||||||||||
Non-sovereigns | 696 | 3,365 | 65 | — | 4,126 | (114 | ) | 4,012 | ||||||||||||||||||||
Total | $ | 6,087 | $ | 3,419 | $ | 65 | $ | — | $ | 9,571 | $ | (217 | ) | $ | 9,354 | |||||||||||||
Brazil: | ||||||||||||||||||||||||||||
Sovereigns | $ | 3,729 | $ | — | $ | — | $ | — | $ | 3,729 | $ | (11 | ) | $ | 3,718 | |||||||||||||
Non-sovereigns | 196 | 577 | 755 | 75 | 1,603 | (343 | ) | 1,260 | ||||||||||||||||||||
Total | $ | 3,925 | $ | 577 | $ | 755 | $ | 75 | $ | 5,332 | $ | (354 | ) | $ | 4,978 | |||||||||||||
Canada: | ||||||||||||||||||||||||||||
Sovereigns | $ | 84 | $ | 25 | $ | — | $ | — | $ | 109 | $ | — | $ | 109 | ||||||||||||||
Non-sovereigns | 211 | 1,885 | 110 | 1,605 | 3,811 | (384 | ) | 3,427 | ||||||||||||||||||||
Total | $ | 295 | $ | 1,910 | $ | 110 | $ | 1,605 | $ | 3,920 | $ | (384 | ) | $ | 3,536 | |||||||||||||
India: | ||||||||||||||||||||||||||||
Sovereigns | $ | 1,503 | $ | — | $ | — | $ | — | $ | 1,503 | $ | — | $ | 1,503 | ||||||||||||||
Non-sovereigns | 615 | 467 | — | — | 1,082 | — | 1,082 | |||||||||||||||||||||
Total | $ | 2,118 | $ | 467 | $ | — | $ | — | $ | 2,585 | $ | — | $ | 2,585 | ||||||||||||||
Italy: | ||||||||||||||||||||||||||||
Sovereigns | $ | 1,201 | $ | (14 | ) | $ | — | $ | — | $ | 1,187 | $ | 9 | $ | 1,196 | |||||||||||||
Non-sovereigns | 99 | 447 | 348 | 748 | 1,642 | (286 | ) | 1,356 | ||||||||||||||||||||
Total | $ | 1,300 | $ | 433 | $ | 348 | $ | 748 | $ | 2,829 | $ | (277 | ) | $ | 2,552 | |||||||||||||
China: | ||||||||||||||||||||||||||||
Sovereigns | $ | (24 | ) | $ | 227 | $ | — | $ | — | $ | 203 | $ | (79 | ) | $ | 124 | ||||||||||||
Non-sovereigns | 774 | 215 | 657 | 524 | 2,170 | (10 | ) | 2,160 | ||||||||||||||||||||
Total | $ | 750 | $ | 442 | $ | 657 | $ | 524 | $ | 2,373 | $ | (89 | ) | $ | 2,284 | |||||||||||||
Singapore: | ||||||||||||||||||||||||||||
Sovereigns | $ | 1,670 | $ | 107 | $ | — | $ | — | $ | 1,777 | $ | — | $ | 1,777 | ||||||||||||||
Non-sovereigns | 70 | 189 | 106 | 37 | 402 | — | 402 | |||||||||||||||||||||
Total | $ | 1,740 | $ | 296 | $ | 106 | $ | 37 | $ | 2,179 | $ | — | $ | 2,179 | ||||||||||||||
Netherlands: | ||||||||||||||||||||||||||||
Sovereigns | $ | (286 | ) | $ | — | $ | — | $ | — | $ | (286 | ) | $ | (20 | ) | $ | (306 | ) | ||||||||||
Non-sovereigns | 125 | 565 | 922 | 1,156 | 2,768 | (383 | ) | 2,385 | ||||||||||||||||||||
Total | $ | (161 | ) | $ | 565 | $ | 922 | $ | 1,156 | $ | 2,482 | $ | (403 | ) | $ | 2,079 | ||||||||||||
Ireland: | ||||||||||||||||||||||||||||
Sovereigns | $ | (57 | ) | $ | 3 | $ | — | $ | — | $ | (54 | ) | $ | (81 | ) | $ | (135 | ) | ||||||||||
Non-sovereigns | 52 | 205 | 1,770 | 149 | 2,176 | — | 2,176 | |||||||||||||||||||||
Total | $ | (5 | ) | $ | 208 | $ | 1,770 | $ | 149 | $ | 2,122 | $ | (81 | ) | $ | 2,041 |
China | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | (184 | ) | $ | 1,506 | $ | 1,322 | ||
Net counterparty exposure2 | 103 | 481 | 584 | ||||||
Loans | — | 772 | 772 | ||||||
Lending commitments | — | 765 | 765 | ||||||
Exposure before hedges | (81 | ) | 3,524 | 3,443 | |||||
Hedges3 | (82 | ) | (122 | ) | (204 | ) | |||
Net exposure | $ | (163 | ) | $ | 3,402 | $ | 3,239 |
Canada | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | (66 | ) | $ | 330 | $ | 264 | ||
Net counterparty exposure2 | 60 | 1,477 | 1,537 | ||||||
Loans | — | 155 | 155 | ||||||
Lending commitments | — | 1,380 | 1,380 | ||||||
Exposure before hedges | (6 | ) | 3,342 | 3,336 | |||||
Hedges3 | — | (108 | ) | (108 | ) | ||||
Net exposure | $ | (6 | ) | $ | 3,234 | $ | 3,228 |
Netherlands | |||||||||
$ in millions | Sovereigns | Non-sovereigns | Total | ||||||
Net inventory1 | $ | (5 | ) | $ | 280 | $ | 275 | ||
Net counterparty exposure2 | — | 760 | 760 | ||||||
Loans | — | 420 | 420 | ||||||
Lending commitments | — | 1,768 | 1,768 | ||||||
Exposure before hedges | (5 | ) | 3,228 | 3,223 | |||||
Hedges3 | (32 | ) | (210 | ) | (242 | ) | |||
Net exposure | $ | (37 | ) | $ | 3,018 | $ | 2,981 |
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 |
2. | Net counterparty exposure ( |
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 |
$ in millions | At September 30, 2020 | |||
Country of Risk | Collateral2 | |||
Germany | Japan and France | $ | 13,464 | |
United Kingdom | U.K., U.S. and Spain | 12,093 | ||
Other | Japan, U.S. and Canada | 23,884 |
1. | The benefit of collateral received is reflected in the Top 10 Non-U.S. Country Exposures at September | 30, 2020. |
As a market maker, we may transact in CDS positions to facilitate client trading. Exposures related to single-name and index credit derivatives for those countries shown in the previous table were
Credit Derivatives Included in Net Inventory
$ in millions | At September 30, 2017 | |||
Gross purchased protection | $ | (61,795 | ) | |
Gross written protection | 60,031 | |||
Net exposure | $ | (1,764 | ) |
Net counterparty exposure shown in the Top Ten Country Exposure table above includes the benefit of collateral received, which is typically composed of cash and government obligations.
Benefit of Collateral Received Against Counterparty Credit Exposure
$ in millions | At September 30, 2017 | |||
U.K.1 | $ | 8,334 | ||
Japan2 | 4,824 | |||
Other3 | 5,133 |
|
|
|
Country Risk Exposures Related to Brazil. At September 30, 2017, our country risk exposures in Brazil included net exposures of $4,978 million as shown in the table above. Our sovereign net exposures in Brazil were principally in the form of local currency government bonds held onshore to support client activity. The $1,260 million of exposures tonon-sovereigns were diversified across both names and sectors.
clearinghouses.
theft, legal and compliance risks, cyber attacks or damage to physical assets). We may incur operational risk across the full scope of our business activities, including revenue-generating activities (e.g., 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 Market Risk—Risk Management—Operational Risk” in Part II, Item 7Athe 2019 Form 10-K. In addition, for further information on market and economic conditions and their effects on risk in general, see “Management’s Discussion and Analysis of the 2016 Form10-K.
Financial Condition and Results of Operations—Executive Summary—Coronavirus Disease (COVID-19) Pandemic” and “Risk Factors” herein.
43 | September 2020 Form 10-Q |
Risk Disclosures |
general, see “Risk Factors” herein.
Under the supervision and with the participation of the Firm’s management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Firm’s disclosure controls and procedures (as defined in Rule13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our 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 Rule13a-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.
September |
America.
Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them 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), the consolidated balance sheet of the Firm as of December 31, 2016, and the 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 Form10-K; and in our report dated February 27, 2017, 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, 2016 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP |
New York, New York |
November 3, |
Consolidated Income Statements
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
in millions, except per share data | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Revenues | ||||||||||||||||||||
Investment banking | $ | 1,380 | $ | 1,225 | $ | 4,455 | $ | 3,556 | ||||||||||||
Trading | 2,704 | 2,609 | 8,870 | 7,420 | ||||||||||||||||
Investments | 167 | 87 | 495 | 179 | ||||||||||||||||
Commissions and fees | 937 | 991 | 2,997 | 3,066 | ||||||||||||||||
Asset management, distribution and administration fees | 3,026 | 2,686 | 8,695 | 7,943 | ||||||||||||||||
Other | 200 | 308 | 628 | 631 | ||||||||||||||||
Totalnon-interest revenues | 8,414 | 7,906 | 26,140 | 22,795 | ||||||||||||||||
Interest income | 2,340 | 1,734 | 6,411 | 5,148 | ||||||||||||||||
Interest expense | 1,557 | 731 | 4,106 | 2,333 | ||||||||||||||||
Net interest | 783 | 1,003 | 2,305 | 2,815 | ||||||||||||||||
Net revenues | 9,197 | 8,909 | 28,445 | 25,610 | ||||||||||||||||
Non-interest expenses | ||||||||||||||||||||
Compensation and benefits | 4,169 | 4,097 | 12,887 | 11,795 | ||||||||||||||||
Occupancy and equipment | 330 | 339 | 990 | 997 | ||||||||||||||||
Brokerage, clearing and exchange fees | 522 | 491 | 1,556 | 1,440 | ||||||||||||||||
Information processing and communications | 459 | 456 | 1,320 | 1,327 | ||||||||||||||||
Marketing and business development | 128 | 130 | 419 | 418 | ||||||||||||||||
Professional services | 534 | 489 | 1,622 | 1,550 | ||||||||||||||||
Other | 573 | 526 | 1,719 | 1,481 | ||||||||||||||||
Totalnon-interest expenses | 6,715 | 6,528 | 20,513 | 19,008 | ||||||||||||||||
Income from continuing operations before income taxes | 2,482 | 2,381 | 7,932 | 6,602 | ||||||||||||||||
Provision for income taxes | 697 | 749 | 2,358 | 2,160 | ||||||||||||||||
Income from continuing operations | 1,785 | 1,632 | 5,574 | 4,442 | ||||||||||||||||
Income (loss) from discontinued operations, net of income taxes | 6 | 8 | (21 | ) | 1 | |||||||||||||||
Net income | $ | 1,791 | $ | 1,640 | $ | 5,553 | $ | 4,443 | ||||||||||||
Net income applicable to noncontrolling interests | 10 | 43 | 85 | 130 | ||||||||||||||||
Net income applicable to Morgan Stanley | $ | 1,781 | $ | 1,597 | $ | 5,468 | $ | 4,313 | ||||||||||||
Preferred stock dividends and other | 93 | 79 | 353 | 314 | ||||||||||||||||
Earnings applicable to Morgan Stanley common shareholders | $ | 1,688 | $ | 1,518 | $ | 5,115 | $ | 3,999 | ||||||||||||
Earnings per basic common share | ||||||||||||||||||||
Income from continuing operations | $ | 0.95 | $ | 0.82 | $ | 2.87 | $ | 2.15 | ||||||||||||
Income (loss) from discontinued operations | — | 0.01 | (0.01 | ) | — | |||||||||||||||
Earnings per basic common share | $ | 0.95 | $ | 0.83 | $ | 2.86 | $ | 2.15 | ||||||||||||
Earnings per diluted common share | ||||||||||||||||||||
Income from continuing operations | $ | 0.93 | $ | 0.80 | $ | 2.81 | $ | 2.11 | ||||||||||||
Income (loss) from discontinued operations | — | 0.01 | (0.02 | ) | — | |||||||||||||||
Earnings per diluted common share | $ | 0.93 | $ | 0.81 | $ | 2.79 | $ | 2.11 | ||||||||||||
Dividends declared per common share | $ | 0.25 | $ | 0.20 | $ | 0.65 | $ | 0.50 | ||||||||||||
Average common shares outstanding | ||||||||||||||||||||
Basic | 1,776 | 1,838 | 1,789 | 1,863 | ||||||||||||||||
Diluted | 1,818 | 1,879 | 1,830 | 1,898 |
Consolidated Income Statements (Unaudited) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
in millions, except per share data | 2020 | 2019 | 2020 | 2019 | ||||||||
Revenues | ||||||||||||
Investment banking | $ | 1,826 | $ | 1,635 | $ | 5,239 | $ | 4,467 | ||||
Trading | 3,092 | 2,608 | 10,831 | 8,781 | ||||||||
Investments | 346 | 87 | 659 | 801 | ||||||||
Commissions and fees | 1,037 | 990 | 3,499 | 2,935 | ||||||||
Asset management | 3,664 | 3,363 | 10,346 | 9,632 | ||||||||
Other | 206 | 131 | (458 | ) | 685 | |||||||
Total non-interest revenues | 10,171 | 8,814 | 30,116 | 27,301 | ||||||||
Interest income | 2,056 | 4,350 | 7,917 | 13,146 | ||||||||
Interest expense | 570 | 3,132 | 3,475 | 9,885 | ||||||||
Net interest | 1,486 | 1,218 | 4,442 | 3,261 | ||||||||
Net revenues | 11,657 | 10,032 | 34,558 | 30,562 | ||||||||
Non-interest expenses | ||||||||||||
Compensation and benefits | 5,086 | 4,427 | 15,404 | 13,609 | ||||||||
Brokerage, clearing and exchange fees | 697 | 637 | 2,153 | 1,860 | ||||||||
Information processing and communications | 616 | 557 | 1,768 | 1,627 | ||||||||
Professional services | 542 | 531 | 1,526 | 1,582 | ||||||||
Occupancy and equipment | 373 | 353 | 1,103 | 1,053 | ||||||||
Marketing and business development | 78 | 157 | 273 | 460 | ||||||||
Other | 778 | 660 | 2,343 | 1,803 | ||||||||
Total non-interest expenses | 8,170 | 7,322 | 24,570 | 21,994 | ||||||||
Income before provision for income taxes | 3,487 | 2,710 | 9,988 | 8,568 | ||||||||
Provision for income taxes | 736 | 492 | 2,221 | 1,636 | ||||||||
Net income | $ | 2,751 | $ | 2,218 | $ | 7,767 | $ | 6,932 | ||||
Net income applicable to noncontrolling interests | 34 | 45 | 156 | 129 | ||||||||
Net income applicable to Morgan Stanley | $ | 2,717 | $ | 2,173 | $ | 7,611 | $ | 6,803 | ||||
Preferred stock dividends | 120 | 113 | 377 | 376 | ||||||||
Earnings applicable to Morgan Stanley common shareholders | $ | 2,597 | $ | 2,060 | $ | 7,234 | $ | 6,427 | ||||
Earnings per common share | ||||||||||||
Basic | $ | 1.68 | $ | 1.28 | $ | 4.68 | $ | 3.94 | ||||
Diluted | $ | 1.66 | $ | 1.27 | $ | 4.62 | $ | 3.89 | ||||
Average common shares outstanding | ||||||||||||
Basic | 1,542 | 1,604 | 1,546 | 1,632 | ||||||||
Diluted | 1,566 | 1,627 | 1,565 | 1,653 |
September | 46 | See Notes to Consolidated Financial Statements |
Consolidated Comprehensive Income Statements (Unaudited) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 1,791 | $ | 1,640 | $ | 5,553 | $ | 4,443 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments | $ | 61 | $ | 43 | 223 | 360 | ||||||||||
Change in net unrealized gains (losses) onavailable-for-sale securities | 26 | (99 | ) | 218 | 439 | |||||||||||
Pension, postretirement and other | — | (1 | ) | 4 | (5) | |||||||||||
Change in net debt valuation adjustment | (149 | ) | (93 | ) | (323 | ) | 255 | |||||||||
Total other comprehensive income (loss) | $ | (62 | ) | $ | (150 | ) | $ | 122 | $ | 1,049 | ||||||
Comprehensive income | $ | 1,729 | $ | 1,490 | $ | 5,675 | $ | 5,492 | ||||||||
Net income applicable to noncontrolling interests | 10 | 43 | 85 | 130 | ||||||||||||
Other comprehensive income (loss) applicable to noncontrolling interests | (6 | ) | 15 | 23 | 151 | |||||||||||
Comprehensive income applicable to Morgan Stanley | $ | 1,725 | $ | 1,432 | $ | 5,567 | $ | 5,211 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Net income | $ | 2,751 | $ | 2,218 | $ | 7,767 | $ | 6,932 | ||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Foreign currency translation adjustments | 110 | (99 | ) | (1 | ) | (56 | ) | |||||
Change in net unrealized gains (losses) on available-for-sale securities | (62 | ) | 214 | 1,558 | 1,252 | |||||||
Pension, postretirement and other | 5 | 3 | 29 | 7 | ||||||||
Change in net debt valuation adjustment | (563 | ) | 337 | 744 | (529 | ) | ||||||
Total other comprehensive income (loss) | $ | (510 | ) | $ | 455 | $ | 2,330 | $ | 674 | |||
Comprehensive income | $ | 2,241 | $ | 2,673 | $ | 10,097 | $ | 7,606 | ||||
Net income applicable to noncontrolling interests | 34 | 45 | 156 | 129 | ||||||||
Other comprehensive income (loss) applicable to noncontrolling interests | 28 | 2 | 79 | (20 | ) | |||||||
Comprehensive income applicable to Morgan Stanley | $ | 2,179 | $ | 2,626 | $ | 9,862 | $ | 7,497 |
See Notes to Consolidated Financial Statements | 47 | September |
Consolidated Balance Sheets |
$ in millions, except share data | (Unaudited) At September 30, 2017 | At December 31, 2016 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 24,047 | $ | 22,017 | ||||
Interest bearing deposits with banks | 24,144 | 21,364 | ||||||
Trading assets at fair value ($158,445and $152,548 were pledged to various parties) | 285,088 | 262,154 | ||||||
Investment securities (includes$54,954 and $63,170 at fair value) | 79,086 | 80,092 | ||||||
Securities purchased under agreements to resell (includes$101 and $302 at fair value) | 90,106 | 101,955 | ||||||
Securities borrowed | 132,892 | 125,236 | ||||||
Customer and other receivables | 54,388 | 46,460 | ||||||
Loans: | ||||||||
Held for investment (net of allowance of$245 and $274) | 91,207 | 81,704 | ||||||
Held for sale | 13,224 | 12,544 | ||||||
Goodwill | 6,590 | 6,577 | ||||||
Intangible assets (net of accumulated amortization of$2,651 and $2,421) | 2,491 | 2,721 | ||||||
Other assets | 50,430 | 52,125 | ||||||
Total assets | $ | 853,693 | $ | 814,949 | ||||
Liabilities | ||||||||
Deposits (includes$174 and $63 at fair value) | $ | 154,639 | $ | 155,863 | ||||
Short-term borrowings (includes$658 and $406 at fair value) | 1,087 | 941 | ||||||
Trading liabilities at fair value | 127,237 | 128,194 | ||||||
Securities sold under agreements to repurchase (includes$810 and $729 at fair value) | 53,983 | 54,628 | ||||||
Securities loaned | 15,630 | 15,844 | ||||||
Other secured financings (includes$6,514and $5,041 at fair value) | 14,244 | 11,118 | ||||||
Customer and other payables | 198,792 | 190,513 | ||||||
Other liabilities and accrued expenses | 16,290 | 15,896 | ||||||
Long-term borrowings (includes$46,231 and $38,736 at fair value) | 191,677 | 164,775 | ||||||
Total liabilities | 773,579 | 737,772 | ||||||
Commitments and contingent liabilities (see Note 11) | ||||||||
Equity | ||||||||
Morgan Stanley shareholders’ equity: | ||||||||
Preferred stock | 8,520 | 7,520 | ||||||
Common stock, $0.01 par value: | ||||||||
Shares authorized:3,500,000,000; Shares issued:2,038,893,979; Shares outstanding:1,812,472,419 and 1,852,481,601 | 20 | 20 | ||||||
Additionalpaid-in capital | 23,389 | 23,271 | ||||||
Retained earnings | 57,554 | 53,679 | ||||||
Employee stock trusts | 2,899 | 2,851 | ||||||
Accumulated other comprehensive income (loss) | (2,544 | ) | (2,643) | |||||
Common stock held in treasury at cost, $0.01 par value (226,421,560and 186,412,378 shares) | (7,961 | ) | (5,797) | |||||
Common stock issued to employee stock trusts | (2,899 | ) | (2,851) | |||||
Total Morgan Stanley shareholders’ equity | 78,978 | 76,050 | ||||||
Noncontrolling interests | 1,136 | 1,127 | ||||||
Total equity | 80,114 | 77,177 | ||||||
Total liabilities and equity | $ | 853,693 | $ | 814,949 |
$ in millions, except share data | (Unaudited) At September 30, 2020 | At December 31, 2019 | ||||
Assets | ||||||
Cash and cash equivalents | $ | 94,772 | $ | 82,171 | ||
Trading assets at fair value ($122,933 and $128,386 were pledged to various parties) | 293,968 | 297,110 | ||||
Investment securities (includes $84,536 and $62,223 at fair value) | 130,705 | 105,725 | ||||
Securities purchased under agreements to resell (includes $15 and $4 at fair value) | 88,283 | 88,224 | ||||
Securities borrowed | 100,803 | 106,549 | ||||
Customer and other receivables | 72,537 | 55,646 | ||||
Loans: | ||||||
Held for investment (net of allowance of $913 and $349) | 133,156 | 118,060 | ||||
Held for sale | 13,081 | 12,577 | ||||
Goodwill | 7,348 | 7,143 | ||||
Intangible assets (net of accumulated amortization of $3,442 and $3,204) | 1,880 | 2,107 | ||||
Other assets | 19,407 | 20,117 | ||||
Total assets | $ | 955,940 | $ | 895,429 | ||
Liabilities | ||||||
Deposits (includes $3,679 and $2,099 at fair value) | $ | 239,253 | $ | 190,356 | ||
Trading liabilities at fair value | 145,016 | 133,356 | ||||
Securities sold under agreements to repurchase (includes $1,166 and $733 at fair value) | 41,376 | 54,200 | ||||
Securities loaned | 7,924 | 8,506 | ||||
Other secured financings (includes $10,185 and $7,809 at fair value) | 13,857 | 14,698 | ||||
Customer and other payables | 192,300 | 197,834 | ||||
Other liabilities and accrued expenses | 22,952 | 21,155 | ||||
Borrowings (includes $69,144 and $64,461 at fair value) | 203,444 | 192,627 | ||||
Total liabilities | 866,122 | 812,732 | ||||
Commitments and contingent liabilities (see Note 14) | ||||||
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: 1,576,447,988 and 1,593,973,680 | 20 | 20 | ||||
Additional paid-in capital | 24,015 | 23,935 | ||||
Retained earnings | 76,061 | 70,589 | ||||
Employee stock trusts | 2,992 | 2,918 | ||||
Accumulated other comprehensive income (loss) | (537 | ) | (2,788 | ) | ||
Common stock held in treasury at cost, $0.01 par value (462,445,991 and 444,920,299 shares) | (19,685 | ) | (18,727 | ) | ||
Common stock issued to employee stock trusts | (2,992 | ) | (2,918 | ) | ||
Total Morgan Stanley shareholders’ equity | 88,394 | 81,549 | ||||
Noncontrolling interests | 1,424 | 1,148 | ||||
Total equity | 89,818 | 82,697 | ||||
Total liabilities and equity | $ | 955,940 | $ | 895,429 |
September | 48 | See Notes to Consolidated Financial Statements |
Consolidated Statements of Changes in Total Equity (Unaudited) |
$ in millions | Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Earnings | Employee Stock Trusts | Accumulated Other Comprehensive Income (Loss) | Common Stock Held in Treasury at Cost | Common Stock Issued to Employee Stock Trusts | Non- controlling Interests | Total Equity | ||||||||||||||||||||||||||||||
Balance at December 31, 2016 | $ | 7,520 | $ | 20 | $ | 23,271 | $ | 53,679 | $ | 2,851 | $ | (2,643 | ) | $ | (5,797 | ) | $ | (2,851 | ) | $ | 1,127 | $ 77,177 | ||||||||||||||||||
Cumulative adjustment for accounting | — | — | 45 | (35 | ) | — | — | — | — | — | 10 | |||||||||||||||||||||||||||||
Net income applicable to Morgan Stanley | — | — | — | 5,468 | — | — | — | — | — | 5,468 | ||||||||||||||||||||||||||||||
Net income applicable to noncontrolling interests | — | — | — | — | — | — | — | — | 85 | 85 | ||||||||||||||||||||||||||||||
Dividends | — | — | — | (1,558 | ) | — | — | — | — | — | (1,558) | |||||||||||||||||||||||||||||
Shares issued under employee plans | — | — | 79 | — | 48 | — | 844 | (48 | ) | — | 923 | |||||||||||||||||||||||||||||
Repurchases of common stock and employee tax withholdings | — | — | — | — | — | — | (3,008 | ) | — | — | (3,008) | |||||||||||||||||||||||||||||
Net change in Accumulated other comprehensive income (loss) | — | — | — | — | — | 99 | — | — | 23 | 122 | ||||||||||||||||||||||||||||||
Issuance of preferred stock | 1,000 | — | (6 | ) | — | — | — | — | — | — | 994 | |||||||||||||||||||||||||||||
Other net decreases | — | — | — | — | — | — | — | — | (99 | ) | (99) | |||||||||||||||||||||||||||||
Balance at September 30, 2017 | $ | 8,520 | $ | 20 | $ | 23,389 | $ | 57,554 | $ | 2,899 | $ | (2,544 | ) | $ | (7,961 | ) | $ | (2,899 | ) | $ | 1,136 | $ 80,114 | ||||||||||||||||||
Balance at December 31, 2015 | $ | 7,520 | $ | 20 | $ | 24,153 | $ | 49,204 | $ | 2,409 | $ | (1,656 | ) | $ | (4,059 | ) | $ | (2,409 | ) | $ | 1,002 | $ 76,184 | ||||||||||||||||||
Cumulative adjustment for accounting change related to DVA2 | — | — | — | 312 | — | (312 | ) | — | — | — | — | |||||||||||||||||||||||||||||
Net adjustment for accounting change related to consolidation3 | — | — | — | — | — | — | — | — | 106 | 106 | ||||||||||||||||||||||||||||||
Net income applicable to Morgan Stanley | — | — | — | 4,313 | — | — | — | — | — | 4,313 | ||||||||||||||||||||||||||||||
Net income applicable to noncontrolling interests | — | — | — | — | — | — | — | — | 130 | 130 | ||||||||||||||||||||||||||||||
Dividends | — | — | — | (1,284 | ) | — | — | — | — | — | (1,284) | |||||||||||||||||||||||||||||
Shares issued under employee plans and related tax effects | — | — | (1,168 | ) | — | 430 | — | 2,106 | (430 | ) | — | 938 | ||||||||||||||||||||||||||||
Repurchases of common stock and employee tax withholdings | — | — | — | — | — | — | (2,908 | ) | — | — | (2,908) | |||||||||||||||||||||||||||||
Net change in Accumulated other comprehensive income (loss) | — | — | — | — | — | 898 | — | — | 151 | 1,049 | ||||||||||||||||||||||||||||||
Other net increase (decreases) | — | — | 10 | — | — | — | — | — | (76 | ) | (66) | |||||||||||||||||||||||||||||
Balance at September 30, 2016 | $ | 7,520 | $ | 20 | $ | 22,995 | $ | 52,545 | $ | 2,839 | $ | (1,070 | ) | $ | (4,861 | ) | $ | (2,839 | ) | $ | 1,313 | $ 78,462 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Preferred Stock | ||||||||||||
Beginning and ending balance | $ | 8,520 | $ | 8,520 | $ | 8,520 | $ | 8,520 | ||||
Common Stock | ||||||||||||
Beginning and ending balance | 20 | 20 | 20 | 20 | ||||||||
Additional Paid-in Capital | ||||||||||||
Beginning balance | 23,782 | 23,446 | 23,935 | 23,794 | ||||||||
Share-based award activity | 232 | 196 | 79 | (154 | ) | |||||||
Other net increases | 1 | 7 | 1 | 9 | ||||||||
Ending balance | 24,015 | 23,649 | 24,015 | 23,649 | ||||||||
Retained Earnings | ||||||||||||
Beginning balance | 74,015 | 67,588 | 70,589 | 64,175 | ||||||||
Cumulative adjustments for accounting changes1 | 0 | 0 | (100 | ) | 63 | |||||||
Net income applicable to Morgan Stanley | 2,717 | 2,173 | 7,611 | 6,803 | ||||||||
Preferred stock dividends2 | (120 | ) | (113 | ) | (377 | ) | (376 | ) | ||||
Common stock dividends2 | (551 | ) | (577 | ) | (1,662 | ) | (1,594 | ) | ||||
Ending balance | 76,061 | 69,071 | 76,061 | 69,071 | ||||||||
Employee Stock Trusts | ||||||||||||
Beginning balance | 3,018 | 2,889 | 2,918 | 2,836 | ||||||||
Share-based award activity | (26 | ) | (24 | ) | 74 | 29 | ||||||
Ending balance | 2,992 | 2,865 | 2,992 | 2,865 | ||||||||
Accumulated Other Comprehensive Income (Loss) | ||||||||||||
Beginning balance | 1 | (2,051 | ) | (2,788 | ) | (2,292 | ) | |||||
Net change in Accumulated other comprehensive income (loss) | (538 | ) | 453 | 2,251 | 694 | |||||||
Ending balance | (537 | ) | (1,598 | ) | (537 | ) | (1,598 | ) | ||||
Common Stock Held In Treasury at Cost | ||||||||||||
Beginning balance | (19,693 | ) | (15,799 | ) | (18,727 | ) | (13,971 | ) | ||||
Share-based award activity | 38 | 57 | 882 | 1,138 | ||||||||
Repurchases of common stock and employee tax withholdings | (30 | ) | (1,538 | ) | (1,840 | ) | (4,447 | ) | ||||
Ending balance | (19,685 | ) | (17,280 | ) | (19,685 | ) | (17,280 | ) | ||||
Common Stock Issued to Employee Stock Trusts | ||||||||||||
Beginning balance | (3,018 | ) | (2,889 | ) | (2,918 | ) | (2,836 | ) | ||||
Share-based award activity | 26 | 24 | (74 | ) | (29 | ) | ||||||
Ending balance | (2,992 | ) | (2,865 | ) | (2,992 | ) | (2,865 | ) | ||||
Non-Controlling Interests | ||||||||||||
Beginning balance | 1,364 | 1,121 | 1,148 | 1,160 | ||||||||
Net income applicable to non-controlling interests | 34 | 45 | 156 | 129 | ||||||||
Net change in Accumulated other comprehensive income (loss) applicable to non-controlling interests | 28 | 2 | 79 | (20 | ) | |||||||
Other net increases (decreases) | (2 | ) | 0 | 41 | (101 | ) | ||||||
Ending balance | 1,424 | 1,168 | 1,424 | 1,168 | ||||||||
Total Equity | $ | 89,818 | $ | 83,550 | $ | 89,818 | $ | 83,550 |
1. |
See Notes 2 and 17 for further |
2. |
See Note |
|
See Notes to Consolidated Financial Statements | 49 | September |
Consolidated Cash Flow Statements (Unaudited) |
Nine Months Ended September 30, | ||||||||
$ in millions | 2017 | 2016 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | 5,553 | $ | 4,443 | ||||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||||||
(Income) loss from equity method investments | — | 39 | ||||||
Compensation payable in common stock and options | 775 | 794 | ||||||
Depreciation and amortization | 1,340 | 1,357 | ||||||
Net gain on sale ofavailable-for-sale securities | (27 | ) | (127) | |||||
Impairment charges | 13 | 102 | ||||||
Provision for credit losses on lending activities | 32 | 138 | ||||||
Other operating adjustments | (48 | ) | (36) | |||||
Changes in assets and liabilities: | ||||||||
Trading assets, net of Trading liabilities | (18,599 | ) | (20,509) | |||||
Securities borrowed | (7,656 | ) | 16,136 | |||||
Securities loaned | (214 | ) | (2,843) | |||||
Customer and other receivables and other assets | (6,682 | ) | (2,800) | |||||
Customer and other payables and other liabilities | 8,196 | 3,849 | ||||||
Securities purchased under agreements to resell | 11,849 | (2,922) | ||||||
Securities sold under agreements to repurchase | (645 | ) | 10,244 | |||||
Net cash provided by (used for) operating activities | (6,113 | ) | 7,865 | |||||
Cash flows from investing activities | ||||||||
Proceeds from (payments for): | ||||||||
Other assets—Premises, equipment and software, net | (1,177 | ) | (941) | |||||
Changes in loans, net | (9,350 | ) | (7,709) | |||||
Investment securities: | ||||||||
Purchases | (19,713 | ) | (41,230) | |||||
Proceeds from sales | 16,111 | 28,960 | ||||||
Proceeds from paydowns and maturities | 5,378 | 5,956 | ||||||
Other investing activities | (77 | ) | (24) | |||||
Net cash provided by (used for) investing activities | (8,828 | ) | (14,988) | |||||
Cash flows from financing activities | ||||||||
Net proceeds from (payments for): | ||||||||
Short-term borrowings | 64 | (1,233) | ||||||
Noncontrolling interests | (43 | ) | (47) | |||||
Other secured financings | 1,400 | (278) | ||||||
Deposits | (1,224 | ) | (4,191) | |||||
Proceeds from: | ||||||||
Derivatives financing activities | 73 | — | ||||||
Issuance of preferred stock, net of issuance costs | 994 | — | ||||||
Issuance of long-term borrowings | 45,334 | 27,528 | ||||||
Payments for: | ||||||||
Long-term borrowings | (24,480 | ) | (22,902) | |||||
Derivatives financing activities | (73 | ) | (120) | |||||
Repurchases of common stock and employee tax withholdings | (3,008 | ) | (2,908) | |||||
Cash dividends | (1,562 | ) | (1,311) | |||||
Other financing activities | 58 | — | ||||||
Net cash provided by (used for) financing activities | 17,533 | (5,462) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 2,218 | 1,054 | ||||||
Net increase (decrease) in cash and cash equivalents | 4,810 | (11,531) | ||||||
Cash and cash equivalents, at beginning of period | 43,381 | 54,083 | ||||||
Cash and cash equivalents, at end of period | $ | 48,191 | $ | 42,552 | ||||
Cash and cash equivalents include: | ||||||||
Cash and due from banks | $ | 24,047 | $ | 26,899 | ||||
Interest bearing deposits with banks | 24,144 | 15,653 | ||||||
Cash and cash equivalents, at end of period | $ | 48,191 | $ | 42,552 |
Supplemental Disclosure of Cash Flow Information
Cash payments for interest were$3,422 millionand $1,784 million.
Cash payments for income taxes, net of refunds, were$967 millionand $504 million.
Nine Months Ended September 30, | ||||||
$ in millions | 2020 | 2019 | ||||
Cash flows from operating activities | ||||||
Net income | $ | 7,767 | $ | 6,932 | ||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||||
Stock-based compensation expense | 802 | 825 | ||||
Depreciation and amortization | 2,363 | 1,987 | ||||
Provision for (Release of) credit losses on lending activities | 757 | 104 | ||||
Other operating adjustments | 663 | (114 | ) | |||
Changes in assets and liabilities: | ||||||
Trading assets, net of Trading liabilities | 18,442 | 17,036 | ||||
Securities borrowed | 5,746 | (16,088 | ) | |||
Securities loaned | (582 | ) | (2,217 | ) | ||
Customer and other receivables and other assets | (17,098 | ) | (5,135 | ) | ||
Customer and other payables and other liabilities | (5,818 | ) | 22,721 | |||
Securities purchased under agreements to resell | (59 | ) | 5,155 | |||
Securities sold under agreements to repurchase | (12,824 | ) | 9,703 | |||
Net cash provided by (used for) operating activities | 159 | 40,909 | ||||
Cash flows from investing activities | ||||||
Proceeds from (payments for): | ||||||
Other assets—Premises, equipment and software, net | (905 | ) | (1,460 | ) | ||
Changes in loans, net | (13,592 | ) | (10,079 | ) | ||
Investment securities: | ||||||
Purchases | (41,147 | ) | (35,078 | ) | ||
Proceeds from sales | 7,220 | 13,561 | ||||
Proceeds from paydowns and maturities | 11,240 | 8,183 | ||||
Other investing activities | (254 | ) | (848 | ) | ||
Net cash provided by (used for) investing activities | (37,438 | ) | (25,721 | ) | ||
Cash flows from financing activities | ||||||
Net proceeds from (payments for): | ||||||
Other secured financings | 229 | (587 | ) | |||
Deposits | 48,734 | (7,084 | ) | |||
Proceeds from issuance of Borrowings | 42,169 | 23,697 | ||||
Payments for: | ||||||
Borrowings | (38,151 | ) | (30,391 | ) | ||
Repurchases of common stock and employee tax withholdings | (1,840 | ) | (4,447 | ) | ||
Cash dividends | (2,008 | ) | (2,082 | ) | ||
Other financing activities | (208 | ) | (286 | ) | ||
Net cash provided by (used for) financing activities | 48,925 | (21,180 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 955 | (1,548 | ) | |||
Net increase (decrease) in cash and cash equivalents | 12,601 | (7,540 | ) | |||
Cash and cash equivalents, at beginning of period | 82,171 | 87,196 | ||||
Cash and cash equivalents, at end of period | $ | 94,772 | $ | 79,656 | ||
Supplemental Disclosure of Cash Flow Information | ||||||
Cash payments for: | ||||||
Interest | $ | 3,747 | $ | 9,760 | ||
Income taxes, net of refunds | 1,675 | 1,603 |
September | 50 | See Notes to Consolidated Financial Statements |
Notes to Consolidated Financial Statements (Unaudited) |
The Firm
See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.
research.
Basis of Financial Information
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.
sheets.
51 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
policies, other than for the accounting updates adopted.
in 2020
|
Beginning in 2017,2020.
September 2020 Form 10-Q | 52 |
Notes to Consolidated Financial Statements (Unaudited) |
In addition, this accounting update permits an entity to elect whether to continue to estimate the total forfeitures, or to account for forfeitures on an actual basis as they occur.such collateral. The Firm has elected to accountuse this approach for forfeiturescertain securities-based loans, customer receivables representing margin loans, Securities purchased under agreements to resell and Securities borrowed.
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 |
53 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
ACL | Provision for credit losses | |
AFS securities | Contra Investment securities | Other revenue |
COVID-19.”
September |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Cash and due from banks | $ | 13,840 | $ | 6,763 | ||
Interest bearing deposits with banks | 80,932 | 75,408 | ||||
Total Cash and cash equivalents | $ | 94,772 | $ | 82,171 | ||
Restricted cash | $ | 37,186 | $ | 32,512 |
Measurements
At September 30, 2017 | ||||||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | |||||||||||||||
Assets at Fair Value | ||||||||||||||||||||
Trading assets: | ||||||||||||||||||||
U.S. Treasury and | $ | 27,538 | $ | 23,186 | $ | — | $ | — | $ | 50,724 | ||||||||||
Other sovereign | 25,428 | 6,201 | 104 | — | 31,733 | |||||||||||||||
Corporate and other debt: |
| |||||||||||||||||||
State and municipal | — | 2,123 | 10 | — | 2,133 | |||||||||||||||
MABS | — | 2,399 | 274 | — | 2,673 | |||||||||||||||
Corporate bonds | — | 14,164 | 419 | — | 14,583 | |||||||||||||||
CDO | — | 313 | 76 | — | 389 | |||||||||||||||
Loans and lending | — | 3,423 | 4,865 | — | 8,288 | |||||||||||||||
Other debt | — | 1,041 | 193 | — | 1,234 | |||||||||||||||
Total corporate | — | 23,463 | 5,837 | — | 29,300 | |||||||||||||||
Corporate equities4 | 137,028 | 425 | 296 | — | 137,749 | |||||||||||||||
Derivative and | ||||||||||||||||||||
Interest rate | 581 | 183,561 | 1,658 | — | 185,800 | |||||||||||||||
Credit | — | 8,527 | 377 | — | 8,904 | |||||||||||||||
Foreign exchange | 93 | 53,842 | 47 | — | 53,982 | |||||||||||||||
Equity | 1,056 | 44,986 | 3,402 | — | 49,444 | |||||||||||||||
Commodity and | 1,240 | 4,929 | 4,107 | — | 10,276 | |||||||||||||||
Netting1 | (2,896 | ) | (225,857 | ) | (1,853 | ) | (46,425 | ) | (277,031 | ) | ||||||||||
Total derivative and | 74 | 69,988 | 7,738 | (46,425 | ) | 31,375 | ||||||||||||||
Investments5 | 316 | 257 | 925 | — | 1,498 | |||||||||||||||
Physical commodities | — | 157 | — | — | 157 | |||||||||||||||
Total trading assets5 | 190,384 | 123,677 | 14,900 | (46,425 | ) | 282,536 | ||||||||||||||
Investment securities— AFS | 25,022 | 29,932 | — | — | 54,954 | |||||||||||||||
Securities purchased | — | 101 | — | — | 101 | |||||||||||||||
Intangible assets | — | 3 | — | — | 3 | |||||||||||||||
Total assets | $ | 215,406 | $ | 153,713 | $ | 14,900 | $ | (46,425 | ) | $ | 337,594 |
At September 30, 2017 | ||||||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | |||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||
Deposits | $ | — | $ | 68 | $ | 106 | $ | — | $ | 174 | ||||||||||
Short-term borrowings | — | 658 | — | — | 658 | |||||||||||||||
Trading liabilities: | ||||||||||||||||||||
U.S. Treasury and | 14,574 | 61 | — | — | 14,635 | |||||||||||||||
Other sovereign | 24,351 | 1,432 | — | — | 25,783 | |||||||||||||||
Corporate and other debt: |
| |||||||||||||||||||
Corporate bonds | — | 7,044 | 6 | — | 7,050 | |||||||||||||||
Other debt | — | 342 | 2 | — | 344 | |||||||||||||||
Total corporate and other debt | — | 7,386 | 8 | — | 7,394 | |||||||||||||||
Corporate equities4 | 54,778 | 157 | 51 | — | 54,986 | |||||||||||||||
Derivative and other contracts: | ||||||||||||||||||||
Interest rate | 478 | 165,399 | 582 | — | 166,459 | |||||||||||||||
Credit | — | 9,353 | 680 | — | 10,033 | |||||||||||||||
Foreign exchange | 52 | 54,198 | 125 | — | 54,375 | |||||||||||||||
Equity | 1,252 | 47,603 | 2,171 | — | 51,026 | |||||||||||||||
Commodity and | 1,233 | 3,879 | 2,573 | — | 7,685 | |||||||||||||||
Netting1 | (2,896 | ) | (225,857 | ) | (1,853 | ) | (34,533 | ) | (265,139 | ) | ||||||||||
Total derivative and | 119 | 54,575 | 4,278 | (34,533 | ) | 24,439 | ||||||||||||||
Total trading liabilities | 93,822 | 63,611 | 4,337 | (34,533 | ) | 127,237 | ||||||||||||||
Securities sold under agreements to repurchase | — | 661 | 149 | — | 810 | |||||||||||||||
Other secured | — | 6,264 | 250 | — | 6,514 | |||||||||||||||
Long-term borrowings | 35 | 43,593 | 2,603 | — | 46,231 | |||||||||||||||
Total liabilities | $ | 93,857 | $ | 114,855 | $ | 7,445 | $ | (34,533 | ) | $ | 181,624 |
At September 30, 2020 | |||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||
Assets at fair value | |||||||||||||||
Trading assets: | |||||||||||||||
U.S. Treasury and agency securities | $ | 41,488 | $ | 27,033 | $ | 122 | $ | — | $ | 68,643 | |||||
Other sovereign government obligations | 31,171 | 5,909 | 10 | — | 37,090 | ||||||||||
State and municipal securities | 0 | 1,479 | 0 | — | 1,479 | ||||||||||
MABS | 0 | 999 | 443 | — | 1,442 | ||||||||||
Loans and lending commitments2 | 0 | 3,982 | 4,351 | — | 8,333 | ||||||||||
Corporate and other debt | 0 | 27,158 | 2,727 | — | 29,885 | ||||||||||
Corporate equities3 | 102,975 | 655 | 135 | — | 103,765 | ||||||||||
Derivative and other contracts: | |||||||||||||||
Interest rate | 2,784 | 239,900 | 1,114 | — | 243,798 | ||||||||||
Credit | 0 | 9,138 | 768 | — | 9,906 | ||||||||||
Foreign exchange | 16 | 67,016 | 152 | — | 67,184 | ||||||||||
Equity | 1,244 | 65,115 | 1,127 | — | 67,486 | ||||||||||
Commodity and other | 3,022 | 12,031 | 3,480 | — | 18,533 | ||||||||||
Netting1 | (5,913 | ) | (304,977 | ) | (1,060 | ) | (59,715 | ) | (371,665 | ) | |||||
Total derivative and other contracts | 1,153 | 88,223 | 5,581 | (59,715 | ) | 35,242 | |||||||||
Investments4 | 664 | 144 | 821 | — | 1,629 | ||||||||||
Physical commodities | 0 | 2,615 | 0 | — | 2,615 | ||||||||||
Total trading assets4 | 177,451 | 158,197 | 14,190 | (59,715 | ) | 290,123 | |||||||||
Investment securities—AFS | 46,946 | 37,590 | 0 | — | 84,536 | ||||||||||
Securities purchased under agreements to resell | 0 | 15 | 0 | — | 15 | ||||||||||
Total assets at fair value | $ | 224,397 | $ | 195,802 | $ | 14,190 | $ | (59,715 | ) | $ | 374,674 |
At September 30, 2020 | |||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||
Liabilities at fair value | |||||||||||||||
Deposits | $ | 0 | $ | 3,574 | $ | 105 | $ | — | $ | 3,679 | |||||
Trading liabilities: | |||||||||||||||
U.S. Treasury and agency securities | 11,311 | 462 | 1 | — | 11,774 | ||||||||||
Other sovereign government obligations | 25,589 | 1,513 | 0 | — | 27,102 | ||||||||||
Corporate and other debt | 0 | 8,623 | 2 | — | 8,625 | ||||||||||
Corporate equities3 | 59,950 | 344 | 57 | — | 60,351 | ||||||||||
Derivative and other contracts: | |||||||||||||||
Interest rate | 2,942 | 226,788 | 478 | — | 230,208 | ||||||||||
Credit | 0 | 9,602 | 652 | — | 10,254 | ||||||||||
Foreign exchange | 17 | 65,390 | 53 | — | 65,460 | ||||||||||
Equity | 1,219 | 75,900 | 3,272 | — | 80,391 | ||||||||||
Commodity and other | 3,025 | 10,304 | 1,676 | — | 15,005 | ||||||||||
Netting1 | (5,913 | ) | (304,977 | ) | (1,060 | ) | (52,204 | ) | (364,154 | ) | |||||
Total derivative and other contracts | 1,290 | 83,007 | 5,071 | (52,204 | ) | 37,164 | |||||||||
Total trading liabilities | 98,140 | 93,949 | 5,131 | (52,204 | ) | 145,016 | |||||||||
Securities sold under agreements to repurchase | 0 | 718 | 448 | — | 1,166 | ||||||||||
Other secured financings | 0 | 9,876 | 309 | — | 10,185 | ||||||||||
Borrowings | 0 | 65,063 | 4,081 | — | 69,144 | ||||||||||
Total liabilities at fair value | $ | 98,140 | $ | 173,180 | $ | 10,074 | $ | (52,204 | ) | $ | 229,190 |
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 | 0 | 2,790 | 1 | — | 2,791 | ||||||||||
MABS | 0 | 1,690 | 438 | — | 2,128 | ||||||||||
Loans and lending commitments2 | 0 | 6,253 | 5,073 | — | 11,326 | ||||||||||
Corporate and other debt | 0 | 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 | 0 | 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 | 0 | 1,907 | 0 | — | 1,907 | ||||||||||
Total trading assets4 | 185,475 | 143,137 | 12,781 | (47,804 | ) | 293,589 | |||||||||
Investment securities—AFS | 32,902 | 29,321 | 0 | — | 62,223 | ||||||||||
Securities purchased under agreements to resell | 0 | 4 | 0 | — | 4 | ||||||||||
Total assets at fair value | $ | 218,377 | $ | 172,462 | $ | 12,781 | $ | (47,804 | ) | $ | 355,816 |
September 2020 Form 10-Q | 55 |
Notes to Consolidated Financial Statements (Unaudited) |
At December 31, 2016 | ||||||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | |||||||||||||||
Assets at Fair Value | ||||||||||||||||||||
Trading assets: | ||||||||||||||||||||
U.S. Treasury and | $ | 27,579 | $ | 20,392 | $ | 74 | $ | — | $ | 48,045 | ||||||||||
Other sovereign | 14,005 | 5,497 | 6 | — | 19,508 | |||||||||||||||
Corporate and other debt: State and municipal | — | 2,355 | 250 | — | 2,605 | |||||||||||||||
MABS | — | 1,691 | 217 | — | 1,908 | |||||||||||||||
Corporate bonds | — | 11,051 | 232 | — | 11,283 | |||||||||||||||
CDO | — | 602 | 63 | — | 665 | |||||||||||||||
Loans and lending | — | 3,580 | 5,122 | — | 8,702 | |||||||||||||||
Other debt | — | 1,360 | 180 | — | 1,540 | |||||||||||||||
Total corporate and | — | 20,639 | 6,064 | — | 26,703 | |||||||||||||||
Corporate equities4 | 131,574 | 352 | 446 | — | 132,372 | |||||||||||||||
Derivative and other | ||||||||||||||||||||
Interest rate | 1,131 | 300,406 | 1,373 | — | 302,910 | |||||||||||||||
Credit | — | 11,727 | 502 | — | 12,229 | |||||||||||||||
Foreign exchange | 231 | 74,921 | 13 | — | 75,165 | |||||||||||||||
Equity | 1,185 | 35,736 | 1,708 | — | 38,629 | |||||||||||||||
Commodity and | 2,808 | 6,734 | 3,977 | — | 13,519 | |||||||||||||||
Netting1 | (4,378 | ) | (353,543 | ) | (1,944 | ) | (51,381 | ) | (411,246) | |||||||||||
Total derivative and | 977 | 75,981 | 5,629 | (51,381 | ) | 31,206 | ||||||||||||||
Investments5 | 237 | 197 | 958 | — | 1,392 | |||||||||||||||
Physical commodities | — | 112 | — | — | 112 | |||||||||||||||
Total trading assets5 | 174,372 | 123,170 | 13,177 | (51,381 | ) | 259,338 | ||||||||||||||
Investment securities—AFS | 29,120 | 34,050 | — | — | 63,170 | |||||||||||||||
Securities purchased | — | 302 | — | — | 302 | |||||||||||||||
Intangible assets | — | 3 | — | — | 3 | |||||||||||||||
Total assets | $ | 203,492 | $ | 157,525 | $ | 13,177 | $ | (51,381 | ) | $ | 322,813 |
At December 31, 2016 | ||||||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | |||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||
Deposits | $ | — | $ | 21 | $ | 42 | $ | — | $ | 63 | ||||||||||
Short-term borrowings | — | 404 | 2 | — | 406 | |||||||||||||||
Trading liabilities: | ||||||||||||||||||||
U.S. Treasury and | 11,636 | 61 | — | — | 11,697 | |||||||||||||||
Other sovereign | 20,658 | 2,430 | — | — | 23,088 | |||||||||||||||
Corporate and other debt: |
| |||||||||||||||||||
Corporate bonds | — | 5,572 | 34 | — | 5,606 | |||||||||||||||
Other debt | — | 549 | 2 | — | 551 | |||||||||||||||
Total corporate | — | 6,121 | 36 | — | 6,157 | |||||||||||||||
Corporate equities4 | 57,847 | 54 | 35 | — | 57,936 | |||||||||||||||
Derivative and other | ||||||||||||||||||||
Interest rate | 1,244 | 285,379 | 953 | — | 287,576 | |||||||||||||||
Credit | — | 12,550 | 875 | — | 13,425 | |||||||||||||||
Foreign exchange | 17 | 75,510 | 56 | — | 75,583 | |||||||||||||||
Equity | 1,162 | 37,828 | 1,524 | — | 40,514 | |||||||||||||||
Commodity and | 2,663 | 6,845 | 2,377 | — | 11,885 | |||||||||||||||
Netting1 | (4,378 | ) | (353,543 | ) | (1,944 | ) | (39,803 | ) | (399,668) | |||||||||||
Total derivative and | 708 | 64,569 | 3,841 | (39,803 | ) | 29,315 | ||||||||||||||
Physical commodities | — | 1 | — | — | 1 | |||||||||||||||
Total trading liabilities | 90,849 | 73,236 | 3,912 | (39,803 | ) | 128,194 | ||||||||||||||
Securities sold under | — | 580 | 149 | — | 729 | |||||||||||||||
Other secured | — | 4,607 | 434 | — | 5,041 | |||||||||||||||
Long-term borrowings | 47 | 36,677 | 2,012 | — | 38,736 | |||||||||||||||
Total liabilities | $ | 90,896 | $ | 115,525 | $ | 6,551 | $ | (39,803 | ) | $ | 173,169 |
MABS—
At December 31, 2019 | |||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||
Liabilities at fair value | |||||||||||||||
Deposits | $ | 0 | $ | 1,920 | $ | 179 | $ | — | $ | 2,099 | |||||
Trading liabilities: | |||||||||||||||
U.S. Treasury and agency securities | 11,191 | 34 | 0 | — | 11,225 | ||||||||||
Other sovereign government obligations | 21,837 | 1,332 | 1 | — | 23,170 | ||||||||||
Corporate and other debt | 0 | 7,410 | 0 | — | 7,410 | ||||||||||
Corporate equities3 | 63,002 | 79 | 36 | — | 63,117 | ||||||||||
Derivative and other contracts: | |||||||||||||||
Interest rate | 1,144 | 171,025 | 462 | — | 172,631 | ||||||||||
Credit | 0 | 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 | 0 | 733 | 0 | — | 733 | ||||||||||
Other secured financings | 0 | 7,700 | 109 | — | 7,809 | ||||||||||
Borrowings | 0 | 60,373 | 4,088 | — | 64,461 | ||||||||||
Total liabilities at fair value | $ | 96,780 | $ | 145,703 | $ | 8,506 | $ | (42,531 | ) | $ | 208,458 |
AFS—Available for sale
CDO—Collateralized debt obligations, including collateralized loan obligations
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 |
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 |
Loans and Lending Commitments at Fair Value | ||||||||
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Corporate | $ | 6,441 | $ | 7,217 | ||||
Residential real estate | 690 | 966 | ||||||
Wholesale real estate | 1,157 | 519 | ||||||
Total | $ | 8,288 | $ | 8,702 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Corporate | $ | 14 | $ | 20 | ||
Secured lending facilities | 445 | 951 | ||||
Commercial Real Estate | 769 | 2,098 | ||||
Residential Real Estate | 824 | 1,192 | ||||
Securities-based lending and Other loans | 6,281 | 7,065 | ||||
Total | $ | 8,333 | $ | 11,326 |
Loans previously classified as corporate have been further disaggregated; prior period balances have been revised to conform with current period presentation. |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Customer and other receivables, net | $ | 589 | $ | 365 |
|
Unsettled Fair Value of Futures Contracts1 | ||||||||
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Long | ||||||||
Customer and other receivables | $ | 977 | $ | 784 | ||||
Short | ||||||||
Customer and other payables | $ | 140 | $ | 174 |
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. |
Changes in
The following tables present additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended September 30, 2017
(“current quarter”), the three months ended September 30, 2016 (“prior year quarter”), the current year period and the nine months ended September 30, 2016 (“prior year period”).
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
U.S. Treasury and agency securities | ||||||||||||
Beginning balance | $ | 97 | $ | 5 | $ | 22 | $ | 54 | ||||
Realized and unrealized gains (losses) | (1 | ) | 0 | 0 | 0 | |||||||
Purchases | 109 | 11 | 133 | 18 | ||||||||
Sales | (36 | ) | 0 | (42 | ) | (54 | ) | |||||
Net transfers | (47 | ) | 2 | 9 | 0 | |||||||
Ending balance | $ | 122 | $ | 18 | $ | 122 | $ | 18 | ||||
Unrealized gains (losses) | $ | (1 | ) | $ | 0 | $ | 0 | $ | 0 | |||
Other sovereign government obligations | ||||||||||||
Beginning balance | $ | 11 | $ | 10 | $ | 5 | $ | 17 | ||||
Realized and unrealized gains (losses) | (1 | ) | (3 | ) | 0 | (2 | ) | |||||
Purchases | 1 | 2 | 8 | 13 | ||||||||
Sales | (1 | ) | (2 | ) | (3 | ) | (6 | ) | ||||
Net transfers | 0 | 5 | 0 | (10 | ) | |||||||
Ending balance | $ | 10 | $ | 12 | $ | 10 | $ | 12 | ||||
Unrealized gains (losses) | $ | 0 | $ | (3 | ) | $ | 0 | $ | (2 | ) | ||
State and municipal securities | ||||||||||||
Beginning balance | $ | 0 | $ | 16 | $ | 1 | $ | 148 | ||||
Sales | 0 | (2 | ) | 0 | (43 | ) | ||||||
Net transfers | 0 | (13 | ) | (1 | ) | (104 | ) | |||||
Ending balance | $ | 0 | $ | 1 | $ | 0 | $ | 1 | ||||
Unrealized gains (losses) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
MABS | ||||||||||||
Beginning balance | $ | 379 | $ | 480 | $ | 438 | $ | 354 | ||||
Realized and unrealized gains (losses) | 13 | (10 | ) | (60 | ) | (9 | ) | |||||
Purchases | 13 | 5 | 172 | 66 | ||||||||
Sales | (54 | ) | (58 | ) | (162 | ) | (157 | ) | ||||
Settlements | 0 | 0 | 0 | (39 | ) | |||||||
Net transfers | 92 | (16 | ) | 55 | 186 | |||||||
Ending balance | $ | 443 | $ | 401 | $ | 443 | $ | 401 | ||||
Unrealized gains (losses) | $ | 8 | $ | (8 | ) | $ | (35 | ) | $ | (38 | ) | |
Loans and lending commitments | ||||||||||||
Beginning balance | $ | 4,068 | $ | 5,604 | $ | 5,073 | $ | 6,870 | ||||
Realized and unrealized gains (losses) | 20 | (51 | ) | (161 | ) | 3 | ||||||
Purchases and originations | 846 | 852 | 1,926 | 1,934 | ||||||||
Sales | (725 | ) | (464 | ) | (1,139 | ) | (1,541 | ) | ||||
Settlements | (285 | ) | (811 | ) | (1,907 | ) | (2,130 | ) | ||||
Net transfers1 | 427 | (261 | ) | 559 | (267 | ) | ||||||
Ending balance | $ | 4,351 | $ | 4,869 | $ | 4,351 | $ | 4,869 | ||||
Unrealized gains (losses) | $ | 27 | $ | (55 | ) | $ | (137 | ) | $ | 283 |
September 2020 Form 10-Q | 56 |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Corporate and other debt | ||||||||||||
Beginning balance | $ | 2,686 | $ | 1,364 | $ | 1,396 | $ | 1,076 | ||||
Realized and unrealized gains (losses) | (107 | ) | 157 | (184 | ) | 269 | ||||||
Purchases | 451 | 341 | 2,217 | 632 | ||||||||
Sales | (325 | ) | (474 | ) | (425 | ) | (587 | ) | ||||
Settlements | 0 | 0 | (311 | ) | (7 | ) | ||||||
Net transfers | 22 | 2 | 34 | 7 | ||||||||
Ending balance | $ | 2,727 | $ | 1,390 | $ | 2,727 | $ | 1,390 | ||||
Unrealized gains (losses) | $ | (96 | ) | $ | 114 | $ | (186 | ) | $ | 217 | ||
Corporate equities | ||||||||||||
Beginning balance | $ | 83 | $ | 98 | $ | 97 | $ | 95 | ||||
Realized and unrealized gains (losses) | 32 | 1 | 0 | (41 | ) | |||||||
Purchases | 32 | 5 | 42 | 44 | ||||||||
Sales | (27 | ) | (16 | ) | (27 | ) | (268 | ) | ||||
Net transfers | 15 | 15 | 23 | 273 | ||||||||
Ending balance | $ | 135 | $ | 103 | $ | 135 | $ | 103 | ||||
Unrealized gains (losses) | $ | 39 | $ | 7 | $ | 14 | $ | (38 | ) | |||
Investments | ||||||||||||
Beginning balance | $ | 759 | $ | 785 | $ | 858 | $ | 757 | ||||
Realized and unrealized gains (losses) | 55 | (15 | ) | (6 | ) | 19 | ||||||
Purchases | 7 | 7 | 37 | 28 | ||||||||
Sales | (16 | ) | (7 | ) | (37 | ) | (43 | ) | ||||
Net transfers | 16 | 15 | (31 | ) | 24 | |||||||
Ending balance | $ | 821 | $ | 785 | $ | 821 | $ | 785 | ||||
Unrealized gains (losses) | $ | 44 | $ | (12 | ) | $ | (19 | ) | $ | 22 | ||
Net derivatives: Interest rate | ||||||||||||
Beginning balance | $ | 760 | $ | 816 | $ | 777 | $ | 618 | ||||
Realized and unrealized gains (losses) | (147 | ) | (40 | ) | (95 | ) | 143 | |||||
Purchases | 36 | 69 | 153 | 132 | ||||||||
Issuances | (15 | ) | (11 | ) | (41 | ) | (22 | ) | ||||
Settlements | (31 | ) | 2 | 36 | 16 | |||||||
Net transfers | 33 | (48 | ) | (194 | ) | (99 | ) | |||||
Ending balance | $ | 636 | $ | 788 | $ | 636 | $ | 788 | ||||
Unrealized gains (losses) | $ | (139 | ) | $ | 120 | $ | (37 | ) | $ | 214 | ||
Net derivatives: Credit | ||||||||||||
Beginning balance | $ | 131 | $ | (138 | ) | $ | 124 | $ | 40 | |||
Realized and unrealized gains (losses) | (16 | ) | (183 | ) | 11 | 36 | ||||||
Purchases | 17 | 44 | 66 | 103 | ||||||||
Issuances | (51 | ) | (19 | ) | (101 | ) | (162 | ) | ||||
Settlements | 10 | 389 | 61 | 90 | ||||||||
Net transfers | 25 | 12 | (45 | ) | (2 | ) | ||||||
Ending balance | $ | 116 | $ | 105 | $ | 116 | $ | 105 | ||||
Unrealized gains (losses) | $ | (16 | ) | $ | 20 | $ | 2 | $ | 41 | |||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Net derivatives: Foreign exchange | ||||||||||||
Beginning balance | $ | 17 | $ | (29 | ) | $ | (31 | ) | $ | 75 | ||
Realized and unrealized gains (losses) | 86 | 67 | 202 | (83 | ) | |||||||
Purchases | 0 | 0 | 3 | 0 | ||||||||
Issuances | (4 | ) | 0 | (5 | ) | 0 | ||||||
Settlements | (9 | ) | 5 | (27 | ) | 0 | ||||||
Net transfers | 9 | 9 | (43 | ) | 60 | |||||||
Ending balance | $ | 99 | $ | 52 | $ | 99 | $ | 52 | ||||
Unrealized gains (losses) | $ | 75 | $ | 79 | $ | 136 | $ | 26 | ||||
Net derivatives: Equity | ||||||||||||
Beginning balance | $ | (1,884 | ) | $ | (1,715 | ) | $ | (1,684 | ) | $ | (1,485 | ) |
Realized and unrealized gains (losses) | 3 | (61 | ) | 75 | 59 | |||||||
Purchases | 19 | 36 | 192 | 75 | ||||||||
Issuances | (181 | ) | (207 | ) | (706 | ) | (227 | ) | ||||
Settlements | (151 | ) | (56 | ) | (167 | ) | (173 | ) | ||||
Net transfers | 49 | 622 | 145 | 370 | ||||||||
Ending balance | $ | (2,145 | ) | $ | (1,381 | ) | $ | (2,145 | ) | $ | (1,381 | ) |
Unrealized gains (losses) | $ | 32 | $ | (86 | ) | $ | (143 | ) | $ | 81 | ||
Net derivatives: Commodity and other | ||||||||||||
Beginning balance | $ | 2,087 | $ | 1,861 | $ | 1,612 | $ | 2,052 | ||||
Realized and unrealized gains (losses) | (29 | ) | 120 | 373 | 35 | |||||||
Purchases | 1 | 126 | 26 | 145 | ||||||||
Issuances | (40 | ) | (36 | ) | (65 | ) | (71 | ) | ||||
Settlements | (181 | ) | (107 | ) | (101 | ) | (307 | ) | ||||
Net transfers | (34 | ) | 10 | (41 | ) | 120 | ||||||
Ending balance | $ | 1,804 | $ | 1,974 | $ | 1,804 | $ | 1,974 | ||||
Unrealized gains (losses) | $ | (251 | ) | $ | 33 | $ | (6 | ) | $ | (89 | ) | |
Deposits | ||||||||||||
Beginning balance | $ | 90 | $ | 138 | $ | 179 | $ | 27 | ||||
Realized and unrealized losses (gains) | 4 | 5 | 8 | 16 | ||||||||
Issuances | 0 | 23 | 0 | 70 | ||||||||
Settlements | (2 | ) | (8 | ) | (13 | ) | (12 | ) | ||||
Net transfers | 13 | (13 | ) | (69 | ) | 44 | ||||||
Ending balance | $ | 105 | $ | 145 | $ | 105 | $ | 145 | ||||
Unrealized losses (gains) | $ | 4 | $ | 5 | $ | 8 | $ | 16 | ||||
Nonderivative trading liabilities | ||||||||||||
Beginning balance | $ | 74 | $ | 36 | $ | 37 | $ | 16 | ||||
Realized and unrealized losses (gains) | (6 | ) | (7 | ) | (21 | ) | (37 | ) | ||||
Purchases | (7 | ) | (13 | ) | (23 | ) | (31 | ) | ||||
Sales | 5 | 6 | 23 | 36 | ||||||||
Settlements | 0 | 0 | 3 | 0 | ||||||||
Net transfers | (6 | ) | 18 | 41 | 56 | |||||||
Ending balance | $ | 60 | $ | 40 | $ | 60 | $ | 40 | ||||
Unrealized losses (gains) | $ | (4 | ) | $ | (7 | ) | $ | (21 | ) | $ | (37 | ) |
57 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Securities sold under agreements to repurchase | ||||||||||||
Beginning balance | $ | 440 | $ | 0 | $ | 0 | $ | 0 | ||||
Realized and unrealized losses (gains) | 8 | 0 | (22 | ) | 0 | |||||||
Issuances | 0 | 0 | 470 | 0 | ||||||||
Ending balance | $ | 448 | $ | 0 | $ | 448 | $ | 0 | ||||
Unrealized losses (gains) | $ | 8 | $ | 0 | $ | (22 | ) | $ | 0 | |||
Other secured financings | ||||||||||||
Beginning balance | $ | 300 | $ | 154 | $ | 109 | $ | 208 | ||||
Realized and unrealized losses (gains) | 11 | (1 | ) | (1 | ) | 5 | ||||||
Issuances | 3 | 0 | 10 | 0 | ||||||||
Settlements | (5 | ) | 0 | (208 | ) | (8 | ) | |||||
Net transfers | 0 | (43 | ) | 399 | (95 | ) | ||||||
Ending balance | $ | 309 | $ | 110 | $ | 309 | $ | 110 | ||||
Unrealized losses (gains) | $ | 11 | $ | (1 | ) | $ | (1 | ) | $ | 5 | ||
Borrowings | ||||||||||||
Beginning balance | $ | 4,135 | $ | 3,939 | $ | 4,088 | $ | 3,806 | ||||
Realized and unrealized losses (gains) | (32 | ) | 88 | (284 | ) | 498 | ||||||
Issuances | 194 | 201 | 992 | 610 | ||||||||
Settlements | (70 | ) | (260 | ) | (346 | ) | (438 | ) | ||||
Net transfers | (146 | ) | (430 | ) | (369 | ) | (938 | ) | ||||
Ending balance | $ | 4,081 | $ | 3,538 | $ | 4,081 | $ | 3,538 | ||||
Unrealized losses (gains) | $ | (33 | ) | $ | 91 | $ | (282 | ) | $ | 459 | ||
Portion of Unrealized losses (gains) recorded in OCI—Change in net DVA | 22 | (23 | ) | (124 | ) | 68 |
1. | Net transfers in the current year period reflect the largely offsetting impacts of transfers in of $857 million of equity margin loans and transfers out of $707 million of equity margin loans. The loans were transferred into Level 3 in the first quarter as the significance of the margin loan rate input increased as a result of reduced liquidity, and transferred out of Level 3 in the second quarter as liquidity conditions improved reducing the significance of the input. |
Additionally, both observable and unobservable inputs may be used to determine the fair value of positions that the Firm has classified within the Level 3 category. As a result, the
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Current Quarter
$ in millions | Beginning Balance at June 30, 2017 | Realized and Unrealized Gains (Losses) | Purchases1 | Sales and Issuances2 | Settlements1 | Net Transfers | Ending Balance at September 30, 2017 | Unrealized Gains (Losses) at September 30, 2017 | ||||||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||
Other sovereign government obligations | $ | 100 | $ | 2 | $ | 86 | $ | (82 | ) | $ | — | $ | (2 | ) | $ | 104 | $ | 1 | ||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||
State and municipal securities | 9 | — | 4 | (3 | ) | — | — | 10 | — | |||||||||||||||||||||||
MABS | 264 | 4 | 52 | (54 | ) | — | 8 | 274 | 1 | |||||||||||||||||||||||
Corporate bonds | 449 | 29 | 120 | (144 | ) | — | (35 | ) | 419 | 27 | ||||||||||||||||||||||
CDO | 58 | 7 | 20 | (15 | ) | (4 | ) | 10 | 76 | 6 | ||||||||||||||||||||||
Loans and lending commitments | 4,864 | 25 | 1,772 | (1,431 | ) | (236 | ) | (129 | ) | 4,865 | 17 | |||||||||||||||||||||
Other debt | 186 | 5 | 80 | (82 | ) | — | 4 | 193 | 1 | |||||||||||||||||||||||
Total corporate and other debt | 5,830 | 70 | 2,048 | (1,729 | ) | (240 | ) | (142 | ) | 5,837 | 52 | |||||||||||||||||||||
Corporate equities | 500 | (9 | ) | 24 | (268 | ) | — | 49 | 296 | — | ||||||||||||||||||||||
Net derivative and other contracts3: | ||||||||||||||||||||||||||||||||
Interest rate | 970 | 105 | 13 | (29 | ) | 33 | (16 | ) | 1,076 | 92 | ||||||||||||||||||||||
Credit | (305 | ) | (33 | ) | 7 | (9 | ) | 35 | 2 | (303 | ) | (33 | ) | |||||||||||||||||||
Foreign exchange | 2 | (59 | ) | 9 | — | 17 | (47 | ) | (78 | ) | (50 | ) | ||||||||||||||||||||
Equity | 1,093 | 114 | 60 | (77 | ) | 79 | (38 | ) | 1,231 | 110 | ||||||||||||||||||||||
Commodity and other | 1,509 | 158 | 1 | (1 | ) | (112 | ) | (21 | ) | 1,534 | 45 | |||||||||||||||||||||
Total net derivative and other contracts | 3,269 | 285 | 90 | (116 | ) | 52 | (120 | ) | 3,460 | 164 | ||||||||||||||||||||||
Investments | 946 | (4 | ) | 13 | (17 | ) | (16 | ) | 3 | 925 | (5 | ) | ||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||||||||||||||
Deposits | $ | 79 | $ | (1 | ) | $ | — | $ | 32 | $ | — | $ | (6 | ) | $ | 106 | $ | (1 | ) | |||||||||||||
Trading liabilities: | ||||||||||||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||
Corporate bonds | 13 | (2 | ) | (18 | ) | 9 | — | — | 6 | (1 | ) | |||||||||||||||||||||
Other debt | 2 | — | — | — | — | — | 2 | — | ||||||||||||||||||||||||
Total corporate and other debt | 15 | (2 | ) | (18 | ) | 9 | — | — | 8 | (1 | ) | |||||||||||||||||||||
Corporate equities | 28 | 1 | (10 | ) | 24 | — | 10 | 51 | 2 | |||||||||||||||||||||||
Securities sold under agreements to repurchase | 148 | (1 | ) | — | — | — | — | 149 | (1 | ) | ||||||||||||||||||||||
Other secured financings | 244 | (5 | ) | — | 2 | (1 | ) | — | 250 | (5 | ) | |||||||||||||||||||||
Long-term borrowings | 2,646 | (53 | ) | — | 679 | (49 | ) | (726 | ) | 2,603 | (47 | ) |
|
|
|
|
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Prior Year Quarter
$ in millions | Beginning Balance at June 30, 2016 | Realized and Unrealized Gains (Losses) | Purchases1 | Sales and Issuances2 | Settlements1 | Net Transfers | Ending Balance at September 30, 2016 | Unrealized (Losses) at | ||||||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||
U.S. Treasury and agency securities | $ | 20 | $ | — | $ | — | $ | (18 | ) | $ | — | $ | 6 | $ | 8 | $ | — | |||||||||||||||
Other sovereign government obligations | 2 | — | 6 | (1 | ) | — | 5 | 12 | — | |||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||
State and municipal securities | 10 | 1 | — | (7 | ) | — | — | 4 | — | |||||||||||||||||||||||
MABS | 355 | (7 | ) | 74 | (156 | ) | — | (2 | ) | 264 | (15 | ) | ||||||||||||||||||||
Corporate bonds | 276 | (55 | ) | 20 | (23 | ) | — | (19 | ) | 199 | (55 | ) | ||||||||||||||||||||
CDO | 109 | 6 | 9 | (38 | ) | — | (1 | ) | 85 | 10 | ||||||||||||||||||||||
Loans and lending commitments | 5,418 | (12 | ) | 501 | (206 | ) | (733 | ) | (813 | ) | 4,155 | (12 | ) | |||||||||||||||||||
Other debt | 528 | — | 191 | (212 | ) | — | (261 | ) | 246 | — | ||||||||||||||||||||||
Total corporate and other debt | 6,696 | (67 | ) | 795 | (642 | ) | (733 | ) | (1,096 | ) | 4,953 | (72 | ) | |||||||||||||||||||
Corporate equities | 572 | (28 | ) | 43 | (36 | ) | — | (214 | ) | 337 | (26 | ) | ||||||||||||||||||||
Net derivative and other contracts3: | ||||||||||||||||||||||||||||||||
Interest rate | (235 | ) | (60 | ) | 3 | (15 | ) | 11 | 337 | 41 | (45 | ) | ||||||||||||||||||||
Credit | (1,114 | ) | 147 | — | — | 2 | 82 | (883 | ) | 147 | ||||||||||||||||||||||
Foreign exchange | (1 | ) | (27 | ) | — | — | (42 | ) | (37 | ) | (107 | ) | (27 | ) | ||||||||||||||||||
Equity | (1,473 | ) | 220 | 31 | (39 | ) | 567 | 834 | 140 | 239 | ||||||||||||||||||||||
Commodity and other | 1,287 | 269 | — | (14 | ) | (170 | ) | (78 | ) | 1,294 | 104 | |||||||||||||||||||||
Total net derivative and other contracts | (1,536 | ) | 549 | 34 | (68 | ) | 368 | 1,138 | 485 | 418 | ||||||||||||||||||||||
Investments | 974 | (41 | ) | 2 | (8 | ) | (27 | ) | 36 | 936 | (36 | ) | ||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||||||||||||||
Deposits | $ | 30 | $ | 1 | $ | — | $ | 5 | $ | — | $ | (3 | ) | $ | 31 | $ | 1 | |||||||||||||||
Short-term borrowings | — | — | — | — | — | 2 | 2 | — | ||||||||||||||||||||||||
Trading liabilities: | ||||||||||||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||
Corporate bonds | 6 | (1 | ) | (3 | ) | 2 | — | 7 | 13 | (1 | ) | |||||||||||||||||||||
Other debt | 3 | — | — | — | — | — | 3 | — | ||||||||||||||||||||||||
Total corporate and other debt | 9 | (1 | ) | (3 | ) | 2 | — | 7 | 16 | (1 | ) | |||||||||||||||||||||
Corporate equities | 26 | 2 | (2 | ) | 3 | — | (5 | ) | 20 | — | ||||||||||||||||||||||
Securities sold under agreements to repurchase | 150 | 1 | — | — | — | — | 149 | 2 | ||||||||||||||||||||||||
Other secured financings | 441 | (11 | ) | — | — | (2 | ) | — | 450 | (11 | ) | |||||||||||||||||||||
Long-term borrowings | 1,929 | (88 | ) | — | 193 | (147 | ) | (21 | ) | 2,042 | (87 | ) |
|
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|
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Current Year Period
$ in millions | Beginning Balance at December 31, 2016 | Realized and Unrealized Gains (Losses) | Purchases1 | Sales and Issuances2 | Settlements1 | Net Transfers | Ending Balance at September 30, 2017 | Unrealized Gains (Losses) at September 30, 2017 | ||||||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||
U.S. Treasury and agency securities | $ | 74 | $ | (1 | ) | $ | — | $ | (240 | ) | $ | — | $ | 167 | $ | — | $ | — | ||||||||||||||
Other sovereign government obligations | 6 | — | 104 | (5 | ) | — | (1 | ) | 104 | — | ||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||
State and municipal securities | 250 | 3 | 6 | (81 | ) | — | (168 | ) | 10 | — | ||||||||||||||||||||||
MABS | 217 | 49 | 120 | (120 | ) | (16 | ) | 24 | 274 | 13 | ||||||||||||||||||||||
Corporate bonds | 232 | 30 | 310 | (205 | ) | — | 52 | 419 | (6 | ) | ||||||||||||||||||||||
CDO | 63 | 6 | 33 | (18 | ) | (7 | ) | (1 | ) | 76 | 3 | |||||||||||||||||||||
Loans and lending commitments | 5,122 | 88 | 2,470 | (1,927 | ) | (964 | ) | 76 | 4,865 | 85 | ||||||||||||||||||||||
Other debt | 180 | 31 | 94 | (160 | ) | — | 48 | 193 | 6 | |||||||||||||||||||||||
Total corporate and other debt | 6,064 | 207 | 3,033 | (2,511 | ) | (987 | ) | 31 | 5,837 | 101 | ||||||||||||||||||||||
Corporate equities | 446 | 8 | 74 | (604 | ) | — | 372 | 296 | 3 | |||||||||||||||||||||||
Net derivative and other contracts3: | ||||||||||||||||||||||||||||||||
Interest rate | 420 | 137 | 36 | (42 | ) | 658 | (133 | ) | 1,076 | 146 | ||||||||||||||||||||||
Credit | (373 | ) | (18 | ) | 6 | (9 | ) | 96 | (5 | ) | (303 | ) | (34 | ) | ||||||||||||||||||
Foreign exchange | (43 | ) | (92 | ) | 9 | — | 48 | — | (78 | ) | (72 | ) | ||||||||||||||||||||
Equity | 184 | 168 | 816 | (231 | ) | 209 | 85 | 1,231 | 277 | |||||||||||||||||||||||
Commodity and other | 1,600 | 523 | 13 | (21 | ) | (431 | ) | (150 | ) | 1,534 | 88 | |||||||||||||||||||||
Total net derivative and other contracts | 1,788 | 718 | 880 | (303 | ) | 580 | (203 | ) | 3,460 | 405 | ||||||||||||||||||||||
Investments | 958 | 16 | 96 | (44 | ) | (78 | ) | (23 | ) | 925 | 10 | |||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||||||||||||||
Deposits | $ | 42 | $ | (2 | ) | $ | — | $ | 62 | $ | — | $ | — | $ | 106 | $ | (2 | ) | ||||||||||||||
Short-term borrowings | 2 | — | — | — | (2 | ) | — | — | — | |||||||||||||||||||||||
Trading liabilities: | ||||||||||||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||
Corporate bonds | 34 | (1 | ) | (54 | ) | 98 | — | (73 | ) | 6 | — | |||||||||||||||||||||
Other debt | 2 | — | (1 | ) | 1 | — | — | 2 | — | |||||||||||||||||||||||
Total corporate and other debt | 36 | (1 | ) | (55 | ) | 99 | — | (73 | ) | 8 | — | |||||||||||||||||||||
Corporate equities | 35 | — | (69 | ) | 27 | — | 58 | 51 | (1 | ) | ||||||||||||||||||||||
Securities sold under agreements to repurchase | 149 | — | — | — | — | — | 149 | 1 | ||||||||||||||||||||||||
Other secured financings | 434 | (28 | ) | — | 54 | (223 | ) | (43 | ) | 250 | (21 | ) | ||||||||||||||||||||
Long-term borrowings | 2,012 | (142 | ) | — | 1,418 | (326 | ) | (643 | ) | 2,603 | (136 | ) |
|
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|
|
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Prior Year Period
$ in millions | Beginning Balance at | Realized and Unrealized Gains (Losses) | Purchases1 | Sales and Issuances2 | Settlements1 | Net Transfers | Ending Balance at September 30, 2016 | Unrealized Gains (Losses) at September 30, 2016 | ||||||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||
U.S. Treasury and agency securities | $ | — | $ | — | $ | 3 | $ | (37 | ) | $ | — | $ | 42 | $ | 8 | $ | — | |||||||||||||||
Other sovereign government obligations | 4 | — | 10 | (6 | ) | — | 4 | 12 | — | |||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||
State and municipal securities | 19 | — | — | (16 | ) | — | 1 | 4 | — | |||||||||||||||||||||||
MABS | 438 | (35 | ) | 88 | (314 | ) | — | 87 | 264 | (31) | ||||||||||||||||||||||
Corporate bonds | 267 | (4 | ) | 146 | (276 | ) | — | 66 | 199 | (17) | ||||||||||||||||||||||
CDO | 430 | 9 | 13 | (295 | ) | — | (72 | ) | 85 | 16 | ||||||||||||||||||||||
Loans and lending commitments | 5,936 | (65 | ) | 921 | (860 | ) | (986 | ) | (791 | ) | 4,155 | (51) | ||||||||||||||||||||
Other debt | 448 | 1 | 92 | (35 | ) | — | (260 | ) | 246 | 65 | ||||||||||||||||||||||
Total corporate and other debt | 7,538 | (94 | ) | 1,260 | (1,796 | ) | (986 | ) | (969 | ) | 4,953 | (18) | ||||||||||||||||||||
Corporate equities | 434 | (57 | ) | 62 | (324 | ) | — | 222 | 337 | (80) | ||||||||||||||||||||||
Net derivative and other contracts3: | ||||||||||||||||||||||||||||||||
Interest rate | 260 | 257 | 3 | (15 | ) | (59 | ) | (405 | ) | 41 | (156) | |||||||||||||||||||||
Credit | (844 | ) | (255 | ) | 1 | — | 155 | 60 | (883 | ) | (277) | |||||||||||||||||||||
Foreign exchange | 141 | (104 | ) | — | — | (224 | ) | 80 | (107 | ) | (102) | |||||||||||||||||||||
Equity | (2,031 | ) | 334 | 816 | (168 | ) | 1,083 | 106 | 140 | 172 | ||||||||||||||||||||||
Commodity and other | 1,050 | 377 | 33 | (20 | ) | (312 | ) | 166 | 1,294 | 162 | ||||||||||||||||||||||
Total net derivative and other contracts | (1,424 | ) | 609 | 853 | (203 | ) | 643 | 7 | 485 | (201) | ||||||||||||||||||||||
Investments | 707 | (60 | ) | 374 | (37 | ) | (67 | ) | 19 | 936 | (63) | |||||||||||||||||||||
Intangible assets | 5 | — | — | — | — | (5 | ) | — | — | |||||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||||||||||||||
Deposits | $ | 19 | $ | (1 | ) | $ | — | $ | 15 | $ | — | $ | (4 | ) | $ | 31 | $ | (1) | ||||||||||||||
Short-term borrowings | 1 | — | — | — | (1 | ) | 2 | 2 | — | |||||||||||||||||||||||
Trading liabilities: | ||||||||||||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||
Corporate bonds | — | (3 | ) | (7 | ) | 32 | — | (15 | ) | 13 | (3) | |||||||||||||||||||||
Other debt | 4 | — | (1 | ) | — | — | — | 3 | — | |||||||||||||||||||||||
Total corporate and other debt | 4 | (3 | ) | (8 | ) | 32 | — | (15 | ) | 16 | (3) | |||||||||||||||||||||
Corporate equities | 18 | 4 | (37 | ) | 14 | — | 29 | 20 | 32 | |||||||||||||||||||||||
Securities sold under agreements to repurchase | 151 | 2 | — | — | — | — | 149 | 3 | ||||||||||||||||||||||||
Other secured financings | 461 | (42 | ) | — | 69 | (44 | ) | (78 | ) | 450 | (42) | |||||||||||||||||||||
Long-term borrowings | 1,987 | (103 | ) | — | 366 | (262 | ) | (152 | ) | 2,042 | 91 |
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|
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 September 30, 2020 | At December 31, 2019 | ||||
Assets Measured at Fair Value on a Recurring Basis | ||||||
U.S. Treasury and agency securities | $ | 122 | $ | 22 | ||
Comparable pricing: | ||||||
Bond price | 102 to 108 points (104 points) | N/M | ||||
MABS | $ | 443 | $ | 438 | ||
Comparable pricing: | ||||||
Bond price | 0 to 80 points (47 points) | 0 to 96 points (47 points) | ||||
Loans and lending commitments | $ | 4,351 | $ | 5,073 | ||
Margin loan model: | ||||||
Discount rate | N/A | 1% to 9% (2%) | ||||
Volatility skew | N/A | 15% to 80% (28%) | ||||
Credit Spread | N/A | 9 to 39 bps (19 bps) | ||||
Margin loan rate | 1% to 5% (3%) | N/A | ||||
Comparable pricing: | ||||||
Loan price | 70 to 103 points (96 points) | 69 to 100 points (93 points) | ||||
Corporate and other debt | $ | 2,727 | $ | 1,396 | ||
Comparable pricing: | ||||||
Bond price | 10 to 103 points (94 points) | 11 to 108 points (84 points) | ||||
Discounted cash flow: | ||||||
Recovery rate | 51% to 62% (53% / 51%) | 35 | % | |||
Option model: | ||||||
At the money volatility | 21 | % | 21 | % | ||
Corporate equities | $ | 135 | $ | 97 | ||
Comparable pricing: | ||||||
Equity price | 100 | % | 100 | % | ||
Investments | $ | 821 | $ | 858 | ||
Discounted cash flow: | ||||||
WACC | 10% to 21% (15%) | 8% to 17% (15%) | ||||
Exit multiple | 7 to 17 times (11 times) | 7 to 16 times (11 times) | ||||
Market approach: | ||||||
EBITDA multiple | 8 to 29 times (11 times) | 7 to 24 times (11 times) | ||||
Comparable pricing: | ||||||
Equity price | 50% to 100% (98%) | 75% to 100% (99%) | ||||
Net derivative and other contracts: | ||||||
Interest rate | $ | 636 | $ | 777 | ||
Option model: | ||||||
IR volatility skew | 0% to 162% (62% / 75%) | 24% to 156% (63% / 59%) | ||||
IR curve correlation | 59% to 97% (87% / 92%) | 47% to 90% (72% / 72%) | ||||
Bond volatility | 4% to 32% (13% / 8%) | 4% to 15% (13% / 14%) | ||||
Inflation volatility | 25% to 64% (44% / 42%) | 24% to 63% (44% / 41%) | ||||
IR curve | 1 | % | 1 | % | ||
September 2020 Form 10-Q | 58 |
Notes to Consolidated Financial Statements (Unaudited) |
Balance / Range (Average)1 | ||||||
$ in millions, except inputs | At September 30, 2020 | At December 31, 2019 | ||||
Credit | $ | 116 | $ | 124 | ||
Credit default swap model: | ||||||
Cash-synthetic basis | 6 points | 6 points | ||||
Bond price | 0 to 95 points (52 points) | 0 to 104 points (45 points) | ||||
Credit spread | 20 to 435 bps (79 bps) | 9 to 469 bps (81 bps) | ||||
Funding spread | 71 to 138 bps (116 bps) | 47 to 117 bps (84 bps) | ||||
Correlation model: | ||||||
Credit correlation | 29% to 56% (35%) | 29% to 62% (36%) | ||||
Foreign exchange2 | $ | 99 | $ | (31 | ) | |
Option model: | ||||||
IR - FX correlation | 13% to 59% (37% / 37%) | 32% to 56% (46% / 46%) | ||||
IR volatility skew | 0% to 162% (62% / 75%) | 24% to 156% (63% / 59%) | ||||
IR curve | 8% to 9% (8% / 8%) | 10% to 11% (10% / 10%) | ||||
Foreign exchange volatility skew | -7% to -5% (-6% / -6%) | N/A | ||||
Contingency probability | 95% (95%) | 85% to 95% (94% / 95%) | ||||
Equity2 | $ | (2,145 | ) | $ | (1,684 | ) |
Option model: | ||||||
At the money volatility | 16% to 92% (42%) | 9% to 90% (36%) | ||||
Volatility skew | -2% to 0% (-1%) | -2% to 0% (-1%) | ||||
Equity correlation | 5% to 96% (70%) | 5% to 98% (70%) | ||||
FX correlation | -60% to 60% (-17%) | -79% to 60% (-37%) | ||||
IR correlation | -7% to 44% (20% / 18%) | -11% to 44% (18% / 16%) | ||||
Commodity and other | $ | 1,804 | $ | 1,612 | ||
Option model: | ||||||
Forward power price | $-1 to $116 ($28) per MWh | $3 to $182 ($28) per MWh | ||||
Commodity volatility | 8% to 95% (19%) | 7% to 183% (18%) | ||||
Cross-commodity correlation | 43% to 99% (92%) | 43% to 99% (93%) | ||||
Liabilities Measured at Fair Value on a Recurring Basis | ||||||
Deposits | $ | 105 | $ | 179 | ||
Option Model: | ||||||
Equity at the money volatility | 7% to 23% (7%) | 16% to 37% (20%) | ||||
Corporate equities | $ | 57 | $ | 36 | ||
Comparable pricing: | ||||||
Equity price | 100% (100%) | N/M | ||||
Securities sold under agreements to repurchase | $ | 448 | $ | 0 | ||
Discounted cash flow: | ||||||
Funding spread | 105 to 130 bps (114 bps) | N/A | ||||
Other secured financings | $ | 309 | $ | 109 | ||
Discounted cash flow: | ||||||
Funding spread | 110 bps (110 bps) | 111 to 124 bps (117 bps) | ||||
Comparable pricing: | ||||||
Loan price | 25 to 101 points (68 points) | N/A | ||||
Balance / Range (Average)1 | ||||||
$ in millions, except inputs | At September 30, 2020 | At December 31, 2019 | ||||
Borrowings | $ | 4,081 | $ | 4,088 | ||
Option model: | ||||||
At the money volatility | 6% to 70% (23%) | 5% to 44% (21%) | ||||
Volatility skew | -2% to 0% (0%) | -2% to 0% (0%) | ||||
Equity correlation | 37% to 98% (81%) | 38% to 94% (78%) | ||||
Equity - FX correlation | -72% to 13% (-28%) | -75% to 26% (-25%) | ||||
IR - FX Correlation | -28% to 6% (-6% / -6%) | -26% to 10% (-7% / -7%) | ||||
Nonrecurring Fair Value Measurement | ||||||
Loans | $ | 2,088 | $ | 1,500 | ||
Corporate loan model: | ||||||
Credit spread | 52 bps to 668 bps (380 bps) | 69 to 446 bps (225 bps) | ||||
Warehouse model: | ||||||
Credit spread | 191 bps to 580 bps (379 bps) | 287 to 318 bps (297 bps) |
1. | A single amount is disclosed for range and average when there is no significant difference between the minimum, maximum and average. Amounts represent weighted averages except where simple averages and the median of the inputs are more relevant. |
2. | Includes derivative contracts with multiple risks (i.e., hybrid products). |
qualitative information on the sensitivity of the fair value measurements to changes in the significant unobservable inputs, see Note 3 to the consolidated financial statements in the 2016 Form10-K. ThereGenerally, there are no predictable relationships between multiple significant unobservable inputs attributable to a given valuation technique. A single amount is disclosed when
|
Valuation Techniques and Sensitivity of Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements
Predominant Valuation Techniques/ Significant Unobservable Inputs | Range (Weighted Average or Simple Average/Median)1 | |||||
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||
Recurring Fair Value Measurement | ||||||
Assets at Fair Value | ||||||
U.S. Treasury and agency securities($— and $74) | ||||||
Comparable pricing: | Comparable bond price | N/A | 96 to 105 points (102 points) | |||
Other sovereign government obligations ($104 and $6) | ||||||
Comparable pricing: | Comparable bond price | 86 to 97 points (88 points) | N/M | |||
State and municipal securities ($10 and $250) | ||||||
Comparable pricing: | Comparable bond price | N/M | 53 to 100 points (91 points) | |||
MABS ($274 and $217) | ||||||
Comparable pricing: | Comparable bond price | 0 to 100 points (33 points) | 0 to 86 points (27 points) | |||
Corporate bonds ($419 and $232) | ||||||
Comparable pricing: | Comparable bond price | 3 to 132 points (60 points) | 3 to 130 points (70 points) | |||
Discounted cash flow: | Recovery rate | 5% to 33% (25%) | N/A | |||
Option model: | At the money volatility | 16% to 35% (25%) | 23% to 33% (30%) | |||
CDO ($76 and $63) | ||||||
Comparable pricing: | Comparable bond price | 15 to 101 points (66 points) | 0 to 103 points (50 points) | |||
Correlation model: | Credit correlation | 43% to 54% (51%) | N/M | |||
Loans and lending commitments ($4,865and $5,122) | ||||||
Corporate loan model: | Credit spread | N/M | 402 to 672 bps (557 bps) | |||
Expected recovery: | Asset coverage | 37% to 100% (83%) | 43% to 100% (83%) | |||
Margin loan model: | Discount rate | 1% to 3% (1%) | 2% to 8% (3%) | |||
Volatility skew | 8% to 43% (19%) | 21% to 63% (33%) | ||||
Comparable pricing: | Comparable loan price | 46 to 102 points (92 points) | 45 to 100 points (84 points) | |||
Discounted cash flow: | Implied weighted average cost of capital | N/M | 5% | |||
Capitalization rate | N/M | 4% to 10% (4%) | ||||
Other debt ($193 and $180) | ||||||
Option model: | At the money volatility | 17% to 52% (47%) | 16% to 52% (52%) | |||
Discounted cash flow: | Discount rate | 7% to 18% (9%) | 7% to 12% (11%) | |||
Comparable pricing: | Comparable loan price | 1 to 5 points (2 points) | 1 to 74 points (23 points) | |||
Corporate equities ($296 and $446) | ||||||
Comparable pricing: | Comparable equity price | 100% | 100% | |||
Net derivative and other contracts2: | ||||||
Interest rate ($1,076 and $420) | ||||||
Option model: | Interest rate — Foreign exchange correlation | N/M | 28% to 58% (44% / 43%) | |||
Interest rate volatility skew | 29% to 106% (44% / 44%) | 19% to 117% (55% / 56%) | ||||
Interest rate quanto correlation | N/M | -17% to 31% (1% /-5%) | ||||
Interest rate curve correlation | 30% to 96% (75% / 78%) | 28% to 96% (68% / 72%) | ||||
Inflation volatility | 24% to 64% (45% / 43%) | 23% to 55% (40% / 39%) | ||||
Interest rate curve | 1% to 2% (1% / 1%) | N/M | ||||
Credit ($(303)and $(373)) | ||||||
Comparable pricing: | Cash synthetic basis | 14 to 15 points (14 points) | 5 to 12 points (11 points) | |||
Comparable bond price | 0 to 70 points (25 points) | 0 to 70 points (23 points) | ||||
Correlation model: | Credit correlation | 29% to 99% (51%) | 32% to 70% (45%) | |||
Foreign exchange3 ($(78)and $(43)) | ||||||
Option model: | Interest rate — Foreign exchange correlation | 27% to 59% (44% / 44%) | 28% to 58% (44% / 43%) | |||
Interest rate volatility skew | N/M | 34% to 117% (55% / 56%) | ||||
Contingency probability | 95% | N/M | ||||
Interest rate quanto correlation | N/M | -17% to 31% (1% /-5%) |
|
Predominant Valuation Techniques/ Significant Unobservable Inputs | Range (Weighted Average or Simple Average/Median)1 | |||||
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||
Equity3 ($1,231and $184) | ||||||
Option model: | At the money volatility | 5% to 55% (36%) | 7% to 66% (33%) | |||
Volatility skew | -3% to 0%(-1%) | -4% to 0%(-1%) | ||||
Equity — Equity correlation | 5% to 99% (73%) | 25% to 99% (73%) | ||||
Equity — Foreign exchange correlation | -70% to 30%(-28%) | -63% to 30%(-43%) | ||||
Equity — Interest rate correlation | -7% to 52% (17% / 21%) | -8% to 52% (12% / 4%) | ||||
Commodity and other ($1,534and $1,600) | ||||||
Option model: | Forward power price | $6 to $84 ($30) per MWh | $7 to $90 ($32) per MWh | |||
Commodity volatility | 5% to 56% (16%) | 6% to 130% (18%) | ||||
Cross-commodity correlation | 5% to 99% (92%) | 5% to 99% (92%) | ||||
Investments ($925 and $958) | ||||||
Discounted cash flow: | Implied weighted average cost of capital | N/M | 10% | |||
Exit multiple | N/M | 10 to 24 times (11 times) | ||||
Market approach: | EBITDA multiple | 6 to 24 times (12 times) | 6 to 24 times (12 times) | |||
Comparable pricing: | Comparable equity price | 45% to 100% (90%) | 75% to 100% (93%) | |||
Liabilities at Fair Value | ||||||
Deposits ($106and $42) | ||||||
Option model: | At the money volatility | 15% to 37% (32%) | N/M | |||
Volatility skew | -1% to 0%(-1%) | N/M | ||||
Securities sold under agreements to repurchase ($149and $149) | ||||||
Discounted cash flow: | Funding spread | 145 to 154 bps (151 bps) | 118 to 127 bps (121 bps) | |||
Other secured financings ($250 and $434) | ||||||
Discounted cash flow: | Funding spread | 38 to 81 bps (60 bps) | 63 to 92 bps (78 bps) | |||
Option model: | Volatility skew | -1% | -1% | |||
At the money volatility | 10% to 40% (25%) | N/M | ||||
Comparable pricing: | Comparable bond price | 14 to 58 points (30 points) | N/M | |||
Discounted cash flow: | Discount rate | N/M | 4% | |||
Long-term borrowings ($2,603and $2,012) | ||||||
Option model: | At the money volatility | 5% to 35% (21%) | 7% to 42% (30%) | |||
Volatility skew | -3% to 0%(-1%) | -2% to 0%(-1%) | ||||
Equity — Equity correlation | 36% to 98% (88%) | 35% to 99% (84%) | ||||
Equity — Foreign exchange correlation | -51% to 10%(-32%) | -63% to 13%(-40%) | ||||
Option model: | Interest rate volatility skew | 29% to 106% (44% / 44%) | 25% | |||
Equity volatility discount | 8% to 11% (9% / 8%) | 7% to 11% (10% / 10%) | ||||
Interest rate — Foreign exchange correlation | 21% to 22% (23% / 22%) | N/M | ||||
Comparable pricing: | Comparable equity price | 100% | N/M | |||
Nonrecurring Fair Value Measurement | ||||||
Assets at Fair Value | ||||||
Loans ($1,448and $2,443) | ||||||
Corporate loan model: | Credit spread | 86 to 563 bps (229 bps) | 90 to 487 bps (208 bps) | |||
Expected recovery: | Asset coverage | 73% to 95% (84%) | 73% to 99% (97%) |
bps—Basis points. One basis point equals 1/100th of 1%.
Points—Percentage of par
MWh—Megawatt hours
EBITDA—Earnings before interest, taxes, depreciation and amortization
N/A—Not Applicable
N/M—Not Meaningful
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|
volatility measures. For a description of the Firm’s significant unobservable inputs and related sensitivity,qualitative information about the effect of hypothetical changes in the values of those inputs, see Note 3 to the consolidated financial statements in the 20162019 Form10-K. The following significant unobservable inputs were added during the current year period.
59 | September 2020 Form 10-Q |
Notes to (Unaudited) |
At September 30, 2020 | At December 31, 2019 | |||||||||||
$ in millions | Carrying Value | Commitment | Carrying Value | Commitment | ||||||||
Private equity | $ | 2,400 | $ | 614 | $ | 2,078 | $ | 450 | ||||
Real estate | 1,383 | 140 | 1,349 | 150 | ||||||||
Hedge1 | 62 | 0 | 94 | 4 | ||||||||
Total | $ | 3,845 | $ | 754 | $ | 3,521 | $ | 604 |
|
Fair Value of Investments Measured at NAV
For a description of the Firm’s investments in private equity funds, real estate funds and hedge funds measured at fair value based on NAV, see Note 3 to the consolidated financial statements in the 2016 Form10-K.
Investments in Certain Funds Measured at NAV per Share
At September 30, 2017 | At December 31, 2016 | |||||||||||||||
$ in millions | Fair Value | Commitment | Fair Value | Commitment | ||||||||||||
Private equity | $ | 1,580 | $ | 359 | $ | 1,566 | $ | 335 | ||||||||
Real estate | 885 | 168 | 1,103 | 136 | ||||||||||||
Hedge1 | 87 | 4 | 147 | 4 | ||||||||||||
Total | $ | 2,552 | $ | 531 | $ | 2,816 | $ | 475 |
1. | Investments in hedge funds may be subject to initial periodlock-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. |
Fair Value at September 30, 2017 | ||||||||
$ in millions | Private Equity | Real Estate | ||||||
Less than 5 years | $ | 408 | $ | 77 | ||||
5-10 years | 1,005 | 490 | ||||||
Over 10 years | 167 | 318 | ||||||
Total | $ | 1,580 | $ | 885 |
Carrying Value at September 30, 2020 | ||||||
$ in millions | Private Equity | Real Estate | ||||
Less than 5 years | $ | 1,551 | $ | 415 | ||
5-10 years | 765 | 374 | ||||
Over 10 years | 84 | 594 | ||||
Total | $ | 2,400 | $ | 1,383 |
At September 30, 2020 | |||||||||
Fair Value | |||||||||
$ in millions | Level 2 | Level 31 | Total | ||||||
Assets | |||||||||
Loans | $ | 4,827 | $ | 2,088 | $ | 6,915 | |||
Other assets—Other investments | 0 | 18 | 18 | ||||||
Total | $ | 4,827 | $ | 2,106 | $ | 6,933 | |||
Liabilities | |||||||||
Other liabilities and accrued expenses—Lending commitments | $ | 221 | $ | 69 | $ | 290 | |||
Total | $ | 221 | $ | 69 | $ | 290 |
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 | 0 | 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. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Assets | ||||||||||||
Loans2 | $ | (43 | ) | $ | (27 | ) | $ | (467 | ) | $ | (12 | ) |
Intangibles | (1 | ) | 0 | (1 | ) | 0 | ||||||
Other assets—Other investments3 | (2 | ) | (3 | ) | (54 | ) | (8 | ) | ||||
Other assets—Premises, equipment and software4 | (29 | ) | (4 | ) | (35 | ) | (8 | ) | ||||
Total | $ | (75 | ) | $ | (34 | ) | $ | (557 | ) | $ | (28 | ) |
Liabilities | ||||||||||||
Other liabilities and accrued expenses—Lending commitments2 | $ | 25 | $ | (19 | ) | $ | (54 | ) | $ | 82 | ||
Total | $ | 25 | $ | (19 | ) | $ | (54 | ) | $ | 82 |
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. |
September 2020 Form 10-Q | 60 |
Notes to Consolidated Financial Statements (Unaudited) |
At September 30, 2020 | |||||||||||||||
Carrying Value | Fair Value | ||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Financial assets | |||||||||||||||
Cash and cash equivalents | $ | 94,772 | $ | 94,772 | $ | 0 | $ | 0 | $ | 94,772 | |||||
Investment securities—HTM | 46,169 | 30,893 | 17,200 | 861 | 48,954 | ||||||||||
Securities purchased under agreements to resell | 88,268 | 0 | 86,756 | 1,538 | 88,294 | ||||||||||
Securities borrowed | 100,803 | 0 | 100,804 | 0 | 100,804 | ||||||||||
Customer and other receivables1 | 68,541 | 0 | 65,624 | 2,903 | 68,527 | ||||||||||
Loans2 | 146,237 | 0 | 25,942 | 121,217 | 147,159 | ||||||||||
Other assets | 466 | 0 | 466 | 0 | 466 | ||||||||||
Financial liabilities | |||||||||||||||
Deposits | $ | 235,574 | $ | 0 | $ | 235,924 | $ | 0 | $ | 235,924 | |||||
Securities sold under agreements to repurchase | 40,210 | 0 | 39,876 | 375 | 40,251 | ||||||||||
Securities loaned | 7,924 | 0 | 7,921 | 0 | 7,921 | ||||||||||
Other secured financings | 3,672 | 0 | 3,672 | 0 | 3,672 | ||||||||||
Customer and other payables1 | 189,754 | 0 | 189,754 | 0 | 189,754 | ||||||||||
Borrowings | 134,300 | 0 | 138,925 | 5 | 138,930 | ||||||||||
Commitment Amount | |||||||||||||||
Lending commitments3 | $ | 118,966 | $ | 0 | $ | 965 | $ | 406 | $ | 1,371 |
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 | $ | 0 | $ | 0 | $ | 82,171 | |||||
Investment securities—HTM | 43,502 | 30,661 | 12,683 | 789 | 44,133 | ||||||||||
Securities purchased under agreements to resell | 88,220 | 0 | 86,794 | 1,442 | 88,236 | ||||||||||
Securities borrowed | 106,549 | 0 | 106,551 | 0 | 106,551 | ||||||||||
Customer and other receivables1 | 51,134 | 0 | 48,215 | 2,872 | 51,087 | ||||||||||
Loans2 | 130,637 | 0 | 22,293 | 108,059 | 130,352 | ||||||||||
Other assets | 495 | 0 | 495 | 0 | 495 | ||||||||||
Financial liabilities | |||||||||||||||
Deposits | $ | 188,257 | $ | 0 | $ | 188,639 | $ | 0 | $ | 188,639 | |||||
Securities sold under agreements to repurchase | 53,467 | 0 | 53,486 | 0 | 53,486 | ||||||||||
Securities loaned | 8,506 | 0 | 8,506 | 0 | 8,506 | ||||||||||
Other secured financings | 6,889 | 0 | 6,800 | 92 | 6,892 | ||||||||||
Customer and other payables1 | 195,035 | 0 | 195,035 | 0 | 195,035 | ||||||||||
Borrowings | 128,166 | 0 | 133,563 | 10 | 133,573 | ||||||||||
Commitment Amount | |||||||||||||||
Lending commitments3 | $ | 119,004 | $ | 0 | $ | 748 | $ | 338 | $ | 1,086 |
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. |
61 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Earnings Impact of InstrumentsBorrowings Measured at Fair Value on a Recurring Basis
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Business Unit Responsible for Risk Management | ||||||
Equity | $ | 31,673 | $ | 30,214 | ||
Interest rates | 28,986 | 27,298 | ||||
Commodities | 5,097 | 4,501 | ||||
Credit | 1,257 | 1,246 | ||||
Foreign exchange | 2,131 | 1,202 | ||||
Total | $ | 69,144 | $ | 64,461 |
$ in millions | Trading Revenues | Interest Income (Expense) | Net Revenues | |||||||||
Three Months Ended September 30, 2017 |
| |||||||||||
Securities purchased under | $ | (1 | ) | $ | 1 | $ | — | |||||
Deposits | (1 | ) | — | (1) | ||||||||
Short-term borrowings | (7 | ) | — | (7) | ||||||||
Securities sold under agreements | 6 | (5 | ) | 1 | ||||||||
Long-term borrowings | (957 | ) | (107 | ) | (1,064) | |||||||
Three Months Ended September 30, 2016 |
| |||||||||||
Securities purchased under | $ | (1 | ) | $ | 2 | $ | 1 | |||||
Deposits | 2 | — | 2 | |||||||||
Short-term borrowings | (39 | ) | — | (39) | ||||||||
Securities sold under agreements | 7 | (4 | ) | 3 | ||||||||
Long-term borrowings | (1,068 | ) | (116 | ) | (1,184) | |||||||
Nine Months Ended September 30, 2017 |
| |||||||||||
Securities purchased under | $ | (2 | ) | $ | 3 | $ | 1 | |||||
Deposits | (2 | ) | — | (2) | ||||||||
Short-term borrowings | (16 | ) | (1 | ) | (17) | |||||||
Securities sold under agreements to repurchase | 5 | (13 | ) | (8) | ||||||||
Long-term borrowings | (3,468 | ) | (337 | ) | (3,805) | |||||||
Nine Months Ended September 30, 2016 |
| |||||||||||
Securities purchased under | $ | (2 | ) | $ | 6 | $ | 4 | |||||
Deposits | (1 | ) | (1 | ) | (2) | |||||||
Short-term borrowings | (3 | ) | — | (3) | ||||||||
Securities sold under agreements to repurchase | (5 | ) | (9 | ) | (14) | |||||||
Long-term borrowings | (3,322 | ) | (385 | ) | (3,707) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Trading revenues | $ | (1,455 | ) | $ | (795 | ) | $ | (1,447 | ) | $ | (5,888 | ) |
Interest expense | 77 | 93 | 241 | 280 | ||||||||
Net revenues1 | $ | (1,532 | ) | $ | (888 | ) | $ | (1,688 | ) | $ | (6,168 | ) |
1. | Amounts do not reflect any gains or losses from related economic hedges. |
The amounts in the previous table are included within Net revenues and do not reflect any gainsinterest rates or losses on related hedging instruments. In addition to the amounts in the previous table, as discussed in Note 2 to the consolidated financial statements in the 2016 Form10-K, instruments within Trading assets or Trading liabilities are measured at fair value.
Three Months Ended September 30, | ||||||||||||
2020 | 2019 | |||||||||||
$ in millions | Trading Revenues | OCI | Trading Revenues | OCI | ||||||||
Loans and other debt1 | $ | 56 | $ | 0 | $ | (3 | ) | $ | 0 | |||
Lending commitments | (3 | ) | 0 | 0 | 0 | |||||||
Deposits | 0 | (19 | ) | 0 | 1 | |||||||
Borrowings | (8 | ) | (720 | ) | (2 | ) | 442 |
Nine Months Ended September 30, | ||||||||||||
2020 | 2019 | |||||||||||
$ in millions | Trading Revenues | OCI | Trading Revenues | OCI | ||||||||
Loans and other debt1 | $ | (183 | ) | $ | 0 | $ | 148 | $ | 0 | |||
Lending commitments | (2 | ) | 0 | (2 | ) | 0 | ||||||
Deposits | 0 | (10 | ) | 0 | (2 | ) | ||||||
Borrowings | (14 | ) | 991 | (9 | ) | (702 | ) |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Cumulative pre-tax DVA gain (loss) recognized in AOCI | $ | (1,017 | ) | $ | (1,998 | ) |
|
Gains (Losses) Due to Changes in Instrument-Specific Credit Risk | ||||||||||||||||
Three Months Ended September 30, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
$ in millions | Trading Revenues | OCI | Trading Revenues | OCI | ||||||||||||
Short-term and long-term borrowings1 | $ | 9 | $ | (226 | ) | $ | (5 | ) | $ | (140) | ||||||
Securities sold under agreements to repurchase1 | — | (3 | ) | — | (3) | |||||||||||
Loans and other debt2 | 49 | — | 26 | — | ||||||||||||
Lending commitments3 | — | — | — | — | ||||||||||||
Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
$ in millions | Trading Revenues | OCI | Trading Revenues | OCI | ||||||||||||
Short-term and long-term borrowings1 | $ | 1 | $ | (493 | ) | $ | 36 | $ | 405 | |||||||
Securities sold under agreements to repurchase1 | — | (6 | ) | — | — | |||||||||||
Loans and other debt2 | 94 | — | (88 | ) | — | |||||||||||
Lending commitments3 | — | — | 3 | — |
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Cumulativepre-tax DVA gain (loss) recognized in AOCI | $ | (1,420 | ) | $ | (921) |
1. |
|
Loans and other debt instrument-specific credit gains (losses) were determined by excluding thenon-credit components of gains and losses. |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Loans and other debt2 | $ | 13,552 | $ | 13,037 | ||
Nonaccrual loans2 | 11,411 | 10,849 | ||||
Borrowings3 | (2,103 | ) | (1,665 | ) |
1. | Amounts indicate contractual principal greater than or (less than) fair value. |
|
Short-Term and Long-Term Borrowings Measured at Fair Value on a Recurring Basis
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Business Unit Responsible for Risk Management |
| |||||||
Equity | $ | 25,300 | $ | 21,066 | ||||
Interest rates | 19,822 | 16,051 | ||||||
Foreign exchange | 782 | 1,114 | ||||||
Credit | 753 | 647 | ||||||
Commodities | 232 | 264 | ||||||
Total | $ | 46,889 | $ | 39,142 |
Excess of Contractual Principal Amount Over Fair Value
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Loans and other debt1 | $ | 12,911 | $ | 13,495 | ||||
Loans 90 or more days past due and/or on nonaccrual status1 | 11,116 | 11,502 | ||||||
Short-term and long-term borrowings2 | 906 | 720 |
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 |
Fair Value Loans on Nonaccrual Status
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Nonaccrual loans | $ | 1,429 | $ | 1,536 | ||||
Nonaccrual loans 90 or more | $ | 760 | $ | 787 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Nonaccrual loans | $ | 1,119 | $ | 1,100 | ||
Nonaccrual loans 90 or more days past due | $ | 238 | $ | 330 |
September |
Notes to Consolidated Financial Statements (Unaudited) |
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Gains (Losses)1
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Assets | ||||||||||||||||
Loans2 | $ | — | $ | 111 | $ | 41 | $ | 41 | ||||||||
Other Assets—Other | (6 | ) | (3 | ) | (6 | ) | (44) | |||||||||
Other assets—Premises, | (1 | ) | (29 | ) | (7 | ) | (56) | |||||||||
Intangible assets5 | — | (2 | ) | — | (2) | |||||||||||
Total | $ | (7 | ) | $ | 77 | $ | 28 | $ | (61) | |||||||
Liabilities | ||||||||||||||||
Other liabilities and | $ | 4 | $ | 52 | $ | 64 | $ | 98 | ||||||||
Total | $ | 4 | $ | 52 | $ | 64 | $ | 98 |
|
|
|
|
|
Carrying and Fair Values
At September 30, 2017 | ||||||||||||
Fair Value by Level | ||||||||||||
$ in millions | Total | Level 2 | Level 31 | |||||||||
Assets | ||||||||||||
Loans |
$ |
2,713 |
|
$ |
1,265 |
|
$ |
1,448 |
| |||
Other Assets—Other | 42 | — | 42 | |||||||||
Total assets | $ | 2,755 | $ | 1,265 | $ | 1,490 | ||||||
Liabilities | ||||||||||||
Other liabilities and | $ | 196 | $ | 154 | $ | 42 | ||||||
Total liabilities | $ | 196 | $ | 154 | $ | 42 |
At December 31, 2016 | ||||||||||||
Fair Value by Level | ||||||||||||
$ in millions | Total | Level 2 | Level 31 | |||||||||
Assets | ||||||||||||
Loans |
$ |
4,913 |
|
$ |
2,470 |
|
$ |
2,443 |
| |||
Other assets—Other | 123 | — | 123 | |||||||||
Other assets—Premises, | 25 | 22 | 3 | |||||||||
Total assets | $ | 5,061 | $ | 2,492 | $ | 2,569 | ||||||
Liabilities | ||||||||||||
Other liabilities and | $ | 226 | $ | 166 | $ | 60 | ||||||
Total liabilities | $ | 226 | $ | 166 | $ | 60 |
|
Financial Instruments Not Measured at Fair Value
At September 30, 2017 | ||||||||||||||||||||
Carrying Value | Fair Value | |||||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial Assets | ||||||||||||||||||||
Cash and due | $ | 24,047 | $ | 24,047 | $ | — | $ | — | $ | 24,047 | ||||||||||
Interest bearing | 24,144 | 24,144 | — | — | 24,144 | |||||||||||||||
Investment securities—HTM | 24,132 | 11,260 | 12,250 | 247 | 23,757 | |||||||||||||||
Securities purchased under agreements to resell | 90,005 | — | 85,679 | 4,282 | 89,961 | |||||||||||||||
Securities borrowed | 132,892 | — | 132,883 | 10 | 132,893 | |||||||||||||||
Customer and other | 48,579 | — | 44,340 | 4,115 | 48,455 | |||||||||||||||
Loans2 | 104,431 | — | 19,476 | 86,223 | 105,699 | |||||||||||||||
Other assets3 | 32,731 | 32,731 | — | — | 32,731 | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Deposits | $ | 154,465 | $ | — | $ | 154,465 | $ | — | $ | 154,465 | ||||||||||
Short-term borrowings | 429 | — | 429 | — | 429 | |||||||||||||||
Securities sold under agreements to repurchase | 53,173 | — | 48,505 | 4,656 | 53,161 | |||||||||||||||
Securities loaned | 15,630 | — | 15,240 | 402 | 15,642 | |||||||||||||||
Other secured | 7,730 | — | 6,440 | 1,297 | 7,737 | |||||||||||||||
Customer and | 195,304 | — | 195,304 | — | 195,304 | |||||||||||||||
Long-term | 145,446 | — | 150,625 | 39 | 150,664 |
|
At December 31, 2016 | ||||||||||||||||||||
Carrying Value | Fair Value | |||||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial Assets |
| |||||||||||||||||||
Cash and due | $ | 22,017 | $ | 22,017 | $ | — | $ | — | $ | 22,017 | ||||||||||
Interest bearing | 21,364 | 21,364 | — | — | 21,364 | |||||||||||||||
Investment securities— | 16,922 | 5,557 | 10,896 | — | 16,453 | |||||||||||||||
Securities purchased | 101,653 | — | 97,825 | 3,830 | 101,655 | |||||||||||||||
Securities borrowed | 125,236 | — | 125,093 | 147 | 125,240 | |||||||||||||||
Customer and other receivables1 | 41,679 | — | 36,962 | 4,575 | 41,537 | |||||||||||||||
Loans2 | 94,248 | — | 20,906 | 74,121 | 95,027 | |||||||||||||||
Other assets3 | 33,979 | 33,979 | — | — | 33,979 | |||||||||||||||
Financial Liabilities |
| |||||||||||||||||||
Deposits | $ | 155,800 | $ | — | $ | 155,800 | $ | — | $ | 155,800 | ||||||||||
Short-term | 535 | — | 535 | — | 535 | |||||||||||||||
Securities sold | 53,899 | — | 50,941 | 2,972 | 53,913 | |||||||||||||||
Securities loaned | 15,844 | — | 15,853 | — | 15,853 | |||||||||||||||
Other secured | 6,077 | — | 4,792 | 1,290 | 6,082 | |||||||||||||||
Customer and | 187,497 | — | 187,497 | — | 187,497 | |||||||||||||||
Long-term | 126,039 | — | 129,826 | 51 | 129,877 |
HTM—Held to maturity
|
|
|
Lending Commitments—Held for Investment and Held for Sale
$ in millions | Commitment amount1 | Fair Value | ||||||||||||||
Total | Level 2 | Level 3 | ||||||||||||||
September 30, 2017 | $ | 96,939 | $ | 1,084 | $ | 636 | $ | 448 | ||||||||
December 31, 2016 | 97,409 | 1,241 | 973 | 268 |
|
The previous tables exclude certain financial instruments such as equity method investments and allnon-financial assets and liabilities such as the value of the long-term relationships with the Firm’s deposit customers. For further discussion of the contents and valuation techniques of financial instruments not measured at fair value, see Note 3 to the consolidated financial statements in the 2016 Form10-K. During the current year period, there were no significant updates made to the Firm’s valuation techniques for financial instruments not measured at fair value.
|
of Derivative Contracts
Assets | ||||||||||||||||
$ in millions | Bilateral OTC | Cleared OTC1 | Exchange- Traded | Total | ||||||||||||
Designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | $ | 1,380 | $ | 1 | $ | — | $ | 1,381 | ||||||||
Foreign exchange contracts | 93 | 9 | — | 102 | ||||||||||||
Total | 1,473 | 10 | — | 1,483 | ||||||||||||
Not designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | 177,955 | 6,223 | 241 | 184,419 | ||||||||||||
Credit contracts | 6,599 | 2,305 | — | 8,904 | ||||||||||||
Foreign exchange contracts | 53,024 | 763 | 93 | 53,880 | ||||||||||||
Equity contracts | 26,915 | — | 22,529 | 49,444 | ||||||||||||
Commodity and other contracts | 8,117 | — | 2,159 | 10,276 | ||||||||||||
Total | 272,610 | 9,291 | 25,022 | 306,923 | ||||||||||||
Total gross derivatives | $ | 274,083 | $ | 9,301 | $ | 25,022 | $ | 308,406 | ||||||||
Amounts offset | ||||||||||||||||
Counterparty netting | (206,283) | (6,917) | (21,470) | (234,670) | ||||||||||||
Cash collateral netting | (40,379) | (1,982) | — | (42,361) | ||||||||||||
Total in Trading assets | $ | 27,421 | $ | 402 | $ | 3,552 | $ | 31,375 | ||||||||
Amounts not offset2 | ||||||||||||||||
Financial instruments collateral | (12,241) | — | — | (12,241) | ||||||||||||
Other cash collateral | (13) | — | — | (13) | ||||||||||||
Net amounts3 | $ | 15,167 | $ | 402 | $ | 3,552 | $ | 19,121 | ||||||||
Not subject to legally enforceable master netting or |
| |||||||||||||||
Derivative assets | $ | 3,848 |
Liabilities | ||||||||||||||||
$ in millions | Bilateral OTC | Cleared OTC1 | Exchange- Traded | Total | ||||||||||||
Designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | $ | 66 | $ | — | $ | — | $ | 66 | ||||||||
Foreign exchange contracts | 47 | 21 | — | 68 | ||||||||||||
Total | 113 | 21 | �� | — | 134 | |||||||||||
Not designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | 161,790 | 4,419 | 184 | 166,393 | ||||||||||||
Credit contracts | 7,475 | 2,558 | — | 10,033 | ||||||||||||
Foreign exchange contracts | 53,580 | 675 | 52 | 54,307 | ||||||||||||
Equity contracts | 29,189 | — | 21,837 | 51,026 | ||||||||||||
Commodity and other contracts | 5,596 | — | 2,089 | 7,685 | ||||||||||||
Total | 257,630 | 7,652 | 24,162 | 289,444 | ||||||||||||
Total gross derivatives | $ | 257,743 | $ | 7,673 | $ | 24,162 | $ | 289,578 | ||||||||
Amounts offset | ||||||||||||||||
Counterparty netting | (206,283) | (6,917) | (21,470) | (234,670) | ||||||||||||
Cash collateral netting | (30,021) | (448) | — | (30,469) | ||||||||||||
Total in Trading liabilities | $ | 21,439 | $ | 308 | $ | 2,692 | $ | 24,439 | ||||||||
Amounts not offset2 | ||||||||||||||||
Financial instruments collateral | (5,035) | — | (497) | (5,532) | ||||||||||||
Other cash collateral | (10) | (81) | — | (91) | ||||||||||||
Net amounts3 | $ | 16,394 | $ | 227 | $ | 2,195 | $ | 18,816 | ||||||||
Not subject to legally enforceable master netting or |
| |||||||||||||||
Derivative liabilities | $ | 3,508 |
Assets $ in millions Total Designated as accounting hedges Interest rate $ 1,109 $ 4 $ 0 $ 1,113 Foreign exchange 63 9 0 72 Total 1,172 13 0 1,185 Not designated as accounting hedges Interest rate 232,894 9,261 530 242,685 Credit 6,889 3,017 0 9,906 Foreign exchange 65,734 1,299 79 67,112 Equity 28,255 0 39,231 67,486 Commodity and other 13,378 0 5,155 18,533 Total 347,150 13,577 44,995 405,722 Total gross derivatives $ 348,322 $ 13,590 $ 44,995 $ 406,907 Amounts offset Counterparty netting (263,488 ) (11,426 ) (42,320 ) (317,234 ) Cash collateral netting (52,608 ) (1,823 ) 0 (54,431 ) Total in Trading assets $ 32,226 $ 341 $ 2,675 $ 35,242 Financial instruments collateral (14,117 ) 0 0 (14,117 ) Other cash collateral (88 ) 0 0 (88 ) Net amounts $ 18,021 $ 341 $ 2,675 $ 21,037 Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable $ 2,848
Liabilities | ||||||||||||
$ in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
Foreign exchange | 92 | 40 | 0 | 132 | ||||||||
Total | 92 | 40 | 0 | 132 | ||||||||
Not designated as accounting hedges | ||||||||||||
Interest rate | 222,102 | 7,258 | 848 | 230,208 | ||||||||
Credit | 6,638 | 3,616 | 0 | 10,254 | ||||||||
Foreign exchange | 63,885 | 1,405 | 38 | 65,328 | ||||||||
Equity | 38,518 | 0 | 41,873 | 80,391 | ||||||||
Commodity and other | 9,910 | 0 | 5,095 | 15,005 | ||||||||
Total | 341,053 | 12,279 | 47,854 | 401,186 | ||||||||
Total gross derivatives | $ | 341,145 | $ | 12,319 | $ | 47,854 | $ | 401,318 | ||||
Amounts offset | ||||||||||||
Counterparty netting | (263,488 | ) | (11,426 | ) | (42,320 | ) | (317,234 | ) | ||||
Cash collateral netting | (46,148 | ) | (772 | ) | 0 | (46,920 | ) | |||||
Total in Trading liabilities | $ | 31,509 | $ | 121 | $ | 5,534 | $ | 37,164 | ||||
Amounts not offset1 | ||||||||||||
Financial instruments collateral | (9,085 | ) | 0 | (2,240 | ) | (11,325 | ) | |||||
Other cash collateral | (62 | ) | (3 | ) | 0 | (65 | ) | |||||
Net amounts | $ | 22,362 | $ | 118 | $ | 3,294 | $ | 25,774 | ||||
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable | 5,282 |
Assets | ||||||||||||||||
$ in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||||
Designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | $ | 1,924 | $ | 1,049 | $ | — | $ | 2,973 | ||||||||
Foreign exchange contracts | 249 | 18 | — | 267 | ||||||||||||
Total | 2,173 | 1,067 | — | 3,240 | ||||||||||||
Not designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | 200,336 | 99,217 | 384 | 299,937 | ||||||||||||
Credit contracts | 9,837 | 2,392 | — | 12,229 | ||||||||||||
Foreign exchange contracts | 73,645 | 1,022 | 231 | 74,898 | ||||||||||||
Equity contracts | 20,710 | — | 17,919 | 38,629 | ||||||||||||
Commodity and other contracts | 9,792 | — | 3,727 | 13,519 | ||||||||||||
Total | 314,320 | 102,631 | 22,261 | 439,212 | ||||||||||||
Total gross derivatives | $ | 316,493 | $ | 103,698 | $ | 22,261 | $ | 442,452 | ||||||||
Amounts offset | ||||||||||||||||
Counterparty netting | (243,488 | ) | (100,477 | ) | (19,607 | ) | (363,572) | |||||||||
Cash collateral netting | (45,875 | ) | (1,799 | ) | — | (47,674) | ||||||||||
Total in Trading assets | $ | 27,130 | $ | 1,422 | $ | 2,654 | $ | 31,206 | ||||||||
Amounts not offset2 | ||||||||||||||||
Financial instruments collateral | (10,293 | ) | — | — | (10,293) | |||||||||||
Other cash collateral | (124 | ) | — | — | (124) | |||||||||||
Net amounts3 | $ | 16,713 | $ | 1,422 | $ | 2,654 | $ | 20,789 | ||||||||
Not subject to legally enforceable master netting or |
| |||||||||||||||
Derivative assets | $ | 3,656 |
Liabilities | ||||||||||||||||
$ in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||||
Designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | $ | 77 | $ | 647 | $ | — | $ | 724 | ||||||||
Foreign exchange contracts | 15 | 25 | — | 40 | ||||||||||||
Total | 92 | 672 | — | 764 | ||||||||||||
Not designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | 183,063 | 103,392 | 397 | 286,852 | ||||||||||||
Credit contracts | 11,024 | 2,401 | — | 13,425 | ||||||||||||
Foreign exchange contracts | 74,575 | 952 | 16 | 75,543 | ||||||||||||
Equity contracts | 22,531 | — | 17,983 | 40,514 | ||||||||||||
Commodity and other contracts | 8,303 | — | 3,582 | 11,885 | ||||||||||||
Total | 299,496 | 106,745 | 21,978 | 428,219 | ||||||||||||
Total gross derivatives | $ | 299,588 | $ | 107,417 | $ | 21,978 | $ | 428,983 | ||||||||
Amounts offset | ||||||||||||||||
Counterparty netting | (243,488 | ) | (100,477 | ) | (19,607 | ) | (363,572) | |||||||||
Cash collateral netting | (30,405 | ) | (5,691 | ) | — | (36,096) | ||||||||||
Total in Trading liabilities | $ | 25,695 | $ | 1,249 | $ | 2,371 | $ | 29,315 | ||||||||
Amounts not offset2 | ||||||||||||||||
Financial instruments collateral | (7,638 | ) | — | (585 | ) | (8,223) | ||||||||||
Other cash collateral | (10 | ) | (1 | ) | — | (11) | ||||||||||
Net amounts3 | $ | 18,047 | $ | 1,248 | $ | 1,786 | $ | 21,081 | ||||||||
Not subject to legally enforceable master netting or |
| |||||||||||||||
Derivative liabilities | $ | 3,497 |
Assets | ||||||||||||
$ in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | 673 | $ | 0 | $ | 0 | $ | 673 | ||||
Foreign exchange | 41 | 1 | 0 | 42 | ||||||||
Total | 714 | 1 | 0 | 715 | ||||||||
Not designated as accounting hedges | ||||||||||||
Interest rate | 179,450 | 4,839 | 519 | 184,808 | ||||||||
Credit | 4,895 | 2,417 | 0 | 7,312 | ||||||||
Foreign exchange | 62,957 | 1,399 | 22 | 64,378 | ||||||||
Equity | 27,621 | 0 | 23,447 | 51,068 | ||||||||
Commodity and other | 9,306 | 0 | 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 | ) | 0 | (42,497 | ) | |||||
Total in Trading assets | $ | 30,011 | $ | 87 | $ | 1,903 | $ | 32,001 | ||||
Amounts not offset1 | ||||||||||||
Financial instruments collateral | (15,596 | ) | 0 | 0 | (15,596 | ) | ||||||
Other cash collateral | (46 | ) | 0 | 0 | (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 | $ | 0 | $ | 0 | $ | 1 | ||||
Foreign exchange | 121 | 38 | 0 | 159 | ||||||||
Total | 122 | 38 | 0 | 160 | ||||||||
Not designated as accounting hedges | ||||||||||||
Interest rate | 168,597 | 3,597 | 436 | 172,630 | ||||||||
Credit | 4,798 | 3,123 | 0 | 7,921 | ||||||||
Foreign exchange | 65,965 | 1,492 | 39 | 67,496 | ||||||||
Equity | 30,135 | 0 | 22,733 | 52,868 | ||||||||
Commodity and other | 7,713 | 0 | 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 | ) | 0 | (37,224 | ) | |||||
Total in Trading liabilities | $ | 27,228 | $ | 124 | $ | 1,082 | $ | 28,434 | ||||
Amounts not offset1 | ||||||||||||
Financial instruments collateral | (7,747 | ) | 0 | (287 | ) | (8,034 | ) | |||||
Other cash collateral | (14 | ) | 0 | 0 | (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 |
|
OTC—Over-the-counter
1. |
|
Amounts relate to master netting agreements and collateral agreements that have been determined by the Firm to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance. |
| ||
63 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
previous tables.
Contracts
Assets | ||||||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||||
Designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | $ | 24 | $ | 44 | $ | — | $ | 68 | ||||||||
Foreign exchange contracts | 6 | 1 | — | 7 | ||||||||||||
Total | 30 | 45 | — | 75 | ||||||||||||
Not designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | 3,952 | 6,675 | 2,880 | 13,507 | ||||||||||||
Credit contracts | 242 | 110 | — | 352 | ||||||||||||
Foreign exchange contracts | 2,224 | 77 | 30 | 2,331 | ||||||||||||
Equity contracts | 388 | — | 323 | 711 | ||||||||||||
Commodity and other contracts | 85 | — | 80 | 165 | ||||||||||||
Total | 6,891 | 6,862 | 3,313 | 17,066 | ||||||||||||
Total gross derivatives | $ | 6,921 | $ | 6,907 | $ | 3,313 | $ | 17,141 |
Liabilities | ||||||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||||
Designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | $ | 2 | $ | 97 | $ | — | $ | 99 | ||||||||
Foreign exchange contracts | 3 | 1 | — | 4 | ||||||||||||
Total | 5 | 98 | — | 103 | ||||||||||||
Not designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | 3,919 | 6,749 | 1,028 | 11,696 | ||||||||||||
Credit contracts | 271 | 92 | — | 363 | ||||||||||||
Foreign exchange contracts | 2,137 | 74 | 14 | 2,225 | ||||||||||||
Equity contracts | 409 | — | 381 | 790 | ||||||||||||
Commodity and other contracts | 67 | — | 69 | 136 | ||||||||||||
Total | 6,803 | 6,915 | 1,492 | 15,210 | ||||||||||||
Total gross derivatives | $ | 6,808 | $ | 7,013 | $ | 1,492 | $ | 15,313 |
Assets | ||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | 6 | $ | 120 | $ | 0 | $ | 126 | ||||
Foreign exchange | 6 | 1 | 0 | 7 | ||||||||
Total | 12 | 121 | 0 | 133 | ||||||||
Not designated as accounting hedges | ||||||||||||
Interest rate | 4,234 | 6,726 | 409 | 11,369 | ||||||||
Credit | 136 | 124 | 0 | 260 | ||||||||
Foreign exchange | 2,941 | 102 | 10 | 3,053 | ||||||||
Equity | 466 | 0 | 416 | 882 | ||||||||
Commodity and other | 118 | 0 | 79 | 197 | ||||||||
Total | 7,895 | 6,952 | 914 | 15,761 | ||||||||
Total gross derivatives | $ | 7,907 | $ | 7,073 | $ | 914 | $ | 15,894 |
Liabilities | ||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | 0 | $ | 64 | $ | 0 | $ | 64 | ||||
Foreign exchange | 6 | 2 | 0 | 8 | ||||||||
Total | 6 | 66 | 0 | 72 | ||||||||
Not designated as accounting hedges | ||||||||||||
Interest rate | 4,108 | 6,596 | 668 | 11,372 | ||||||||
Credit | 143 | 128 | 0 | 271 | ||||||||
Foreign exchange | 2,943 | 100 | 8 | 3,051 | ||||||||
Equity | 473 | 0 | 579 | 1,052 | ||||||||
Commodity and other | 91 | 0 | 76 | 167 | ||||||||
Total | 7,758 | 6,824 | 1,331 | 15,913 | ||||||||
Total gross derivatives | $ | 7,764 | $ | 6,890 | $ | 1,331 | $ | 15,985 |
Assets | ||||||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||||
Designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | $ | 30 | $ | 38 | $ | — | $ | 68 | ||||||||
Foreign exchange contracts | 6 | — | — | 6 | ||||||||||||
Total | 36 | 38 | — | 74 | ||||||||||||
Not designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | 3,586 | 6,224 | 2,586 | 12,396 | ||||||||||||
Credit contracts | 333 | 112 | — | 445 | ||||||||||||
Foreign exchange contracts | 1,580 | 52 | 13 | 1,645 | ||||||||||||
Equity contracts | 338 | — | 242 | 580 | ||||||||||||
Commodity and other contracts | 67 | — | 79 | 146 | ||||||||||||
Total | 5,904 | 6,388 | 2,920 | 15,212 | ||||||||||||
Total gross derivatives | $ | 5,940 | $ | 6,426 | $ | 2,920 | $ | 15,286 |
Liabilities | ||||||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||||
Designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | $ | 2 | $ | 52 | $ | — | $ | 54 | ||||||||
Foreign exchange contracts | 1 | 1 | — | 2 | ||||||||||||
Total | 3 | 53 | — | 56 | ||||||||||||
Not designated as accounting hedges |
| |||||||||||||||
Interest rate contracts | 3,462 | 6,087 | 897 | 10,446 | ||||||||||||
Credit contracts | 359 | 96 | — | 455 | ||||||||||||
Foreign exchange contracts | 1,557 | 48 | 14 | 1,619 | ||||||||||||
Equity contracts | 321 | — | 273 | 594 | ||||||||||||
Commodity and other contracts | 78 | — | 59 | 137 | ||||||||||||
Total | 5,777 | 6,231 | 1,243 | 13,251 | ||||||||||||
Total gross derivatives | $ | 5,780 | $ | 6,284 | $ | 1,243 | $ | 13,307 |
For information related2019
Assets | ||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||
Designated as accounting hedges | ||||||||||||
Interest rate | $ | 14 | $ | 94 | $ | 0 | $ | 108 | ||||
Foreign exchange | 2 | 0 | 0 | 2 | ||||||||
Total | 16 | 94 | 0 | 110 | ||||||||
Not designated as accounting hedges | ||||||||||||
Interest rate | 4,230 | 7,398 | 732 | 12,360 | ||||||||
Credit | 136 | 79 | 0 | 215 | ||||||||
Foreign exchange | 2,667 | 91 | 10 | 2,768 | ||||||||
Equity | 429 | 0 | 419 | 848 | ||||||||
Commodity and other | 99 | 0 | 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 | $ | 0 | $ | 71 | $ | 0 | $ | 71 | ||||
Foreign exchange | 9 | 2 | 0 | 11 | ||||||||
Total | 9 | 73 | 0 | 82 | ||||||||
Not designated as accounting hedges | ||||||||||||
Interest rate | 4,185 | 6,866 | 666 | 11,717 | ||||||||
Credit | 153 | 84 | 0 | 237 | ||||||||
Foreign exchange | 2,841 | 91 | 14 | 2,946 | ||||||||
Equity | 455 | 0 | 515 | 970 | ||||||||
Commodity and other | 85 | 0 | 61 | 146 | ||||||||
Total | 7,719 | 7,041 | 1,256 | 16,016 | ||||||||
Total gross derivatives | $ | 7,728 | $ | 7,114 | $ | 1,256 | $ | 16,098 |
Gains (Losses) on Fair Value Hedges
Recognized in Interest Expense | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Derivatives | $ | (218) | $ | (733) | $ | (878 | ) | $ | 2,386 | |||||||
Borrowings | 175 | 790 | 670 | (2,492) | ||||||||||||
Total | $ | (43 | ) | $ | 57 | $ | (208) | $ | (106) |
September | 64 |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Foreign exchange contracts | ||||||||||||||||
Effective portion—OCI | $ | (88 | ) | $ | (60 | ) | $ | (340 | ) | $ | (396 | ) | ||||
Forward points excluded from hedge effectiveness testing—Interest income | $ | (3 | ) | $ | (20 | ) | $ | (22 | ) | $ | (59) |
Trading Revenues by Product Type
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest rate contracts | $ | 648 | $ | 357 | $ | 1,693 | $ | 983 | ||||||||
Foreign exchange contracts | 181 | 170 | 613 | 769 | ||||||||||||
Equity security and index contracts1 | 1,416 | 1,415 | 4,875 | 4,360 | ||||||||||||
Commodity and other contracts | 223 | 63 | 522 | (61) | ||||||||||||
Credit contracts | 236 | 604 | 1,167 | 1,369 | ||||||||||||
Total | $ | 2,704 | $ | 2,609 | $ | 8,870 | $ | 7,420 |
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Fair value hedges—Recognized in Interest income | ||||||||||||
Interest rate contracts | $ | 12 | $ | (7 | ) | $ | (68 | ) | $ | (26 | ) | |
Investment Securities—AFS | (11 | ) | 8 | 78 | 27 | |||||||
Fair value hedges—Recognized in Interest expense | ||||||||||||
Interest rate contracts | $ | (1,004 | ) | $ | 1,999 | $ | 5,908 | $ | 6,046 | |||
Deposits1 | 62 | 0 | (153 | ) | 0 | |||||||
Borrowings | 915 | (1,996 | ) | (5,844 | ) | (6,111 | ) | |||||
Net investment hedges—Foreign exchange contracts | ||||||||||||
Recognized in OCI | $ | (260 | ) | $ | 251 | $ | 54 | $ | 201 | |||
Forward points excluded from hedge effectiveness testing—Recognized in Interest income | (6 | ) | 30 | 19 | 107 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Investment Securities—AFS | ||||||
Amortized cost basis currently or previously hedged | $ | 2,146 | $ | 917 | ||
Basis adjustments included in amortized cost2 | $ | 74 | $ | 14 | ||
Deposits1 | ||||||
Carrying amount currently or previously hedged | $ | 18,241 | $ | 5,435 | ||
Basis adjustments included in carrying amount2 | $ | 146 | $ | (7 | ) | |
Borrowings | ||||||
Carrying amount currently or previously hedged | $ | 107,653 | $ | 102,456 | ||
Basis adjustments included in carrying amount—Outstanding hedges | $ | 7,697 | $ | 2,593 | ||
Basis adjustments included in carrying amount—Terminated hedges | $ | (762 | ) | $ | 0 |
1. |
The Firm began designating interest rate swaps as fair value hedges of certain Deposits in the fourth quarter of 2019. |
2. | Hedge accounting basis adjustments are primarily related to outstanding hedges. |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Net derivative liabilities with credit risk-related contingent features | $ | 27,659 | $ | 21,620 | ||
Collateral posted | 23,426 | 17,392 |
Credit Risk-Related Contingencies
In connection with certain OTC trading agreements, the Firm may be required to provide additional collateral or immediately settle any outstanding liability balances with certain counterparties in the event of a credit rating downgrade of the Firm.
The following 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.
Net Derivative Liabilities
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Net derivative liabilities with credit risk-related contingent features | $ | 19,359 | $ | 22,939 | ||||
Collateral posted | 14,499 | 17,040 |
$ in millions | At September 30, 2020 | ||
One-notch downgrade | $ | 246 | |
Two-notch downgrade | 315 | ||
Bilateral downgrade agreements included in the amounts above1 | $ | 487 |
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. |
Incremental Collateral or Termination Payments upon
$ in millions | At September 30, 20171 | |||
One-notch downgrade | $ | 592 | ||
Two-notch downgrade | 512 |
Years to Maturity at September 30, 2020 | |||||||||||||||
$ in billions | < 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Single-name CDS | |||||||||||||||
Investment grade | $ | 10 | $ | 16 | $ | 31 | $ | 13 | $ | 70 | |||||
Non-investment grade | 6 | 10 | 15 | 4 | 35 | ||||||||||
Total | $ | 16 | $ | 26 | $ | 46 | $ | 17 | $ | 105 | |||||
Index and basket CDS | |||||||||||||||
Investment grade | $ | 3 | $ | 11 | $ | 44 | $ | 35 | $ | 93 | |||||
Non-investment grade | 6 | 6 | 25 | 20 | 57 | ||||||||||
Total | $ | 9 | $ | 17 | $ | 69 | $ | 55 | $ | 150 | |||||
Total CDS sold | $ | 25 | $ | 43 | $ | 115 | $ | 72 | $ | 255 | |||||
Other credit contracts | 0 | 0 | 0 | 0 | 0 | ||||||||||
Total credit protection sold | $ | 25 | $ | 43 | $ | 115 | $ | 72 | $ | 255 | |||||
CDS protection sold with identical protection purchased | $ | 222 |
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 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Total credit protection sold | $ | 36 | $ | 37 | $ | 112 | $ | 31 | $ | 216 | |||||
CDS protection sold with identical protection purchased | $ | 187 |
65 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Single-name CDS | ||||||
Investment grade | $ | 764 | $ | 1,057 | ||
Non-investment grade | (969 | ) | (540 | ) | ||
Total | $ | (205 | ) | $ | 517 | |
Index and basket CDS | ||||||
Investment grade | $ | 994 | $ | 1,052 | ||
Non-investment grade | (2,546 | ) | 134 | |||
Total | $ | (1,552 | ) | $ | 1,186 | |
Total CDS sold | $ | (1,757 | ) | $ | 1,703 | |
Other credit contracts | (4 | ) | (17 | ) | ||
Total credit protection sold | $ | (1,761 | ) | $ | 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 |
Credit Derivatives and Other Credit Contracts
Notional | ||||||
$ in billions | At September 30, 2020 | At December 31, 2019 | ||||
Single name | $ | 115 | $ | 118 | ||
Index and basket | 143 | 103 | ||||
Tranched index and basket | 18 | 15 | ||||
Total | $ | 276 | $ | 236 |
Fair Value Asset (Liability) | ||||||
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Single name | $ | 72 | $ | (723 | ) | |
Index and basket | 1,276 | (1,139 | ) | |||
Tranched index and basket | 61 | (450 | ) | |||
Total | $ | 1,409 | $ | (2,312 | ) |
Protection Sold and Purchased with Credit Default Swaps
At September 30, 2017 | ||||||||||||||||
Protection Sold | Protection Purchased | |||||||||||||||
$ in millions | Notional | Fair Value Liability | Notional | Fair Value Liability | ||||||||||||
Credit default swaps | ||||||||||||||||
Single name | $ | 173,202 | $ | (1,400 | ) | $ | 189,290 | $ | 1,803 | |||||||
Index and basket | 145,107 | (237 | ) | 141,565 | 264 | |||||||||||
Tranched index and basket | 22,049 | (367 | ) | 44,193 | 1,066 | |||||||||||
Total | $ | 340,358 | $ | (2,004 | ) | $ | 375,048 | $ | 3,133 | |||||||
Portion of single name and non-tranched index and basket with identical underlying reference obligations | $ | 315,931 | — | $ | 327,959 | — |
At September 30, 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 | $ | 45,796 | $ | 1,150 | $ | 0 | $ | 46,946 | ||||
U.S. agency securities2 | 26,887 | 769 | 6 | 27,650 | ||||||||
Total U.S. government and agency securities | 72,683 | 1,919 | 6 | 74,596 | ||||||||
Corporate and other debt: | ||||||||||||
Agency CMBS | 4,653 | 355 | 1 | 5,007 | ||||||||
Corporate bonds | 1,756 | 43 | 1 | 1,798 | ||||||||
State and municipal securities | 1,682 | 60 | 18 | 1,724 | ||||||||
FFELP student loan ABS3 | 1,455 | 0 | 44 | 1,411 | ||||||||
Total corporate and other debt | 9,546 | 458 | 64 | 9,940 | ||||||||
Total AFS securities | 82,229 | 2,377 | 70 | 84,536 | ||||||||
HTM securities | ||||||||||||
U.S. government and agency securities: | ||||||||||||
U.S. Treasury securities | 28,754 | 2,138 | 0 | 30,892 | ||||||||
U.S. agency securities2 | 16,598 | 610 | 7 | 17,201 | ||||||||
Total U.S. government and agency securities | 45,352 | 2,748 | 7 | 48,093 | ||||||||
Corporate and other debt: | ||||||||||||
Non-agency CMBS | 817 | 45 | 1 | 861 | ||||||||
Total HTM securities | 46,169 | 2,793 | 8 | 48,954 | ||||||||
Total investment securities | $ | 128,398 | $ | 5,170 | $ | 78 | $ | 133,490 |
|
At December 31, 2016 | ||||||||||||||||
Protection Sold | Protection Purchased | |||||||||||||||
$ in millions | Notional | Fair Value Liability | Notional | Fair Value Liability | ||||||||||||
Credit default swaps | ||||||||||||||||
Single name | $ | 266,918 | $ | (753 | ) | $ | 269,623 | $ | 826 | |||||||
Index and basket | 130,383 | 374 | 122,061 | (481) | ||||||||||||
Tranched index and basket | 32,429 | (670 | ) | 78,505 | 1,900 | |||||||||||
Total | $ | 429,730 | $ | (1,049 | ) | $ | 470,189 | $ | 2,245 | |||||||
Portion of single name and non-tranched index and basket with identical underlying reference obligations | $ | 395,536 | — | $ | 389,221 | — |
Fair value amounts as shown in the table below are on a gross basis prior to cash collateral or counterparty netting. In order to provide an indication of the current payment status or performance risk of the credit default swaps, a breakdown of credit default swaps based on the Firm’s internal credit ratings by investment grade andnon-investment grade is provided. 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.
Credit Ratings of Reference Obligation and Maturities of Credit Protection Sold
At September 30, 2017 | ||||||||||||||||||||||||
Maximum Potential Payout/Notional | Fair Value (Asset)/ Liability | |||||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||||||
Single name credit default swaps | ||||||||||||||||||||||||
Investment grade | $ | 46,372 | $ | 44,877 | $ | 21,662 | $ | 11,411 | $ | 124,322 | $ | (1,220) | ||||||||||||
Non-investment grade | 20,527 | 19,378 | 6,959 | 2,016 | 48,880 | (180) | ||||||||||||||||||
Total single name credit default swaps | 66,899 | 64,255 | 28,621 | 13,427 | 173,202 | (1,400) | ||||||||||||||||||
Index and basket credit default swaps | ||||||||||||||||||||||||
Investment grade | 23,097 | 13,752 | 28,918 | 19,124 | 84,891 | (885) | ||||||||||||||||||
Non-investment grade | 28,650 | 7,293 | 25,129 | 21,193 | 82,265 | 281 | ||||||||||||||||||
Total index and basket credit default swaps | 51,747 | 21,045 | 54,047 | 40,317 | 167,156 | (604) | ||||||||||||||||||
Total credit default swaps sold | $ | 118,646 | $ | 85,300 | $ | 82,668 | $ | 53,744 | $ | 340,358 | $ | (2,004) | ||||||||||||
Other credit contracts | 14 | — | — | 135 | 149 | 13 | ||||||||||||||||||
Total credit derivatives and other credit contracts | $ | 118,660 | $ | 85,300 | $ | 82,668 | $ | 53,879 | $ | 340,507 | $ | (1,991) |
At December 31, 2016 | ||||||||||||||||||||||||
Maximum Potential Payout/Notional | Fair Value (Asset)/ Liability | |||||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||||||
Single name credit default swaps | ||||||||||||||||||||||||
Investment grade | $ | 79,449 | $ | 70,796 | $ | 34,529 | $ | 10,293 | $ | 195,067 | $ | (1,060) | ||||||||||||
Non-investment grade | 34,571 | 25,820 | 10,436 | 1,024 | 71,851 | 307 | ||||||||||||||||||
Total single name credit default swaps | $ | 114,020 | $ | 96,616 | $ | 44,965 | $ | 11,317 | $ | 266,918 | $ | (753) | ||||||||||||
Index and basket credit default swaps | ||||||||||||||||||||||||
Investment grade | $ | 26,530 | $ | 21,388 | $ | 35,060 | $ | 9,096 | $ | 92,074 | $ | (846) | ||||||||||||
Non-investment grade | 26,135 | 22,983 | 11,759 | 9,861 | 70,738 | 550 | ||||||||||||||||||
Total index and basket credit default swaps | $ | 52,665 | $ | 44,371 | $ | 46,819 | $ | 18,957 | $ | 162,812 | $ | (296) | ||||||||||||
Total credit default swaps sold | $ | 166,685 | $ | 140,987 | $ | 91,784 | $ | 30,274 | $ | 429,730 | $ | (1,049) | ||||||||||||
Other credit contracts | 49 | 6 | — | 215 | 270 | — | ||||||||||||||||||
Total credit derivatives and other credit contracts | $ | 166,734 | $ | 140,993 | $ | 91,784 | $ | 30,489 | $ | 430,000 | $ | (1,049) |
September | 66 |
Notes to Consolidated Financial Statements (Unaudited) |
The following tables present information about the Firm’s AFS securities, which are carried at fair value, and HTM securities, which are carried at amortized cost. The net unrealized gains or losses on AFS securities are reported on anafter-tax basis as a component of AOCI.
AFS and HTM Securities
At September 30, 2017 | ||||||||||||||||
$ in millions | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
AFS debt securities | ||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||
U.S. Treasury securities | $ | 24,706 | $ | — | $ | 425 | $ | 24,281 | ||||||||
U.S. agency securities1 | 24,018 | 42 | 164 | 23,896 | ||||||||||||
Total U.S. government and agency securities | 48,724 | 42 | 589 | 48,177 | ||||||||||||
Corporate and other debt: | ||||||||||||||||
CMBS: | ||||||||||||||||
Agency | 1,452 | 2 | 42 | 1,412 | ||||||||||||
Non-agency | 1,215 | 4 | 7 | 1,212 | ||||||||||||
Corporate bonds | 1,486 | 13 | 7 | 1,492 | ||||||||||||
CLO | 434 | 1 | — | 435 | ||||||||||||
FFELP student loan ABS2 | 2,217 | 13 | 8 | 2,222 | ||||||||||||
Total corporate and other debt | 6,804 | 33 | 64 | 6,773 | ||||||||||||
Total AFS debt securities | 55,528 | 75 | 653 | 54,950 | ||||||||||||
AFS equity securities | 15 | — | 11 | 4 | ||||||||||||
Total AFS securities | 55,543 | 75 | 664 | 54,954 | ||||||||||||
HTM securities | ||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||
U.S. Treasury securities | 11,501 | 7 | 249 | 11,259 | ||||||||||||
U.S. agency securities1 | 12,384 | 18 | 151 | 12,251 | ||||||||||||
Total U.S. government and agency securities | 23,885 | 25 | 400 | 23,510 | ||||||||||||
Corporate and other debt: | ||||||||||||||||
CMBS: | ||||||||||||||||
Non-agency | 247 | 1 | 1 | 247 | ||||||||||||
Total corporate and other debt | 247 | 1 | 1 | 247 | ||||||||||||
Total HTM securities | 24,132 | 26 | 401 | 23,757 | ||||||||||||
Total investment securities | $ | 79,675 | $ | 101 | $ | 1,065 | $ | 78,711 |
At December 31, 2016 | ||||||||||||||||
$ in millions | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
AFS debt securities | ||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||
U.S. Treasury securities | $ | 28,371 | $ | 1 | $ | 545 | $ | 27,827 | ||||||||
U.S. agency securities1 | 22,348 | 14 | 278 | 22,084 | ||||||||||||
Total U.S. government and agency securities | 50,719 | 15 | 823 | 49,911 | ||||||||||||
Corporate and other debt: | ||||||||||||||||
CMBS: | ||||||||||||||||
Agency | 1,850 | 2 | 44 | 1,808 | ||||||||||||
Non-agency | 2,250 | 11 | 16 | 2,245 | ||||||||||||
Auto loan ABS | 1,509 | 1 | 1 | 1,509 | ||||||||||||
Corporate bonds | 3,836 | 7 | 22 | 3,821 | ||||||||||||
CLO | 540 | — | 1 | 539 | ||||||||||||
FFELP student loan ABS2 | 3,387 | 5 | 61 | 3,331 | ||||||||||||
Total corporate and other debt | 13,372 | 26 | 145 | 13,253 | ||||||||||||
Total AFS debt securities | 64,091 | 41 | 968 | 63,164 | ||||||||||||
AFS equity securities | 15 | — | 9 | 6 | ||||||||||||
Total AFS securities | 64,106 | 41 | 977 | 63,170 | ||||||||||||
HTM securities | ||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||
U.S. Treasury securities | 5,839 | 1 | 283 | 5,557 | ||||||||||||
U.S. agency securities1 | 11,083 | 1 | 188 | 10,896 | ||||||||||||
Total HTM securities | 16,922 | 2 | 471 | 16,453 | ||||||||||||
Total investment securities | $ | 81,028 | $ | 43 | $ | 1,448 | $ | 79,623 |
CMBS—Commercial mortgage-backed securities
CLO—Collateralized loan obligations
ABS—Asset-backed securities
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 | 0 | 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 ACL. |
2. | U.S. agency securities consist mainly of agency-issued debt, agency mortgage pass-through pool securities and |
| |
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 |
|
Investment
At September 30, 2017 | ||||||||||||||||||||||||
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 debt securities | ||||||||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||||||||
U.S. Treasury securities | $ | 21,910 | $ | 364 | $ | 2,371 | $ | 61 | $ | 24,281 | $ | 425 | ||||||||||||
U.S. agency securities | 10,737 | 136 | 1,431 | 28 | 12,168 | 164 | ||||||||||||||||||
Total U.S. government and agency securities | 32,647 | 500 | 3,802 | 89 | 36,449 | 589 | ||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||
CMBS: | ||||||||||||||||||||||||
Agency | 991 | 42 | — | — | 991 | 42 | ||||||||||||||||||
Non-agency | 192 | 2 | 571 | 5 | 763 | 7 | ||||||||||||||||||
Corporate bonds | 186 | 1 | 332 | 6 | 518 | 7 | ||||||||||||||||||
FFELP student loan ABS | 1,058 | 8 | — | — | 1,058 | 8 | ||||||||||||||||||
Total corporate and other debt | 2,427 | 53 | 903 | 11 | 3,330 | 64 | ||||||||||||||||||
Total AFS debt securities | 35,074 | 553 | 4,705 | 100 | 39,779 | 653 | ||||||||||||||||||
AFS equity securities | — | — | 4 | 11 | 4 | 11 | ||||||||||||||||||
Total AFS securities | 35,074 | 553 | 4,709 | 111 | 39,783 | 664 | ||||||||||||||||||
HTM securities | ||||||||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||||||||
U.S. Treasury securities | 9,848 | 249 | — | — | 9,848 | 249 | ||||||||||||||||||
U.S. agency securities | 10,084 | 151 | — | — | 10,084 | 151 | ||||||||||||||||||
Total U.S. government and agency securities | 19,932 | 400 | — | — | 19,932 | 400 | ||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||
CMBS: | ||||||||||||||||||||||||
Non-agency | 71 | 1 | — | — | 71 | 1 | ||||||||||||||||||
Total corporate and other debt | 71 | 1 | — | — | 71 | 1 | ||||||||||||||||||
Total HTM securities | 20,003 | 401 | — | — | 20,003 | 401 | ||||||||||||||||||
Total investment securities | $ | 55,077 | $ | 954 | $ | 4,709 | $ | 111 | $ | 59,786 | $ | 1,065 |
|
At December 31, 2016 | ||||||||||||||||||||||||
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 debt securities | ||||||||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||||||||
U.S. Treasury securities | $ | 25,323 | $ | 545 | $ | — | $ | — | $ | 25,323 | $ | 545 | ||||||||||||
U.S. agency securities | 16,760 | 278 | 125 | — | 16,885 | 278 | ||||||||||||||||||
Total U.S. government and agency securities | 42,083 | 823 | 125 | — | 42,208 | 823 | ||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||
CMBS: | ||||||||||||||||||||||||
Agency | 1,245 | 44 | — | — | 1,245 | 44 | ||||||||||||||||||
Non-agency | 763 | 11 | 594 | 5 | 1,357 | 16 | ||||||||||||||||||
Auto loan ABS | 659 | 1 | 123 | — | 782 | 1 | ||||||||||||||||||
Corporate bonds | 2,050 | 21 | 142 | 1 | 2,192 | 22 | ||||||||||||||||||
CLO | 178 | — | 239 | 1 | 417 | 1 | ||||||||||||||||||
FFELP student loan ABS | 2,612 | 61 | — | — | 2,612 | 61 | ||||||||||||||||||
Total corporate and other debt | 7,507 | 138 | 1,098 | 7 | 8,605 | 145 | ||||||||||||||||||
Total AFS debt securities | 49,590 | 961 | 1,223 | 7 | 50,813 | 968 | ||||||||||||||||||
AFS equity securities | 6 | 9 | — | — | 6 | 9 | ||||||||||||||||||
Total AFS securities | 49,596 | 970 | 1,223 | 7 | 50,819 | 977 | ||||||||||||||||||
HTM securities | ||||||||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||||||||
U.S. Treasury securities | 5,057 | 283 | — | — | 5,057 | 283 | ||||||||||||||||||
U.S. agency securities | 10,612 | 188 | — | — | 10,612 | 188 | ||||||||||||||||||
Total HTM securities | 15,669 | 471 | — | — | 15,669 | 471 | ||||||||||||||||||
Total investment securities | $ | 65,265 | $ | 1,441 | $ | 1,223 | $ | 7 | $ | 66,488 | $ | 1,448 |
As discussed in Note 2 to the consolidated financial statements in the 2016 Form10-K, At September 30,
2020At December 31,
2019$ in millions Fair Value Fair Value U.S. government and agency securities: U.S. Treasury securities Less than12 months $ 0 $ 0 $ 4,793 $ 28 12 months or longer 0 0 7,904 83 Total 0 0 12,697 111 U.S. agency securities Less than12 months 1,198 3 2,641 20 12 months or longer 1,294 3 7,697 80 Total 2,492 6 10,338 100 Total U.S. government and agency securities: Less than12 months 1,198 3 7,434 48 12 months or longer 1,294 3 15,601 163 Total 2,492 6 23,035 211 Corporate and other debt: Agency CMBS Less than12 months 17 0 2,294 26 12 months or longer 189 1 681 31 Total 206 1 2,975 57 Corporate bonds Less than12 months 127 0 194 1 12 months or longer 21 1 44 0 Total 148 1 238 1 State and municipal securities Less than12 months 606 18 0 0 Total 606 18 0 0 FFELP student loan ABS Less than12 months 322 1 91 0 12 months or longer 1,089 43 1,165 28 Total 1,411 44 1,256 28 Less than12 months 1,072 19 2,579 27 12 months or longer 1,299 45 1,890 59 Total 2,371 64 4,469 86 Total AFS securities in an unrealized loss position Less than12 months 2,270 22 10,013 75 12 months or longer 2,593 48 17,491 222 Total $ 4,863 $ 70 $ 27,504 $ 297
The Firm believes there are no securities in an unrealized loss position that are other-than-temporarily-impaired at September 30, 2017 and December 31, 2016 forhave credit losses after performing the reasons discussed herein.
For AFS debt securities,analysis described in Note 2. 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. For AFS and HTM debt securities,Furthermore, the securities have not experienced credit losses as the net unrealized losses reported in the previous tablethey are primarily due to higher interest rates since those securities were purchased.
Additionally, for U.S. government and agency securities, the existence of an explicit and implicit guarantee provided by the U.S. government is consideredpredominantly investment grade and the Firm does not expectexpects to experiencerecover the amortized cost basis.
67 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
For AFS equity securities, the Firm has the intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in market value.
See Note 1215 for additional information on securities issued by VIEs, including U.S. agency mortgage-backed securities,non-agency CMBS auto loan ABS, CLO and FFELP student loan ABS.
At September 30, 2017 | ||||||||||||
$ in millions | Amortized Cost | Fair Value | Annualized Average Yield | |||||||||
AFS debt securities | ||||||||||||
U.S. government and agency securities: |
| |||||||||||
U.S. Treasury securities: | ||||||||||||
Due within 1 year | $ | 5,300 | $ | 5,286 | 0.9% | |||||||
After 1 year through 5 years | 14,129 | 13,954 | 1.4% | |||||||||
After 5 years through 10 years | 5,277 | 5,041 | 1.5% | |||||||||
Total | 24,706 | 24,281 | ||||||||||
U.S. agency securities: | ||||||||||||
Due within 1 year | 1,300 | 1,302 | 0.2% | |||||||||
After 1 year through 5 years | 2,570 | 2,564 | 0.9% | |||||||||
After 5 years through 10 years | 1,250 | 1,246 | 1.9% | |||||||||
After 10 years | 18,898 | 18,784 | 1.8% | |||||||||
Total | 24,018 | 23,896 | ||||||||||
Total U.S. government and agency securities | 48,724 | 48,177 | 1.5% |
At September 30, 2020 | ||||||||
$ in millions | Amortized Cost1 | Fair Value | Annualized Average Yield | |||||
AFS securities | ||||||||
U.S. government and agency securities: | ||||||||
U.S. Treasury securities: | ||||||||
Due within 1 year | $ | 15,671 | $ | 15,741 | 0.9 | % | ||
After 1 year through 5 years | 27,523 | 28,399 | 1.5 | % | ||||
After 5 years through 10 years | 2,602 | 2,806 | 1.7 | % | ||||
Total | 45,796 | 46,946 | ||||||
U.S. agency securities: | ||||||||
Due within 1 year | 215 | 215 | 0.8 | % | ||||
After 1 year through 5 years | 70 | 71 | 1.6 | % | ||||
After 5 years through 10 years | 1,235 | 1,274 | 1.8 | % | ||||
After 10 years | 25,367 | 26,090 | 1.9 | % | ||||
Total | 26,887 | 27,650 | ||||||
Total U.S. government and agency securities | 72,683 | 74,596 | 1.5 | % | ||||
Corporate and other debt: | ||||||||
Agency CMBS: | ||||||||
Due within 1 year | 44 | 45 | 2.5 | % | ||||
After 1 year through 5 years | 535 | 547 | 1.8 | % | ||||
After 5 years through 10 years | 3,399 | 3,728 | 2.5 | % | ||||
After 10 years | 675 | 687 | 1.8 | % | ||||
Total | 4,653 | 5,007 | ||||||
Corporate bonds: | ||||||||
Due within 1 year | 210 | 213 | 2.5 | % | ||||
After 1 year through 5 years | 1,269 | 1,301 | 2.6 | % | ||||
After 5 years through 10 years | 266 | 273 | 2.7 | % | ||||
After 10 years | 11 | 11 | 1.7 | % | ||||
Total | 1,756 | 1,798 | ||||||
State and municipal securities: | ||||||||
Due within 1 year | 3 | 3 | 1.8 | % | ||||
After 1 year through 5 years | 16 | 16 | 2.2 | % | ||||
After 5 years through 10 years | 103 | 109 | 2.6 | % | ||||
After 10 Years | 1,560 | 1,596 | 2.7 | % | ||||
Total | 1,682 | 1,724 | ||||||
At September 30, 2020 | ||||||||
$ in millions | Amortized Cost1 | Fair Value | Annualized Average Yield | |||||
FFELP student loan ABS: | ||||||||
After 1 year through 5 years | 93 | 88 | 0.8 | % | ||||
After 5 years through 10 years | 257 | 241 | 0.8 | % | ||||
After 10 years | 1,105 | 1,082 | 1.2 | % | ||||
Total | 1,455 | 1,411 | ||||||
Total corporate and other debt | 9,546 | 9,940 | 2.3 | % | ||||
Total AFS securities | 82,229 | 84,536 | 1.6 | % | ||||
HTM securities | ||||||||
U.S. government and agency securities: | ||||||||
U.S. Treasury securities: | ||||||||
Due within 1 year | $ | 3,065 | $ | 3,095 | 2.6 | % | ||
After 1 year through 5 years | 16,991 | 17,880 | 2.0 | % | ||||
After 5 years through 10 years | 7,616 | 8,572 | 2.2 | % | ||||
After 10 years | 1,082 | 1,345 | 2.5 | % | ||||
Total | 28,754 | 30,892 | ||||||
U.S. agency securities: | ||||||||
After 5 years through 10 years | 279 | 288 | 1.9 | % | ||||
After 10 years | 16,319 | 16,913 | 2.0 | % | ||||
Total | 16,598 | 17,201 | ||||||
Total U.S. government and agency securities | 45,352 | 48,093 | 2.2 | % | ||||
Corporate and other debt: | ||||||||
Non-agency CMBS: | ||||||||
Due within 1 year | 110 | 109 | 4.6 | % | ||||
After 1 year through 5 years | 77 | 78 | 3.7 | % | ||||
After 5 years through 10 years | 576 | 616 | 3.8 | % | ||||
After 10 years | 54 | 58 | 3.8 | % | ||||
Total corporate and other debt | 817 | 861 | 3.9 | % | ||||
Total HTM securities | 46,169 | 48,954 | 2.2 | % | ||||
Total investment securities | $ | 128,398 | $ | 133,490 | 1.8 | % |
1. |
|
At September 30, 2017 | ||||||||||||
$ in millions | Amortized Cost | Fair Value | Annualized Average Yield | |||||||||
Corporate and other debt: | ||||||||||||
CMBS: |
| |||||||||||
Agency: | ||||||||||||
Due within 1 year | 18 | 18 | 1.1 | % | ||||||||
After 1 year through 5 years | 283 | 282 | 1.4 | % | ||||||||
After 5 years through 10 years | 300 | 301 | 1.2 | % | ||||||||
After 10 years | 851 | 811 | 1.6 | % | ||||||||
Total | 1,452 | 1,412 | ||||||||||
Non-agency: | ||||||||||||
After 5 years through 10 years | 36 | 35 | 2.5 | % | ||||||||
After 10 years | 1,179 | 1,177 | 1.8 | % | ||||||||
Total | 1,215 | 1,212 | ||||||||||
Corporate bonds: | ||||||||||||
Due within 1 year | 46 | 46 | 1.2 | % | ||||||||
After 1 year through 5 years | 1,218 | 1,225 | 2.4 | % | ||||||||
After 5 years through 10 years | 222 | 221 | 2.3 | % | ||||||||
Total | 1,486 | 1,492 | ||||||||||
CLO: | ||||||||||||
After 5 years through 10 years | 236 | 236 | 1.5 | % | ||||||||
After 10 years | 198 | 199 | 2.4 | % | ||||||||
Total | 434 | 435 | ||||||||||
FFELP student loan ABS: |
| |||||||||||
After 1 year through 5 years | 52 | 51 | 0.8 | % | ||||||||
After 5 years through 10 years | 393 | 390 | 0.8 | % | ||||||||
After 10 years | 1,772 | 1,781 | 1.1 | % | ||||||||
Total | 2,217 | 2,222 | ||||||||||
Total corporate and other debt | 6,804 | 6,773 | 1.6 | % | ||||||||
Total AFS debt securities | 55,528 | 54,950 | 1.5 | % | ||||||||
AFS equity securities | 15 | 4 | — | % | ||||||||
Total AFS securities | 55,543 | 54,954 | 1.5 | % | ||||||||
HTM securities | ||||||||||||
U.S. government securities: | ||||||||||||
U.S. Treasury securities: | ||||||||||||
Due within 1 year | 300 | 300 | 0.6 | % | ||||||||
After 1 year through 5 years | 5,163 | 5,151 | 1.5 | % | ||||||||
After 5 years through 10 years | 5,311 | 5,157 | 1.9 | % | ||||||||
After 10 years | 727 | 651 | 2.3 | % | ||||||||
Total | 11,501 | 11,259 | ||||||||||
U.S. agency securities: | ||||||||||||
After 10 years | 12,384 | 12,251 | 2.4 | % | ||||||||
Total | 12,384 | 12,251 | ||||||||||
Total U.S. government and agency securities | 23,885 | 23,510 | 2.0 | % | ||||||||
Corporate and other debt: | ||||||||||||
CMBS: | ||||||||||||
Non-agency: | ||||||||||||
After 1 year through 5 years | 99 | 99 | 3.6 | % | ||||||||
After 5 years through 10 years | 148 | 148 | 3.7 | % | ||||||||
Total | 247 | 247 | ||||||||||
Total corporate and other debt | 247 | 247 | 3.7 | % | ||||||||
Total HTM securities | 24,132 | 23,757 | 2.1 | % | ||||||||
Total investment securities | $ | 79,675 | $ | 78,711 | 1.7 | % |
Gross Realized Gains and Losses(Losses) on Sales of AFS Securities
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Gross realized gains | $ | 11 | $ | 45 | $ | 38 | $ | 130 | ||||||||
Gross realized (losses) | — | — | (11 | ) | (3 | ) | ||||||||||
Total | $ | 11 | $ | 45 | $ | 27 | $ | 127 |
Gross realized gains and losses are recognized in Other revenues in the income statements.
6. Collateralized Transactions
The Firm enters into securities purchased under agreements to resell, securities sold under agreements to repurchase, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers’ needs and to finance its inventory positions. For further discussion of the Firm’s collateralized transactions, see Note 6 to the consolidated financial statements in the 2016 Form10-K.
Offsetting of Certain Collateralized Transactions
At September 30, 2017 | ||||||||||||||||||||
$ in millions | Gross Amounts | Amounts Offset | Net Amounts Presented | Amounts Not Offset1 | Net Amounts | |||||||||||||||
Assets | ||||||||||||||||||||
Securities purchased | $ | 174,387 | $ | (84,281 | ) | $ | 90,106 | $ | (84,895 | ) | $ | 5,211 | ||||||||
Securities borrowed | 145,923 | (13,031 | ) | 132,892 | (128,616 | ) | 4,276 | |||||||||||||
Liabilities | ||||||||||||||||||||
Securities sold | $ | 138,264 | $ | (84,281 | ) | $ | 53,983 | $ | (46,145 | ) | $ | 7,838 | ||||||||
Securities loaned | 28,662 | (13,032 | ) | 15,630 | (15,550 | ) | 80 | |||||||||||||
Not subject to legally enforceable master netting agreements2 |
| |||||||||||||||||||
Securities purchased under agreements to resell |
| $ | 4,599 | |||||||||||||||||
Securities borrowed |
| 720 | ||||||||||||||||||
Securities sold under agreements to repurchase |
| 6,521 | ||||||||||||||||||
Securities loaned |
| 7 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Gross realized gains | $ | 55 | $ | 27 | $ | 120 | $ | 99 | ||||
Gross realized (losses) | 0 | (1 | ) | (14 | ) | (10 | ) | |||||
Total1 | $ | 55 | $ | 26 | $ | 106 | $ | 89 |
1. | Realized gains and losses are recognized in Other revenues in the income statements. |
September |
Notes to Consolidated Financial Statements (Unaudited) |
At December 31, 2016 | ||||||||||||||||||||
$ in millions | Gross Amounts | Amounts Offset | Net Amounts Presented | Amounts Not Offset1 | Net Amounts | |||||||||||||||
Assets | ||||||||||||||||||||
Securities purchased | $ | 182,888 | $ | (80,933) | $ | 101,955 | $ | (93,365 | ) | $ | 8,590 | |||||||||
Securities borrowed | 129,934 | (4,698) | 125,236 | (118,974 | ) | 6,262 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Securities sold | $ | 135,561 | $ | (80,933) | $ | 54,628 | $ | (47,933 | ) | $ | 6,695 | |||||||||
Securities loaned | 20,542 | (4,698) | 15,844 | (15,670 | ) | 174 | ||||||||||||||
Not subject to legally enforceable master netting agreements2 |
| |||||||||||||||||||
Securities purchased under agreements to resell |
| $ | 7,765 | |||||||||||||||||
Securities borrowed | 2,591 | |||||||||||||||||||
Securities sold under agreements to repurchase |
| 6,500 | ||||||||||||||||||
Securities loaned | 154 |
At September 30, 2020 | |||||||||||||||
$ in millions | Gross Amounts | Amounts Offset | Net Amounts Presented | Amounts Not Offset1 | Net Amounts | ||||||||||
Assets | |||||||||||||||
Securities purchased under agreements to resell | $ | 199,725 | $ | (111,442 | ) | $ | 88,283 | $ | (86,057 | ) | $ | 2,226 | |||
Securities borrowed | 104,642 | (3,839 | ) | 100,803 | (97,169 | ) | 3,634 | ||||||||
Liabilities | |||||||||||||||
Securities sold under agreements to repurchase | $ | 152,760 | $ | (111,384 | ) | $ | 41,376 | $ | (35,742 | ) | $ | 5,634 | |||
Securities loaned | 11,821 | (3,897 | ) | 7,924 | (7,725 | ) | 199 | ||||||||
Net amounts for which master netting agreements are not in place or may not be legally enforceable | |||||||||||||||
Securities purchased under agreements to resell | $ | 2,117 | |||||||||||||
Securities borrowed | 601 | ||||||||||||||
Securities sold under agreements to repurchase | 4,698 | ||||||||||||||
Securities loaned | 149 |
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. | 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. |
|
Maturities and Collateral Pledged
7.
At September 30, 2017 | ||||||||||||||||||||
$ in millions | Overnight and Open | Less than 30 Days | 30-90 Days | Over 90 Days | Total | |||||||||||||||
Securities sold under | $ | 38,581 | $ | 38,455 | $ | 18,398 | $ | 42,830 | $ | 138,264 | ||||||||||
Securities loaned | 17,274 | 541 | 1,426 | 9,421 | 28,662 | |||||||||||||||
Total included in the offsetting disclosure | $ | 55,855 | $ | 38,996 | $ | 19,824 | $ | 52,251 | $ | 166,926 | ||||||||||
Trading liabilities— | 21,208 | — | — | — | 21,208 | |||||||||||||||
Total | $ | 77,063 | $ | 38,996 | $ | 19,824 | $ | 52,251 | $ | 188,134 |
At December 31, 2016 | ||||||||||||||||||||
$ in millions | Overnight and Open | Less than 30 Days | 30-90 Days | Over 90 Days | Total | |||||||||||||||
Securities sold | $ | 41,549 | $ | 36,703 | $ | 24,648 | $ | 32,661 | $ | 135,561 | ||||||||||
Securities loaned | 9,487 | 851 | 2,863 | 7,341 | 20,542 | |||||||||||||||
Total included in the | $ | 51,036 | $ | 37,554 | $ | 27,511 | $ | 40,002 | $ | 156,103 | ||||||||||
Trading liabilities— | 20,262 | — | — | — | 20,262 | |||||||||||||||
Total | $ | 71,298 | $ | 37,554 | $ | 27,511 | $ | 40,002 | $ | 176,365 |
At September 30, 2020 | |||||||||||||||
$ in millions | Overnight and Open | Less than 30 Days | 30-90 Days | Over 90 Days | Total | ||||||||||
Securities sold under agreements to repurchase | $ | 69,210 | $ | 37,965 | $ | 13,144 | $ | 32,441 | $ | 152,760 | |||||
Securities loaned | 5,752 | 278 | 1,169 | 4,622 | 11,821 | ||||||||||
Total included in the offsetting disclosure | $ | 74,962 | $ | 38,243 | $ | 14,313 | $ | 37,063 | $ | 164,581 | |||||
Trading liabilities— Obligation to return securities received as collateral | 21,753 | 0 | 0 | 0 | 21,753 | ||||||||||
Total | $ | 96,715 | $ | 38,243 | $ | 14,313 | $ | 37,063 | $ | 186,334 |
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 | 0 | 0 | 0 | 23,877 | ||||||||||
Total | $ | 93,413 | $ | 84,586 | $ | 27,420 | $ | 43,464 | $ | 248,883 |
$ in millions | At September 30, 2017 | At December 31, | ||||||
Securities sold under agreements to repurchase |
| |||||||
U.S. government and agency securities | $ | 40,758 | $ | 56,372 | ||||
State and municipal securities | 828 | 1,363 | ||||||
Other sovereign government obligations | 64,529 | 42,790 | ||||||
Asset-backed securities | 2,267 | 1,918 | ||||||
Corporate and other debt | 8,244 | 9,086 | ||||||
Corporate equities | 20,773 | 23,152 | ||||||
Other | 865 | 880 | ||||||
Total securities sold under agreements to repurchase | $ | 138,264 | $ | 135,561 | ||||
Securities loaned | ||||||||
Other sovereign government obligations | 13,259 | 4,762 | ||||||
Corporate and other debt | 9 | 73 | ||||||
Corporate equities | 15,152 | 15,693 | ||||||
Other | 242 | 14 | ||||||
Total securities loaned | $ | 28,662 | $ | 20,542 | ||||
Total included in the offsetting disclosure | $ | 166,926 | $ | 156,103 | ||||
Trading liabilities—Obligation to return securities received as collateral |
| |||||||
Corporate equities | $ | 21,208 | $ | 20,262 | ||||
Total | $ | 188,134 | $ | 176,365 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Securities sold under agreements to repurchase | ||||||
U.S. Treasury and agency securities | $ | 55,759 | $ | 68,895 | ||
State and municipal securities | 864 | 905 | ||||
Other sovereign government obligations | 70,281 | 109,414 | ||||
ABS | 1,945 | 2,218 | ||||
Corporate and other debt | 4,923 | 6,066 | ||||
Corporate equities | 18,256 | 25,563 | ||||
Other | 732 | 458 | ||||
Total | $ | 152,760 | $ | 213,519 | ||
Securities loaned | ||||||
Other sovereign government obligations | $ | 4,254 | $ | 3,026 | ||
Corporate equities | 7,034 | 8,422 | ||||
Other | 533 | 39 | ||||
Total | $ | 11,821 | $ | 11,487 | ||
Total included in the offsetting disclosure | $ | 164,581 | $ | 225,006 | ||
Trading liabilities—Obligation to return securities received as collateral | ||||||
Corporate equities | $ | 21,724 | $ | 23,873 | ||
Other | 29 | 4 | ||||
Total | $ | 21,753 | $ | 23,877 | ||
Total | $ | 186,334 | $ | 248,883 |
69 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
without Counterparty Right to Sell or Repledge
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Trading assets | $ | 34,952 | $ | 41,201 | ||
Loans, before ACL | 0 | 750 | ||||
Total | $ | 34,952 | $ | 41,951 |
|
CarryingFair Value of Assets Loaned or Pledged without
CounterpartyCollateral Received with Right to Sell or Repledge
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Trading assets | $ | 37,800 | $ | 41,358 | ||||
Loans (gross of allowance for loan losses) | 570 | — | ||||||
Total | $ | 38,370 | $ | 41,358 |
Collateral Received
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Collateral received with right to sell or repledge | $ | 609,445 | $ | 679,280 | ||
Collateral that was sold or repledged1 | 455,883 | 539,412 |
1. | Does not include securities used to meet federal regulations for the Firm’s U.S. broker-dealers. |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Segregated securities1 | $ | 27,679 | $ | 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 also receives securities as collateral in connection with certainsecurities-for-securities transactions. In instances where the Firm is the lender and permitted to sell or repledge these securities, it reports the fair value of the collateral received and the related obligation to return the collateral included in Trading assets and Trading liabilities, respectively, in its balance sheets.
Fair Value of Collateral Received with Right to Sell or Repledge
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Collateral received with right to sell or repledge | $ | 575,915 | $ | 561,239 | ||||
Collateral that was sold or repledged | 470,555 | 430,911 |
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Net customer receivables representing margin loans | $ | 28,609 | $ | 24,359 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Customer receivables representing margin loans | $ | 44,658 | $ | 31,916 |
requires customers to deposit additional collateral, or reduce positions, when necessary.
Cash Loans, Lending Commitments and Securities Deposited with Clearing Organizations or Segregated
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Segregated securities1 | $ | 17,491 | $ | 23,756 | ||||
Other assets—Cash deposited with clearing organizations or segregated under federal and other regulations or requirements | 32,731 | 33,979 | ||||||
Total | $ | 50,222 | $ | 57,735 |
|
7. Loans andRelated Allowance for Credit Losses
Loans
The
Loans by Type
At September 30, 2017 | ||||||||||||
$ in millions | Loans Held for Investment | Loans Held for Sale | Total Loans | |||||||||
Corporate loans | $ | 29,686 | $ | 12,524 | $ | 42,210 | ||||||
Consumer loans | 26,616 | — | 26,616 | |||||||||
Residential real estate loans | 26,150 | 60 | 26,210 | |||||||||
Wholesale real estate loans | 9,000 | 640 | 9,640 | |||||||||
Total loans, gross | 91,452 | 13,224 | 104,676 | |||||||||
Allowance for loan losses | (245 | ) | — | (245) | ||||||||
Total loans, net | $ | 91,207 | $ | 13,224 | $ | 104,431 |
• | Corporate. Corporate includes revolving lines of credit, term loans and bridge loans made to corporate entities for a variety of purposes. |
• | Secured lending facilities. Secured lending facilities include loans provided to clients, which are collateralized by various assets including residential and commercial real estate mortgage loans, corporate loans, and other assets. |
• | Residential Real Estate. Residential real estate loans mainly include non-conforming loans and HELOC. |
• | Commercial Real Estate. Commercial real estate loans include owner-occupied loans and income-producing loans. |
• | Securities-based lending and Other. Securities-based lending includes loans which allow clients to borrow money against the value of qualifying securities for any suitable purpose other than purchasing, trading, or carrying securities or refinancing margin debt. The majority of these loans are structured as revolving lines of credit. Other primarily includes certain loans originated in the tailored lending business within the Wealth Management business segment. |
September |
Notes to Consolidated Financial Statements (Unaudited) |
At December 31, 2016 | ||||||||||||
$ in millions | Loans Held for Investment | Loans Held for Sale | Total Loans | |||||||||
Corporate loans | $ | 25,025 | $ | 10,710 | $ | 35,735 | ||||||
Consumer loans | 24,866 | — | 24,866 | |||||||||
Residential real estate loans | 24,385 | 61 | 24,446 | |||||||||
Wholesale real estate loans | 7,702 | 1,773 | 9,475 | |||||||||
Total loans, gross | 81,978 | 12,544 | 94,522 | |||||||||
Allowance for loan losses | (274 | ) | — | (274) | ||||||||
Total loans, net | $ | 81,704 | $ | 12,544 | $ | 94,248 |
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Fixed | $ | 13,323 | $ | 11,895 | ||||
Floating or adjustable | 91,108 | 82,353 | ||||||
Total loans, net | $ | 104,431 | $ | 94,248 |
Loans toNon-U.S. Borrowers
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Loans, net of allowance | $ | 8,883 | $ | 9,388 |
Credit Quality
For a further discussion about the Firm’s evaluation of credit transactions and monitoring and credit quality indicators, as well as factors considered by the Firm in determining the allowance for loan losses and impairments, see Notes 2 and 7 to the consolidated financial statements in the 2016Form 10-K.
At September 30, 2020 | |||||||||
$ in millions | Loans Held for Investment | Loans Held for Sale | Total Loans | ||||||
Corporate | $ | 7,628 | $ | 8,552 | $ | 16,180 | |||
Secured lending facilities | 26,496 | 3,521 | 30,017 | ||||||
Commercial real estate | 7,265 | 891 | 8,156 | ||||||
Residential real estate | 33,674 | 49 | 33,723 | ||||||
Securities-based lending and Other loans | 59,006 | 68 | 59,074 | ||||||
Total loans | 134,069 | 13,081 | 147,150 | ||||||
ACL | (913 | ) | (913 | ) | |||||
Total loans, net | $ | 133,156 | $ | 13,081 | $ | 146,237 | |||
Fixed rate loans, net | $ | 31,342 | |||||||
Floating or adjustable rate loans, net | 114,895 | ||||||||
Loans to non-U.S. borrowers, net | 23,591 |
At December 31, 2019 | |||||||||
$ in millions | Loans Held for Investment | Loans Held for Sale | Total Loans | ||||||
Corporate | $ | 5,426 | $ | 6,192 | $ | 11,618 | |||
Secured lending facilities | 24,502 | 4,200 | 28,702 | ||||||
Commercial real estate | 7,859 | 2,049 | 9,908 | ||||||
Residential real estate | 30,184 | 13 | 30,197 | ||||||
Securities-based lending and Other loans | 50,438 | 123 | 50,561 | ||||||
Total loans | 118,409 | 12,577 | 130,986 | ||||||
ACL | (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. | Loans previously classified as corporate have been further disaggregated; prior period balances have been revised to conform with current period presentation. |
At September 30, 2017 | ||||||||||||||||||||
$ in millions | Corporate | Consumer | Residential Real Estate | Wholesale Real Estate | Total | |||||||||||||||
Pass | $ | 28,735 | $ | 26,613 | $ | 26,092 | $ | 8,435 | $ | 89,875 | ||||||||||
Special mention | 435 | 3 | — | 250 | 688 | |||||||||||||||
Substandard | 509 | — | 58 | 315 | 882 | |||||||||||||||
Doubtful | 7 | — | — | — | 7 | |||||||||||||||
Loss | — | — | — | — | — | |||||||||||||||
Total | $ | 29,686 | $ | 26,616 | $ | 26,150 | $ | 9,000 | $ | 91,452 |
At December 31, 2016 | ||||||||||||||||||||
$ in millions | Corporate | Consumer | Residential Real Estate | Wholesale Real Estate | Total | |||||||||||||||
Pass | $ | 23,409 | $ | 24,853 | $ | 24,345 | $ | 7,294 | $ | 79,901 | ||||||||||
Special mention | 288 | 13 | — | 218 | 519 | |||||||||||||||
Substandard | 1,259 | — | 40 | 190 | 1,489 | |||||||||||||||
Doubtful | 69 | — | — | — | 69 | |||||||||||||||
Loss | — | — | — | — | — | |||||||||||||||
Total | $ | 25,025 | $ | 24,866 | $ | 24,385 | $ | 7,702 | $ | 81,978 |
The following loans and lending commitments have been evaluated for a specific allowance. All remaining loans and lending commitments are assessed under the inherent allowance methodology.
Impaired Loans and Lending Commitments Before Allowance
At September 30, 2017 | ||||||||||||
$ in millions | Corporate | Residential Real Estate | Total | |||||||||
Loans | ||||||||||||
With allowance | $ | 15 | $ | — | $ | 15 | ||||||
Without allowance1 | 146 | 46 | 192 | |||||||||
Unpaid principal balance2 | 170 | 47 | 217 | |||||||||
Lending Commitments | ||||||||||||
With allowance | $ | 1 | $ | — | $ | 1 | ||||||
Without allowance1 | 221 | — | 221 |
At December 31, 2016 | ||||||||||||
$ in millions | Corporate | Residential Real Estate | Total | |||||||||
Loans | ||||||||||||
With allowance | $ | 104 | $ | — | $ | 104 | ||||||
Without allowance1 | 206 | 35 | 241 | |||||||||
Unpaid principal balance2 | 316 | 38 | 354 | |||||||||
Lending Commitments | ||||||||||||
With allowance | $ | — | $ | — | $ | — | ||||||
Without allowance1 | 89 | — | 89 |
|
|
Impaired Loans and Allowance by Region
At September 30, 2017 | ||||||||||||||||
$ in millions | Americas | EMEA | Asia- Pacific | Total | ||||||||||||
Impaired loans | $ | 188 | $ | 9 | $ | 10 | $ | 207 | ||||||||
Allowance for loan losses | 209 | 33 | 3 | 245 |
At December 31, 2016 | ||||||||||||||||
$ in millions | Americas | EMEA | Asia- Pacific | Total | ||||||||||||
Impaired loans | $ | 320 | $ | 9 | $ | 16 | $ | 345 | ||||||||
Allowance for loan losses | 245 | 28 | 1 | 274 |
EMEA—Europe, Middle East and Africa
At September 30, 2020 | |||||||||
Corporate | |||||||||
$ in millions | Investment Grade | Non-Investment Grade | Total | ||||||
Revolving Loans | $ | 1,556 | $ | 4,264 | $ | 5,820 | |||
2020 | 582 | 176 | 758 | ||||||
2019 | 279 | 159 | 438 | ||||||
2018 | 195 | 0 | 195 | ||||||
2017 | 0 | 64 | 64 | ||||||
2016 | 114 | 0 | 114 | ||||||
Prior | 127 | 112 | 239 | ||||||
Total | $ | 2,853 | $ | 4,775 | $ | 7,628 |
At September 30, 2020 | |||||||||
Secured lending facilities | |||||||||
$ in millions | Investment Grade | Non-Investment Grade | Total | ||||||
Revolving Loans | $ | 4,457 | $ | 14,832 | $ | 19,289 | |||
2020 | 206 | 378 | 584 | ||||||
2019 | 297 | 2,000 | 2,297 | ||||||
2018 | 1,063 | 1,449 | 2,512 | ||||||
2017 | 245 | 570 | 815 | ||||||
2016 | 0 | 620 | 620 | ||||||
Prior | 0 | 379 | 379 | ||||||
Total | $ | 6,268 | $ | 20,228 | $ | 26,496 |
At September 30, 2020 | |||||||||
Commercial real estate | |||||||||
$ in millions | Investment Grade | Non-Investment Grade | Total | ||||||
2020 | $ | 17 | $ | 744 | 761 | ||||
2019 | 637 | 2,318 | 2,955 | ||||||
2018 | 601 | 1,053 | 1,654 | ||||||
2017 | 188 | 629 | 817 | ||||||
2016 | 235 | 451 | 686 | ||||||
Prior | 0 | 392 | 392 | ||||||
Total | $ | 1,678 | $ | 5,587 | $ | 7,265 |
At September 30, 2020 | ||||||||||||||||||||
Residential real estate | ||||||||||||||||||||
by FICO Scores | by LTV Ratio | Total | ||||||||||||||||||
$ in millions | ≥ 740 | 680-739 | ≤ 679 | ≤ 80% | > 80% | |||||||||||||||
Revolving Loans | $ | 89 | $ | 34 | $ | 5 | $ | 128 | $ | 0 | $ | 128 | ||||||||
2020 | 6,438 | 1,337 | 138 | 7,487 | 426 | 7,913 | ||||||||||||||
2019 | 5,791 | 1,306 | 175 | 6,812 | 460 | 7,272 | ||||||||||||||
2018 | 2,442 | 685 | 83 | 2,952 | 258 | 3,210 | ||||||||||||||
2017 | 2,875 | 732 | 93 | 3,436 | 264 | 3,700 | ||||||||||||||
2016 | 3,524 | 953 | 134 | 4,305 | 306 | 4,611 | ||||||||||||||
Prior | 4,814 | 1,716 | 310 | 6,094 | 746 | 6,840 | ||||||||||||||
Total | $ | 25,973 | $ | 6,763 | $ | 938 | $ | 31,214 | $ | 2,460 | $ | 33,674 |
At September 30, 2020 | ||||||||||||
Securities-based lending1 | Other2 | |||||||||||
$ in millions | Investment Grade | Non-Investment Grade | Total | |||||||||
Revolving Loans | $ | 47,251 | $ | 4,238 | $ | 684 | $ | 52,173 | ||||
2020 | 0 | 860 | 431 | 1,291 | ||||||||
2019 | 18 | 1,106 | 674 | 1,798 | ||||||||
2018 | 232 | 334 | 456 | 1,022 | ||||||||
2017 | 0 | 663 | 116 | 779 | ||||||||
2016 | 0 | 579 | 113 | 692 | ||||||||
Prior | 16 | 1,068 | 167 | 1,251 | ||||||||
Total | $ | 47,517 | $ | 8,848 | $ | 2,641 | $ | 59,006 |
71 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
At September 30, 2020 | |||||||||
$ in millions | Current | Past Due1 | Total | ||||||
Corporate | $ | 7,628 | $ | 0 | $ | 7,628 | |||
Secured lending facilities | 26,496 | 0 | 26,496 | ||||||
Commercial real estate | 7,264 | 1 | 7,265 | ||||||
Residential real estate | 33,476 | 198 | 33,674 | ||||||
Securities-based lending and Other loans | 58,881 | 125 | 59,006 | ||||||
Total | $ | 133,745 | $ | 324 | $ | 134,069 |
1. | The majority of the amounts are past due for a period of 90 days or more. |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Corporate | $ | 184 | $ | 299 | ||
Commercial real estate | 185 | 85 | ||||
Residential real estate | 92 | 94 | ||||
Securities-based lending and Other loans | 133 | 5 | ||||
Total1 | $ | 594 | $ | 483 | ||
Nonaccrual loans without an ACL | $ | 91 | $ | 120 |
1. | Includes all HFI loans that are 90 days or more past due. |
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Loans | $ | 69 | $ | 67 | ||||
Lending commitments | 11 | 14 | ||||||
Allowance for loan losses | 10 | — |
Impaired loans and lending commitments classified as held for investment within corporate loans include troubled
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Loans, before ACL | $ | 166 | $ | 92 | ||
Lending commitments | 32 | 32 | ||||
ACL on Loans and Lending commitments | 32 | 16 |
See Note 2 for further information on TDR guidance issued by Congress in the CARES Act as well as by the U.S. banking agencies.
$ in millions | Corporate | Consumer | Residential Real | Wholesale Real Estate | Total | |||||||||||||||
December 31, 2016 | $ | 195 | $ | 4 | $ | 20 | $ | 55 | $ | 274 | ||||||||||
Gross charge-offs | (75 | ) | — | — | — | (75 | ) | |||||||||||||
Recoveries | 1 | — | — | — | 1 | |||||||||||||||
Net recoveries (charge-offs) | (74 | ) | — | — | — | (74 | ) | |||||||||||||
Provision (release)1 | 26 | — | 4 | 12 | 42 | |||||||||||||||
Other | 2 | — | — | 1 | 3 | |||||||||||||||
September 30, 2017 | $ | 149 | $ | 4 | $ | 24 | $ | 68 | $ | 245 | ||||||||||
Inherent | $ | 142 | $ | 4 | $ | 24 | $ | 68 | $ | 238 | ||||||||||
Specific | 7 | — | — | — | 7 |
$ in millions | Corporate | Consumer | Residential Real | Wholesale Real Estate | Total | |||||||||||||||
December 31, 2015 | $ | 166 | $ | 5 | $ | 17 | $ | 37 | $ | 225 | ||||||||||
Gross charge-offs | (15 | ) | — | — | — | (15 | ) | |||||||||||||
Gross recoveries | — | — | — | — | — | |||||||||||||||
Net recoveries (charge-offs) | (15 | ) | — | — | — | (15 | ) | |||||||||||||
Provision (release)1 | 120 | (2 | ) | 3 | 8 | 129 | ||||||||||||||
Other2 | (52 | ) | — | — | — | (52 | ) | |||||||||||||
September 30, 2016 | $ | 219 | $ | 3 | $ | 20 | $ | 45 | $ | 287 | ||||||||||
Inherent | $ | 142 | $ | 3 | $ | 20 | $ | 45 | $ | 210 | ||||||||||
Specific | 77 | — | — | — | 77 |
$ 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 | (33 | ) | 0 | (26 | ) | 0 | 0 | (59 | ) | |||||||||
Recoveries | 3 | 0 | 0 | 0 | 2 | 5 | ||||||||||||
Net (charge-offs) recoveries | (30 | ) | 0 | (26 | ) | 0 | 2 | (54 | ) | |||||||||
Provision (release)1 | 281 | 131 | 173 | 12 | 4 | 601 | ||||||||||||
Other | 3 | 1 | (34 | ) | 0 | 38 | 8 | |||||||||||
September 30, 2020 | $ | 367 | $ | 191 | $ | 222 | $ | 58 | $ | 75 | $ | 913 |
$ in millions | Corporate | Secured lending facilities | CRE | Residential real estate | SBL and Other | Total | ||||||||||||
December 31, 2018 | $ | 62 | $ | 60 | $ | 67 | $ | 20 | $ | 29 | $ | 238 | ||||||
Gross charge-offs | 0 | 0 | 0 | (1 | ) | 0 | (1 | ) | ||||||||||
Provision (release)1 | 40 | 28 | (6 | ) | 5 | 1 | 68 | |||||||||||
Other | (6 | ) | (1 | ) | (1 | ) | 0 | 0 | (8 | ) | ||||||||
September 30, 2019 | $ | 96 | $ | 87 | $ | 60 | $ | 24 | $ | 30 | $ | 297 |
1. | The |
|
Allowance for Credit Losses Rollforward—Lending Commitments Rollforward
$ in millions | Corporate | Consumer | Residential Real | Wholesale Real Estate | Total | |||||||||||||||
December 31, 2016 | $ | 185 | $ | 1 | $ | — | $ | 4 | $ | 190 | ||||||||||
Provision (release)1 | (10 | ) | — | — | — | (10 | ) | |||||||||||||
Other | 1 | — | — | — | 1 | |||||||||||||||
September 30, 2017 | $ | 176 | $ | 1 | $ | — | $ | 4 | $ | 181 | ||||||||||
Inherent | $ | 173 | $ | 1 | $ | — | $ | 4 | $ | 178 | ||||||||||
Specific | 3 | — | — | — | 3 |
$ in millions | Corporate | Consumer | Residential Real | Wholesale Real Estate | Total | |||||||||||||||
December 31, 2015 | $ | 180 | $ | 1 | $ | — | $ | 4 | $ | 185 | ||||||||||
Provision (release)1 | 9 | — | — | — | 9 | |||||||||||||||
Other | (7 | ) | — | — | — | (7 | ) | |||||||||||||
September 30, 2016 | $ | 182 | $ | 1 | $ | — | $ | 4 | $ | 187 | ||||||||||
Inherent | $ | 180 | $ | 1 | $ | — | $ | 4 | $ | 185 | ||||||||||
Specific | 2 | — | — | — | 2 |
$ in millions | Corporate | Secured lending facilities | CRE | Residential real estate | SBL and Other | Total | ||||||||||||
December 31, 2019 | $ | 201 | $ | 27 | $ | 7 | $ | 0 | $ | 6 | $ | 241 | ||||||
Effect of CECL adoption | (41 | ) | (11 | ) | 1 | 2 | (1 | ) | (50 | ) | ||||||||
Provision (release)1 | 119 | 24 | 7 | (1 | ) | 7 | 156 | |||||||||||
Other | 0 | 0 | (4 | ) | 0 | 4 | 0 | |||||||||||
September 30, 2020 | $ | 279 | $ | 40 | $ | 11 | $ | 1 | $ | 16 | $ | 347 |
$ in millions | Corporate | Secured lending facilities | CRE | Residential real estate | SBL and Other | Total | ||||||||||||
December 31, 2018 | $ | 178 | $ | 16 | $ | 3 | $ | 0 | $ | 6 | $ | 203 | ||||||
Provision (release)1 | 27 | 7 | 2 | 0 | 0 | 36 | ||||||||||||
Other | (4 | ) | 0 | 0 | 0 | (1 | ) | (5 | ) | |||||||||
September 30, 2019 | $ | 201 | $ | 23 | $ | 5 | $ | 0 | $ | 5 | $ | 234 |
1. | The |
September 2020 Form 10-Q | 72 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Balance | $ | 4,317 | $ | 4,804 | ||||
Allowance for loan losses | (79 | ) | (89 | ) | ||||
Balance, net | $ | 4,238 | $ | 4,715 | ||||
Repayment term range, in years | 1 to 20 | 1 to 12 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Currently employed by the Firm1 | $ | 2,940 | N/A | |||
No longer employed by the Firm2 | 142 | N/A | ||||
Employee loans | $ | 3,082 | $ | 2,980 | ||
ACL3 | (165 | ) | (61 | ) | ||
Employee loans, net of ACL | $ | 2,917 | $ | 2,919 | ||
Remaining repayment term, weighted average in years | 5.1 | 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 ACL includes a $124 million increase due to the adoption of CECL in the first quarter of 2020. |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Investments | $ | 2,338 | $ | 2,363 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Income (loss)1 | $ | 10 | $ | (13 | ) | $ | (24 | ) | $ | (39 | ) |
The current year period includes an impairment of the Investment Management business segment’s investment in a third-party asset manager. |
|
Overview
The Firm’smethod investments, accounted for under the equity method of accounting (see Note 1 to the consolidated financial statementsother than investments in the 2016 Form10-K)certain fund interests, are summarized above and are included in Other assets in the balance sheets. Income (loss) from equity method investments issheets with related income or loss included in Other revenues in the income statements.
Equity Method Investment Balances
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Investments | $ | 2,766 | $ | 2,837 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Income (loss) | $ | — | $ | (40 | ) | $ | — | $ | (39) |
See “Net Asset Value Measurements—Fund Interests” in Note 5 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.
Included in the equity method investments is the Firm’s 40% voting interest (“40% interest”) in
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Income (loss) from investment in MUMSS | $ | 15 | $ | (4 | ) | $ | 46 | $ | 5 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Income from investment in MUMSS | $ | 25 | $ | 26 | $ | 96 | $ | 83 |
In addition to MUMSS, the Firm held other equity method investments that were not individually significant.
2019 Form 10-K.
Deposits
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Savings and demand deposits | $ | 140,707 | $ | 154,559 | ||||
Time deposits1 | 13,932 | 1,304 | ||||||
Total2 | $ | 154,639 | $ | 155,863 | ||||
Deposits subject to FDIC insurance | $ | 121,896 | $ | 127,992 | ||||
Time deposits that equal or exceed the FDIC insurance limit | $ | 10 | $ | 46 |
Interest Bearing Deposits
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Savings and demand deposits | $ | 202,577 | $ | 149,465 | ||
Time deposits | 36,676 | 40,891 | ||||
Total | $ | 239,253 | $ | 190,356 | ||
Deposits subject to FDIC insurance | $ | 173,173 | $ | 149,966 | ||
Time deposits that equal or exceed the FDIC insurance limit | $ | 20 | $ | 12 |
73 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | At September 30, 2017 | |||
2017 | $ | 3,447 | ||
2018 | 9,456 | |||
2019 | 861 | |||
2020 | — | |||
2021 | 8 | |||
Thereafter | 160 |
FDIC—Federal Deposit Insurance Corporation
|
|
$ in millions | At September 30, 2020 | ||
2020 | $ | 5,457 | |
2021 | 17,986 | ||
2022 | 4,984 | ||
2023 | 4,086 | ||
2024 | 2,784 | ||
Thereafter | 1,379 | ||
Total | $ | 36,676 |
Long-Term
$ in millions | At September 30, | At December 31, | ||||||
Senior | $ | 181,336 | $ | 154,472 | ||||
Subordinated | 10,341 | 10,303 | ||||||
Total | $ | 191,677 | $ | 164,775 | ||||
Weighted average stated maturity, in years | 6.7 | 5.9 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Original maturities of one year or less | $ | 4,553 | $ | 2,567 | ||
Original maturities greater than one year | ||||||
Senior | $ | 187,717 | $ | 179,519 | ||
Subordinated | 11,174 | 10,541 | ||||
Total | $ | 198,891 | $ | 190,060 | ||
Total borrowings | $ | 203,444 | $ | 192,627 | ||
Weighted average stated maturity, in years1 | 7.4 | 6.9 |
1. | Only includes borrowings with original maturities greater than one year. |
$ in millions | At September 30, 2020 | At December 31, 20191 | ||||
Original maturities: | ||||||
One year or less | $ | 9,141 | $ | 7,103 | ||
Greater than one year | 4,716 | 7,595 | ||||
Total | $ | 13,857 | $ | 14,698 | ||
Transfers of assets accounted for as secured financings | $ | 1,108 | $ | 1,115 |
1. | Prior period balances have been conformed to the current presentation. |
Other Secured Financings by Original Maturity
$ in millions | At September 30, | At December 31, | ||||||
Secured financings | ||||||||
Original maturities: | ||||||||
Greater than one year | $ | 11,037 | $ | 9,404 | ||||
One year or less | 2,349 | 1,429 | ||||||
Failed sales1 | 858 | 285 | ||||||
Total | $ | 14,244 | $ | 11,118 |
|
Years to Maturity at September 30, 2020 | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Lending: | |||||||||||||||
Corporate | $ | 14,707 | $ | 36,048 | $ | 37,002 | $ | 4,888 | $ | 92,645 | |||||
Secured lending facilities | 5,554 | 3,693 | 1,302 | 133 | 10,682 | ||||||||||
Commercial and Residential real estate | 137 | 226 | 38 | 260 | 661 | ||||||||||
Securities-based lending and Other | 12,421 | 2,934 | 369 | 386 | 16,110 | ||||||||||
Forward-starting secured financing receivables | 81,340 | 0 | 0 | 0 | 81,340 | ||||||||||
Central counterparty1 | 300 | 0 | 0 | 9,329 | 9,629 | ||||||||||
Underwriting | 675 | 0 | 0 | 0 | 675 | ||||||||||
Investment activities | 947 | 241 | 41 | 286 | 1,515 | ||||||||||
Letters of credit and other financial guarantees | 172 | 1 | 0 | 3 | 176 | ||||||||||
Total | $ | 116,253 | $ | 43,143 | $ | 38,752 | $ | 15,285 | $ | 213,433 | |||||
Lending commitments participated to third parties | $ | 8,647 | |||||||||||||
Forward-starting secured financing receivables settled within three business days | $ | 72,771 |
1. |
|
11. Commitments, Guarantees and Contingencies
Commitments
The Firm’s commitments are summarized in the following table by years to maturity. Since commitments associated with these instruments may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.
Years to Maturity at September 30, 2017 | ||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||
Lending: | ||||||||||||||||||||
Corporate | $ | 13,001 | $ | 30,194 | $ | 44,669 | $ | 4,122 | $ | 91,986 | ||||||||||
Consumer | 6,182 | — | 2 | 3 | 6,187 | |||||||||||||||
Residential real | 17 | 39 | 70 | 273 | 399 | |||||||||||||||
Wholesale real | 124 | 281 | 114 | 232 | 751 | |||||||||||||||
Forward-starting | 68,538 | — | — | — | 68,538 | |||||||||||||||
Investment | 504 | 180 | 55 | 259 | 998 | |||||||||||||||
Letters of credit and | 157 | 1 | 1 | 44 | 203 | |||||||||||||||
Total | $ | 88,523 | $ | 30,695 | $ | 44,911 | $ | 4,933 | $ | 169,062 | ||||||||||
Corporate lending commitments participated to third parties |
| $ | 6,335 | |||||||||||||||||
Forward-starting secured financing receivables |
| $ | 60,013 |
|
September 2020 Form 10-Q | 74 |
Notes to Consolidated Financial Statements (Unaudited) |
Maximum Potential Payout/Notional | ||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||
Credit derivatives | $ | 118,646 | $ | 85,300 | $ | 82,668 | $ | 53,744 | $ | 340,358 | ||||||||||
Other credit contracts | 14 | — | — | 135 | 149 | |||||||||||||||
Non-credit derivatives | 1,592,809 | 1,029,404 | 374,956 | 573,755 | 3,570,924 | |||||||||||||||
Standby letters of credit and other financial guarantees issued1 | 782 | 909 | 1,406 | 4,956 | 8,053 | |||||||||||||||
Market value | 40 | 62 | 69 | — | 171 | |||||||||||||||
Liquidity facilities | 3,237 | — | — | — | 3,237 | |||||||||||||||
Whole loan sales | — | — | 1 | 23,260 | 23,261 | |||||||||||||||
Securitization | — | — | — | 58,423 | 58,423 | |||||||||||||||
General partner | 34 | 49 | 332 | 25 | 440 |
$ in millions | Carrying Amount (Asset)/ Liability | Collateral/ Recourse | ||||||||||||||||
Credit derivatives2 | $ | (2,004 | ) | $ | — | |||||||||||||
Other credit contracts |
| 13 | — | |||||||||||||||
Non-credit derivatives2 |
| 38,611 | — | |||||||||||||||
Standby letters of credit and other |
| (186 | ) | 6,593 | ||||||||||||||
Market value guarantees |
| 1 | 4 | |||||||||||||||
Liquidity facilities | (5 | ) | 5,342 | |||||||||||||||
Whole loan sales guarantees |
| 8 | — | |||||||||||||||
Securitization representations and warranties |
| 91 | — | |||||||||||||||
General partner guarantees |
| 53 | — |
Years to Maturity at September 30, 2020 | |||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||
Credit derivatives | $ | 25,206 | $ | 42,799 | $ | 114,950 | $ | 72,312 | $ | 255,267 | |||||
Other credit contracts | 0 | 190 | 0 | 104 | 294 | ||||||||||
Non-credit derivatives | 1,531,263 | 1,122,139 | 367,428 | 779,686 | 3,800,516 | ||||||||||
Standby letters of credit and other financial guarantees issued1 | 1,082 | 1,475 | 758 | 3,967 | 7,282 | ||||||||||
Market value guarantees | 92 | 28 | 0 | 0 | 120 | ||||||||||
Liquidity facilities | 4,342 | 0 | 0 | 0 | 4,342 | ||||||||||
Whole loan sales guarantees | 1 | 0 | 9 | 23,176 | 23,186 | ||||||||||
Securitization representations and warranties | 0 | 0 | 0 | 67,024 | 67,024 | ||||||||||
General partner guarantees | 59 | 161 | 12 | 115 | 347 | ||||||||||
Client clearing guarantees | 92 | 0 | 0 | 0 | 92 |
$ in millions | Carrying Amount Asset (Liability) | ||
Credit derivatives2 | $ | (1,757 | ) |
Other credit contracts | (4 | ) | |
Non-credit derivatives2 | (88,369 | ) | |
Standby letters of credit and other financial guarantees issued1 | 113 | ||
Market value guarantees | 0 | ||
Liquidity facilities | 6 | ||
Whole loan sales guarantees | 0 | ||
Securitization representations and warranties3 | (42 | ) | |
General partner guarantees | (66 | ) | |
Client clearing guarantees | 0 |
1. | These amounts include certain issued standby letters of credit participated to third parties, totaling |
2. |
|
Primarily related to residential mortgage securitizations. |
|
The Firm also 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 ornon-occurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. Also included as guarantees are 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.
Firm’s maximum potential payout amount as of September 30, 2020 reflects the total of the estimated net liquidation amounts for sponsored member accounts.
Over the last several years, the level of litigation and investigatory activity (both formal and informal) by governmental and self-regulatory agencies has increased materially in the financial services industry. As a result, the Firm expects that it will continue to be the subject of elevated claims for damages and other relief and, while
75 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
|
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.
On August 8, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-14SL, Mortgage Pass-Through Certificates, Series 2006-14SL, Morgan Stanley Mortgage Loan Trust 2007-4SL and Mortgage Pass-Through Certificates, Series 2007-4SL against the Firm styledMorganStanley Mortgage Loan Trust 2006-14SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital 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 trusts, which had original principal balances of approximately $354 million and $305 million respectively, breached various representations and warranties. The complaint seeks, among other relief, rescission of the mortgage loan purchase agreements under-
lying the transactions, specific performance and unspecified damages and interest. On August 16, 2013, the court granted in part and denied in part the Firm’s motion to dismiss the complaint. On August 16, 2016, the Firm moved for summary judgment and the plaintiffs moved 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 $527 million, the total original unpaid balance of the mortgage loans for which the Firm received repurchase demands that it did not repurchase, pluspre- 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 May 3, 2013, plaintiffs inDeutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al.filed a complaint against the Firm, certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Firm to plaintiff was approximately $644 million. The complaint alleges causes of action against the Firm for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 10, 2014, the court granted in part and denied in part the Firm’s motion to dismiss the complaint. On June 20, 2017 the Appellate Division, First Department, affirmed the lower court’s June 10, 2014 order. On July 28, 2017, the Firm filed a motion for leave to appeal that decision to the New York Court of Appeals. On October 3, 2017, the Appellate Division, First Department denied the Firm’s motion for leave to appeal. At September 25, 2017, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $232 million, and the certificates had incurred actual losses of approximately $87 million. Based on currently available information, the Firm believes it could incur a loss in this action up to the difference between the $232 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Firm, or upon sale, pluspre- and post-judgment interest, fees and costs. The Firm may be entitled to be indemnified for some of these losses.
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 as Trustee of the Morgan Stanley Mortgage Loan Trust 2007-2AX (MSM 2007-2AX) v. Morgan Stanley Mortgage Capital Holdings LLC, asSuccessor-by-Merger to Morgan Stanley
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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 August 22, 2013, the Firm filed a motion to dismiss the complaint, which was granted in part and denied in part on November 24, 2014. 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, pluspre- 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 December 30, 2013, Wilmington Trust Company, in its capacity as trustee for Morgan Stanley Mortgage LoanTrust 2007-12, filed a complaint against the Firm styledWilmington Trust Company v. MorganStanley Mortgage Capital Holdings LLC et al., 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 $516 million, breached various representations and warranties. The complaint seeks, among other relief, unspecified damages, attorneys’ fees, interest and costs. On February 28, 2014, the defendants filed a motion to dismiss the complaint, which was granted in part and denied in part on June 14, 2016. The plaintiff filed a notice of appeal of that order on August 17, 2016, and the appeal was fully briefed on May 5, 2017. On July 11, 2017, the Appellate Division, First Department affirmed in part and reversed in part the trial court’s order that granted in part the Firm’s motion to dismiss. On August 10, 2017, plaintiff filed a motion for leave to appeal the Appellate Division, First Department’s July 11, 2017 decision and order. On September 26, 2017, the Appellate Division, First Department denied plaintiff’s motion for leave to appeal. Based on currently available information, the Firm believes that it could incur a loss in this action of up to approximately $152 million, the total original unpaid balance of the mortgage loans for which the Firm received repurchase demands that it did not repurchase, plus attorney’s fees, costs and interest, but plaintiff is seeking to expand the number of loans at issue and the possible range of loss could increase.
On April 28, 2014, Deutsche Bank National Trust Company, in its capacity as trustee for Morgan Stanley Structured Trust I2007-1, filed a complaint against the Firm styledDeutsche Bank National Trust Company v. Morgan Stanley Mortgage
Capital Holdings LLC, pending in the United States District Court for the Southern District of New York. 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 $735 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 compensatory and/or rescissory damages, interest and costs. On April 3, 2015, the court granted in part and denied in part the Firm’s motion to dismiss the complaint. On May 8, 2017, the Firm moved for summary judgment. Based on currently available information, the Firm believes that it could incur a loss in this action of up to approximately $292 million, the total original unpaid balance of the mortgage loans for which the Firm received repurchase demands that it did not repurchase, pluspre- 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 19,23, 2014, Financial Guaranty Insurance Company (“FGIC”) filed a complaint against the Firm in the Supreme Court of NY styledFinancial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. relating to a securitization issued by Basket of Aggregated Residential NIMS2007-1 Ltd. The complaint asserts claims for breach of contract and alleges, among other things, that the net interest margin securities (“NIMS”) in the trust breached various representations and warranties. FGIC issued a financial guaranty policy with respect to certain notes that had an original balance of approximately $475 million. The complaint seeks, among other relief, specific performance of the NIMS breach remedy procedures in the transaction documents, unspecified damages, reimbursement of certain payments made pursuant to the transaction documents, attorneys’ fees and interest. On November 24, 2014, the Firm filed a motion to dismiss the complaint, which the court denied on January 19, 2017. On February 24, 2017, the Firm filed a notice of appeal of the court’s order. Based on currently available information, the Firm believes that it could incur a loss in this action of up to approximately $126 million, the unpaid balance of these notes, pluspre- and post-judgment interest, fees and costs, as well as claim payments that FGIC has made and will make in the future.
On September 23, 2014, FGIC filed a complaint against the Firm in the Supreme Court of NY styledFinancial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et 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 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 and interest. On January 23, 2017, the court denied the Firm’s motion to dismiss the complaint. On February 24, 2017,September 13, 2018, the Firm filed a noticeFirst Department affirmed in part and reversed in part the lower court’s order denying the Firm’s motion to dismiss. On December 20, 2018, the First Department denied plaintiff’s motion for leave to appeal its decision to the Court of appeal ofAppeals or, in the court’s order.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, pluspre- and post-judgmentpost- judgment interest, fees and costs, as well as claim payments that FGIC has
September 2020 Form 10-Q | 76 |
Notes to Consolidated Financial Statements (Unaudited) |
Tax
Amsterdam before the Dutch High Court.
Overview
For a discussion of the Firm’s VIEs, the determination and structure of VIEs and securitization activities, see Note 13 to the consolidated financial statements in the 2016 Form10-K.
VIE Assets and Liabilities by Type of Activity
At September 30, 2017 | At December 31, 2016 | |||||||||||||||
$ in millions | VIE Assets | VIE Liabilities | VIE Assets | VIE Liabilities | ||||||||||||
Credit-linked notes | $ | 100 | $ | — | $ | 501 | $ | — | ||||||||
Other structured financings | 398 | 3 | 602 | 10 | ||||||||||||
MABS1 | 90 | 69 | 397 | 283 | ||||||||||||
Other2 | 1,156 | 260 | 910 | 25 | ||||||||||||
Total | $ | 1,744 | $ | 332 | $ | 2,410 | $ | 318 |
At September 30, 2020 | At December 31, 2019 | |||||||||||
$ in millions | VIE Assets | VIE Liabilities | VIE Assets | VIE Liabilities | ||||||||
OSF | $ | 672 | $ | 429 | $ | 696 | $ | 391 | ||||
MABS1 | 447 | 108 | 265 | 4 | ||||||||
Other2 | 942 | 42 | 987 | 66 | ||||||||
Total | $ | 2,061 | $ | 579 | $ | 1,948 | $ | 461 |
1. | Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial |
2. | Other primarily includes |
|
Consolidated VIE Assets and Liabilities by Balance Sheet Caption
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 82 | $ | 74 | ||||
Trading assets at fair value | 741 | 1,295 | ||||||
Customer and other receivables | 15 | 13 | ||||||
Goodwill | 18 | 18 | ||||||
Intangible assets | 160 | 177 | ||||||
Other assets | 728 | 833 | ||||||
Total | $ | 1,744 | $ | 2,410 | ||||
Liabilities | ||||||||
Other secured financings at fair value | $ | 297 | $ | 289 | ||||
Other liabilities and accrued expenses | 35 | 29 | ||||||
Total | $ | 332 | $ | 318 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Assets | ||||||
Cash and cash equivalents | $ | 284 | $ | 488 | ||
Trading assets at fair value | 1,376 | 943 | ||||
Customer and other receivables | 8 | 18 | ||||
Intangible assets | 101 | 111 | ||||
Other assets | 292 | 388 | ||||
Total | $ | 2,061 | $ | 1,948 | ||
Liabilities | ||||||
Other secured financings | $ | 536 | $ | 422 | ||
Other liabilities and accrued expenses | 43 | 39 | ||||
Total | $ | 579 | $ | 461 | ||
Noncontrolling interests | $ | 275 | $ | 192 |
Select Information Related
77 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Noncontrolling interests | $ | 197 | $ | 228 | ||||
Maximum exposure to losses1 | — | 78 |
At September 30, 2020 | |||||||||||||||
$ in millions | MABS1 | CDO | MTOB | OSF | Other2 | ||||||||||
VIE assets (UPB) | $ | 136,362 | $ | 3,744 | $ | 6,404 | $ | 2,190 | $ | 50,040 | |||||
Maximum exposure to loss3 | |||||||||||||||
Debt and equity interests | $ | 16,821 | $ | 390 | $ | 0 | $ | 1,059 | $ | 10,581 | |||||
Derivative and other contracts | 0 | 0 | 4,342 | 0 | 3,853 | ||||||||||
Commitments, guarantees and other | 810 | 0 | 0 | 0 | 685 | ||||||||||
Total | $ | 17,631 | $ | 390 | $ | 4,342 | $ | 1,059 | $ | 15,119 | |||||
Carrying value of variable interests—Assets | |||||||||||||||
Debt and equity interests | $ | 16,821 | $ | 390 | $ | 0 | $ | 1,059 | $ | 10,581 | |||||
Derivative and other contracts | 0 | 0 | 6 | 0 | 621 | ||||||||||
Total | $ | 16,821 | $ | 390 | $ | 6 | $ | 1,059 | $ | 11,202 | |||||
Additional VIE assets owned4 | $ | 11,832 | |||||||||||||
Carrying value of variable interests—Liabilities | |||||||||||||||
Derivative and other contracts | $ | 0 | $ | 0 | $ | 1 | $ | 0 | $ | 114 | |||||
Total | $ | 0 | $ | 0 | $ | 1 | $ | 0 | $ | 114 |
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 | $ | 0 | $ | 1,009 | $ | 11,977 | |||||
Derivative and other contracts | 0 | 0 | 4,599 | 0 | 2,995 | ||||||||||
Commitments, guarantees and other | 631 | 0 | 0 | 0 | 266 | ||||||||||
Total | $ | 16,945 | $ | 240 | $ | 4,599 | $ | 1,009 | $ | 15,238 | |||||
Carrying value of variable interests–Assets | |||||||||||||||
Debt and equity interests | $ | 16,314 | $ | 240 | $ | 0 | $ | 1,008 | $ | 11,977 | |||||
Derivative and other contracts | 0 | 0 | 6 | 0 | 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 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 444 |
1. |
Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets. and may be in loan or security form. |
2. | Other primarily includes exposures to commercial real estate property and investment funds. |
3. | Where notional amounts are utilized in quantifying the maximum exposure related to |
Non-consolidated VIEs
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. |
Non-consolidated VIEs
At September 30, 2017 | ||||||||||||||||||||
$ in millions | MABS | CDO | MTOB | OSF | Other | |||||||||||||||
VIE assets (unpaid principal balance) | $ | 78,134 | $ | 7,153 | $ | 5,149 | $ | 3,709 | $ | 33,041 | ||||||||||
Maximum exposure to loss |
| |||||||||||||||||||
Debt and equity interests | $ | 8,908 | $ | 1,162 | $ | 44 | $ | 1,551 | $ | 5,684 | ||||||||||
Derivative and other contracts | — | — | 3,237 | — | 50 | |||||||||||||||
Commitments, guarantees and other | 850 | 1,007 | — | 169 | 451 | |||||||||||||||
Total | $ | 9,758 | $ | 2,169 | $ | 3,281 | $ | 1,720 | $ | 6,185 | ||||||||||
Carrying value of exposure to loss—Assets |
| |||||||||||||||||||
Debt and equity interests | $ | 8,908 | $ | 1,162 | $ | 44 | $ | 1,145 | $ | 5,684 | ||||||||||
Derivative and other contracts | — | — | 6 | — | 5 | |||||||||||||||
Total | $ | 8,908 | $ | 1,162 | $ | 50 | $ | 1,145 | $ | 5,689 |
At December 31, 2016 | ||||||||||||||||||||
$ in millions | MABS | CDO | MTOB | OSF | Other | |||||||||||||||
VIE assets (unpaid principal balance) | $ | 101,916 | $ | 11,341 | $ | 4,857 | $ | 4,293 | $ | 39,077 | ||||||||||
Maximum exposure to loss |
| |||||||||||||||||||
Debt and equity interests | $ | 11,243 | $ | 1,245 | $ | 50 | $ | 1,570 | $ | 4,877 | ||||||||||
Derivative and other contracts | — | — | 2,812 | — | 45 | |||||||||||||||
Commitments, guarantees and other | 684 | 99 | — | 187 | 228 | |||||||||||||||
Total | $ | 11,927 | $ | 1,344 | $ | 2,862 | $ | 1,757 | $ | 5,150 | ||||||||||
Carrying value of exposure to loss—Assets |
| |||||||||||||||||||
Debt and equity interests | $ | 11,243 | $ | 1,245 | $ | 49 | $ | 1,183 | $ | 4,877 | ||||||||||
Derivative and other contracts | — | — | 5 | — | 18 | |||||||||||||||
Total | $ | 11,243 | $ | 1,245 | $ | 54 | $ | 1,183 | $ | 4,895 |
MTOB—Municipal tender option bonds
OSF—Other structured financings
Non-consolidated VIE Mortgage- and Asset-Backed Securitization Assets
At September 30, 2017 | At December 31, 2016 | |||||||||||||||
$ in millions | Unpaid Principal Balance | Debt and Equity Interests | Unpaid Principal Balance | Debt and Equity Interests | ||||||||||||
Residential mortgages | $ | 13,043 | $ | 910 | $ | 4,775 | $ | 458 | ||||||||
Commercial mortgages | 43,920 | 1,964 | 54,021 | 2,656 | ||||||||||||
U.S. agency collateralized mortgage obligations | 12,015 | 2,723 | 14,796 | 2,758 | ||||||||||||
Other consumer or commercial loans | 9,156 | 3,311 | 28,324 | 5,371 | ||||||||||||
Total | $ | 78,134 | $ | 8,908 | $ | 101,916 | $ | 11,243 |
The Firm’s maximum exposure to loss presented above often differs from the carrying value of the variable interests held by the Firm. The maximum exposure to loss presented above is dependent on the nature of the Firm’s variable interest in the VIEsVIE and is limited to the notional amounts of certain liquidity facilities and other credit support, total return swaps
|
and written put options, andas well as the fair value of certain other derivatives and investments the Firm has made in the VIEs. Liabilities issued by VIEs generally arenon-recourse to the Firm. Where notional amounts are utilized in quantifying the maximum exposure related to derivatives, such amounts do not reflect fair value write-downs already recorded by the Firm.
VIE.
Securitization transactions generally involve VIEs. Primarily as a result of its secondary market-making activities, the Firm owned additional VIE assets mainly
These assets were either retained in connection with transfers of assets by the Firm, acquired in connection with secondary market-making activities, held as AFS securities in its Investment securities portfolio (see Note 5), or held as investments in funds. At September 30, 2017 and December 31, 2016, these assets consisted of securities backed by residential mortgage loans, commercial mortgage loans or other consumer loans, such as credit card receivables, automobile loans and student loans, CDOs or CLOs, and investment funds.
The Firm’s primary risk exposure isVIEs generally are non-recourse to the securities issued by the SPE owned by the Firm,Firm.
At September 30, 2020 | At December 31, 2019 | |||||||||||
$ in millions | UPB | Debt and Equity Interests | UPB | Debt and Equity Interests | ||||||||
Residential mortgages | $ | 20,056 | $ | 3,264 | $ | 30,353 | $ | 3,993 | ||||
Commercial mortgages | 59,111 | 3,940 | 53,892 | 3,881 | ||||||||
U.S. agency collateralized mortgage obligations | 52,335 | 8,021 | 36,366 | 6,365 | ||||||||
Other consumer or commercial loans | 4,860 | 1,596 | 4,992 | 2,075 | ||||||||
Total | $ | 136,362 | $ | 16,821 | $ | 125,603 | $ | 16,314 |
At September 30, 2020 | ||||||||||||
$ in millions | RML | CML | U.S. Agency CMO | CLN and Other1 | ||||||||
SPE assets (UPB)2 | $ | 7,225 | $ | 81,900 | $ | 22,951 | $ | 12,223 | ||||
Retained interests | ||||||||||||
Investment grade | $ | 47 | $ | 794 | $ | 745 | $ | 0 | ||||
Non-investment grade | 16 | 221 | 0 | 89 | ||||||||
Total | $ | 63 | $ | 1,015 | $ | 745 | $ | 89 | ||||
Interests purchased in the secondary market | ||||||||||||
Investment grade | $ | 1 | $ | 129 | $ | 26 | $ | 0 | ||||
Non-investment grade | 24 | 60 | 0 | 0 | ||||||||
Total | $ | 25 | $ | 189 | $ | 26 | $ | 0 | ||||
Derivative assets | $ | 0 | $ | 0 | $ | 0 | $ | 500 | ||||
Derivative liabilities | 0 | 0 | 0 | 127 |
September 2020 Form 10-Q | 78 |
Notes to Consolidated Financial Statements (Unaudited) |
At December 31, 2019 | ||||||||||||
$ in millions | RML | CML | U.S. Agency CMO | CLN and Other1 | ||||||||
SPE assets (UPB)2 | $ | 9,850 | $ | 86,203 | $ | 19,132 | $ | 8,410 | ||||
Retained interests | ||||||||||||
Investment grade | $ | 29 | $ | 720 | $ | 2,376 | $ | 1 | ||||
Non-investment grade | 17 | 254 | 0 | 92 | ||||||||
Total | $ | 46 | $ | 974 | $ | 2,376 | $ | 93 | ||||
Interests purchased in the secondary market | ||||||||||||
Investment grade | $ | 6 | $ | 197 | $ | 77 | $ | 0 | ||||
Non-investment grade | 75 | 51 | 0 | 0 | ||||||||
Total | $ | 81 | $ | 248 | $ | 77 | $ | 0 | ||||
Derivative assets | $ | 0 | $ | 0 | $ | 0 | $ | 339 | ||||
Derivative liabilities | 0 | 0 | 0 | 145 |
Fair Value At September 30, 2020 | |||||||||
$ in millions | Level 2 | Level 3 | Total | ||||||
Retained interests | |||||||||
Investment grade | $ | 771 | $ | 22 | $ | 793 | |||
Non-investment grade | 5 | 72 | 77 | ||||||
Total | $ | 776 | $ | 94 | $ | 870 | |||
Interests purchased in the secondary market | |||||||||
Investment grade | $ | 154 | $ | 2 | $ | 156 | |||
Non-investment grade | 66 | 18 | 84 | ||||||
Total | $ | 220 | $ | 20 | $ | 240 | |||
Derivative assets | $ | 495 | $ | 5 | $ | 500 | |||
Derivative liabilities | 126 | 1 | 127 |
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 |
1. | Amounts include CLO transactions managed by unrelated third parties. |
2. | Amounts include assets transferred by unrelated transferors. |
Transactions with SPEs in which the Firm, acting as principal, transferred financial assets with continuing involvement and received sales treatment are shown in the following tables.
Transfers of Assets with Continuing Involvement
At September 30, 2017 | ||||||||||||||||
$ in millions | Residential | Commercial Mortgage Loans | U.S. Agency Collateralized Mortgage Obligations | Credit- Other1 | ||||||||||||
SPE assets (unpaid principal balance)2 | $ | 16,173 | $ | 55,682 | $ | 11,363 | $ | 11,602 | ||||||||
Retained interests | ||||||||||||||||
Investment grade3 | $ | — | $ | 233 | $ | 682 | $ | 5 | ||||||||
Non-investment grade | 2 | 139 | — | 638 | ||||||||||||
Total | $ | 2 | $ | 372 | $ | 682 | $ | 643 | ||||||||
Interests purchased in the secondary market (fair value) |
| |||||||||||||||
Investment grade | $ | — | $ | 68 | $ | 26 | $ | — | ||||||||
Non-investment grade | 38 | 81 | — | — | ||||||||||||
Total | $ | 38 | $ | 149 | $ | 26 | $ | — | ||||||||
Derivative assets (fair value) | $ | — | $ | — | $ | — | $ | 239 | ||||||||
Derivative liabilities (fair value) | — | — | — | 72 | ||||||||||||
At December 31, 2016 | ||||||||||||||||
$ in millions | Residential | Commercial Mortgage Loans | U.S. Agency Collateralized Mortgage Obligations | Credit- Other1 | ||||||||||||
SPE assets (unpaid principal balance)2 | $ | 19,381 | $ | 43,104 | $ | 11,092 | $ | 11,613 | ||||||||
Retained interests (fair value) | ||||||||||||||||
Investment grade | $ | — | $ | 22 | $ | 375 | $ | — | ||||||||
Non-investment grade | 4 | 79 | — | 826 | ||||||||||||
Total | $ | 4 | $ | 101 | $ | 375 | $ | 826 | ||||||||
Interests purchased in the secondary market (fair value) |
| |||||||||||||||
Investment grade | $ | — | $ | 30 | $ | 26 | $ | — | ||||||||
Non-investment grade | 23 | 75 | — | — | ||||||||||||
Total | $ | 23 | $ | 105 | $ | 26 | $ | — | ||||||||
Derivative assets (fair value) | $ | — | $ | 261 | $ | — | $ | 89 | ||||||||
Derivative liabilities (fair value) | — | — | — | 459 |
|
|
|
Fair Value at September 30, 2017 | ||||||||||||
$ in millions | Level 2 | Level 3 | Total | |||||||||
Retained interests | ||||||||||||
Investment grade |
$ |
687 |
|
$ |
5 |
|
$ |
692 |
| |||
Non-investment grade | 48 | 731 | 779 | |||||||||
Total | $ | 735 | $ | 736 | $ | 1,471 | ||||||
Interests purchased in the secondary market |
| |||||||||||
Investment grade | $ | 93 | $ | 1 | $ | 94 | ||||||
Non-investment grade | 106 | 13 | 119 | |||||||||
Total | $ | 199 | $ | 14 | $ | 213 | ||||||
Derivative assets | $ | 77 | $ | 162 | $ | 239 | ||||||
Derivative liabilities | 67 | 5 | 72 |
|
Fair Value at December 31, 2016 | ||||||||||||
$ in millions | Level 2 | Level 3 | Total | |||||||||
Retained interests | ||||||||||||
Investment grade | $ | 385 | $ | 12 | $ | 397 | ||||||
Non-investment grade | 14 | 895 | 909 | |||||||||
Total | $ | 399 | $ | 907 | $ | 1,306 | ||||||
Interests purchased in the secondary market |
| |||||||||||
Investment grade | $ | 56 | $ | — | $ | 56 | ||||||
Non-investment grade | 84 | 14 | 98 | |||||||||
Total | $ | 140 | $ | 14 | $ | 154 | ||||||
Derivative assets | $ | 348 | $ | 2 | $ | 350 | ||||||
Derivative liabilities | 98 | 361 | 459 |
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.vehicles, for which Investment banking underwriting net revenues are recognized in connection with these transactions.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
Three Months Ended
September 30, | Nine Months Ended
September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
New transactions1 | $ | 6,875 | $ | 6,819 | $ | 17,622 | $ | 13,695 | ||||||||
Retained interests | 648 | 768 | 1,607 | 1,901 | ||||||||||||
Sales of corporate loans to | 56 | 199 | 148 | 230 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
New transactions1 | $ | 12,969 | $ | 8,651 | $ | 30,629 | $ | 20,897 | ||||
Retained interests | 1,991 | 902 | 7,215 | 4,424 | ||||||||
Sales of corporate loans to CLO SPEs1, 2 | 234 | 0 | 373 | 0 |
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 bynon-affiliates. |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Gross cash proceeds from sale of assets1 | $ | 31,800 | $ | 38,661 | ||
Fair value | ||||||
Assets sold | $ | 32,006 | $ | 39,137 | ||
Derivative assets recognized in the balance sheets | 631 | 647 | ||||
Derivative liabilities recognized in the balance sheets | 423 | 152 |
1. | The carrying value of assets derecognized at the time of sale approximates gross cash proceeds. |
Assets Sold with Retained Exposure
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Carrying value of assets derecognized at | $ | 14,458 | $ | 11,209 | ||||
Fair value | ||||||||
Assets sold | 14,618 | 11,301 | ||||||
Derivative assets recognized in the | 177 | 128 | ||||||
Derivative liabilities recognized in the | 17 | 36 |
Failed Sales
For transfers that fail to meet the accounting criteria for a sale, the Firm continues to recognize the assets in Trading assets at fair value, and the Firm recognizes the associated liabilities in Other secured financings at fair value in the balance sheets (see Note 10).
The assets transferred to certain unconsolidated VIEs in transactions accounted for as failed sales cannot be removed unilaterally by the Firm and are not generally available to the Firm. The related liabilities are alsonon-recourse to the Firm. In certain other failed sale transactions, the Firm has the right to remove assets or provides additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.
Carrying Value of Assets and Liabilities Related to Failed Sales
At September 30, 2017 | At December 31, 2016 | |||||||||||||||
$ in millions | Assets | Liabilities | Assets | Liabilities | ||||||||||||
Failed sales | $ | 858 | $ | 858 | $ | 285 | $ | 285 |
The Firm’s risk-based capital ratios for purposes of determining regulatory compliance are the lower of the capital ratios computed under (i) the standardized approaches for calculating credit risk and market risk RWAs (the “Standardized Approach”) and (ii) the applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”).
79 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
interim final rule.
A greater than 2.5%to the following Common Equity Tier 1 capital conservation buffer;
• | A greater than 2.5% capital conservation buffer; |
In 2017, thephase-in amount for each of the buffers is 50% of the fullyphased-in buffer requirement. Failure to maintain the buffers will 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.
The methods for calculating each of the Firm’s risk-based capital ratios will change through January 1, 2022 as aspects of the capital rules are phased in. These changes may result in differences in the Firm’s reported capital ratios from one reporting period to the next that are independent of changes to its capital base, asset composition,off-balance sheet exposures or risk profile.
For a further discussion of the Firm’s calculation of risk-based capital ratios, see Note 14 to the consolidated financial statements in the 2016 Form10-K.
$ in millions Common Equity Tier 1 capital Tier 1 capital Total capital Tier 1 leverage Total RWAs Adjusted average assets2 At December 31, 2016 $ in millions Common Equity Tier 1 capital Tier 1 capital Total capital Tier 1 leverage Total RWAs Adjusted average assets2At September 30, 2017, the Firm’s ratios are based on the Standardized Approach transitional rules. At December 31, 2016, the Firm’s ratios were based on the Advanced Approach transitional rules.Regulatory Capital At September 30, 2017 Amount Ratio Minimum
Capital
Ratio1 $ 62,214 16.9% 7.3% 71,006 19.3% 8.8% 81,861 22.2% 10.8% — 8.4% 4.0% $ 368,629 N/A N/A 841,360 N/A N/A Amount Ratio Minimum
Capital
Ratio1 $ 60,398 16.9% 5.9% 68,097 19.0% 7.4% 78,642 22.0% 9.4% — 8.4% 4.0% $ 358,141 N/A N/A 811,402 N/A N/A N/A—Not Applicable At September 30, 2020 $ in millions Amount Ratio Risk-based capital 10.0 % $ 71,157 16.9 % Tier 1 capital 11.5 % 79,905 19.0 % Total capital 13.5 % 89,763 21.4 % Total RWA 420,081 $ in millions At
September 30,
2020Leverage-based capital $ 962,435 Tier 1 leverage ratio 4.0 % 8.3 % $ 1,084,348 5.0 % 7.4 %
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 |
$ in millions | Required Ratio1 | At December 31, 2019 | ||||
Leverage-based capital | ||||||
Adjusted average assets2 | $ | 889,195 | ||||
Tier 1 leverage ratio | 4.0 | % | 8.3 | % | ||
Supplementary leverage exposure3,4 | $ | 1,155,177 | ||||
SLR3 | 5.0 | % | 6.4 | % |
1. |
Required ratios are inclusive of any buffers applicable as of the date presented. Failure to maintain the buffers would result in restrictions on the Firm’s ability to make capital |
2. | Adjusted average assets |
3. Based on a Federal Reserve interim final rule in effect until March 31, 2021, the Firm’s SLR and Supplementary leverage exposure as of September 30, 2020 reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. 4. subjectcalculated in a similar manner to similarthe Firm’s regulatory capital requirements, asalthough G-SIB capital surcharge requirements do not apply to the Firm. FailureU.S. Bank Subsidiaries.
September 2020 Form 10-Q | 80 |
Notes to Consolidated Financial Statements (Unaudited) |
Each U.S. depository institution subsidiary of the Firm must be well-capitalized in order for the Firm to continue to qualify as a financial holding company and to continue to engage in the broadest range of financial activities permitted for financial holding companies. Under regulatory capital requirements adopted by the U.S. federal banking agencies, U.S. depository institutions must maintain certain minimum capital ratios in order to be considered well-capitalized. At September 30, 2017 and December 31, 2016, the Firm’s U.S. Bank Subsidi-
|
aries maintained capital at levels sufficiently in excess of the universally mandated well-capitalized requirements to address any additional capital needs and requirements identified by the U.S. federal banking regulators.
At September 30, 2017 and December 31, 2016, the U.S. Bank Subsidiaries’ ratios are based on the Standardized Approach transitional rules.
At September 30, 2020, the risk-based and leverage-based capital amounts and ratios are calculated excluding the effect of the adoption of CECL based on our election to defer this effect over a five-year transition period.
At September 30, 2017 | ||||||||||||
$ in millions | Amount | Ratio | Minimum Capital Ratio1 | |||||||||
Common Equity Tier 1 capital | $ | 14,839 | 19.3 | % | 6.5% | |||||||
Tier 1 capital | 14,839 | 19.3 | % | 8.0% | ||||||||
Total capital | 15,110 | 19.7 | % | 10.0% | ||||||||
Tier 1 leverage | 14,839 | 11.8 | % | 5.0% | ||||||||
At December 31, 2016 | ||||||||||||
$ in millions | Amount | Ratio | Minimum Capital Ratio1 | |||||||||
Common Equity Tier 1 capital | $ | 13,398 | 16.9 | % | 6.5% | |||||||
Tier 1 capital | 13,398 | 16.9 | % | 8.0% | ||||||||
Total capital | 14,858 | 18.7 | % | 10.0% | ||||||||
Tier 1 leverage | 13,398 | 10.5 | % | 5.0% |
At September 30, 2020 | |||||||||
$ in millions | Well-Capitalized Requirement | Required Ratio1 | Amount | Ratio | |||||
Risk-based capital | |||||||||
Common Equity Tier 1 capital | 6.5 | % | 7.0 | % | $ | 17,764 | 19.7 | % | |
Tier 1 capital | 8.0 | % | 8.5 | % | 17,764 | 19.7 | % | ||
Total capital | 10.0 | % | 10.5 | % | 18,442 | 20.4 | % | ||
Leverage-based capital | |||||||||
Tier 1 leverage | 5.0 | % | 4.0 | % | $ | 17,764 | 10.7 | % | |
SLR | 6.0 | % | 3.0 | % | 17,764 | 8.5 | % |
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 September 30, 2020 | |||||||||
$ in millions | Well-Capitalized Requirement | Required Ratio1 | Amount | Ratio | |||||
Risk-based capital | |||||||||
Common Equity Tier 1 capital | 6.5 | % | 7.0 | % | $ | 8,528 | 23.4 | % | |
Tier 1 capital | 8.0 | % | 8.5 | % | 8,528 | 23.4 | % | ||
Total capital | 10.0 | % | 10.5 | % | 8,611 | 23.6 | % | ||
Leverage-based capital | |||||||||
Tier 1 leverage | 5.0 | % | 4.0 | % | $ | 8,528 | 8.2 | % | |
SLR | 6.0 | % | 3.0 | % | 8,528 | 7.8 | % |
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 | % | $ | 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. |
|
MSPBNA’s Regulatory Capital
At September 30, 2017 | ||||||||||||
$ in millions | Amount | Ratio | Minimum Capital Ratio1 | |||||||||
Common Equity Tier 1 capital | $ | 6,082 | 24.6 | % | 6.5% | |||||||
Tier 1 capital | 6,082 | 24.6 | % | 8.0% | ||||||||
Total capital | 6,124 | 24.8 | % | 10.0% | ||||||||
Tier 1 leverage | 6,082 | 9.8 | % | 5.0% | ||||||||
At December 31, 2016 | ||||||||||||
$ in millions | Amount | Ratio | Minimum Capital Ratio1 | |||||||||
Common Equity Tier 1 capital | $ | 5,589 | 26.1 | % | 6.5% | |||||||
Tier 1 capital | 5,589 | 26.1 | % | 8.0% | ||||||||
Total capital | 5,626 | 26.3 | % | 10.0% | ||||||||
Tier 1 leverage | 5,589 | 10.6 | % | 5.0% |
|
U.S. Broker-Dealer Regulatory Capital Requirements
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Net capital | $ | 10,613 | $ | 10,311 | ||||
Excess net capital | 8,558 | 8,034 |
Morgan Stanley & Co. LLC (“
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Net capital | $ | 14,183 | $ | 13,708 | ||
Excess net capital | 10,217 | 10,686 |
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Net capital | $ | 2,573 | $ | 3,946 | ||||
Excess net capital | 2,415 | 3,797 |
Morgan Stanley Smith Barney LLC (“
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Net capital | $ | 2,758 | $ | 3,387 | ||
Excess net capital | 2,581 | 3,238 |
Morgan Stanley & Co. International plc (“MSIP”),
81 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Shares Outstanding | Carrying Value | ||||||||||
$ in millions, except per share data | At September 30, 2020 | Liquidation Preference per Share | At September 30, 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. |
|
Dividends and Share Repurchases
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Repurchases of common stock | $ | 1,250 | $ | 1,250 | $ | 2,500 | $ | 2,500 |
On June 28, 2017, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) announced that they did not object to the Firm’s 2017 capital plan (“Capital Plan”). The Capital Plan includes the share repurchase of up to $5.0 billion of outstanding common stock for the period beginning July 1, 2017 through June 30, 2018, an increase from $3.5 billion in the 2016 Capital Plan. Additionally, the Capital Plan includes an increase in the quarterly common stock dividend to $0.25 per share from $0.20 per share, beginning with the common stock dividend declared on July 19, 2017.
On October 17, 2017, the Firm announced that the Board of Directors (the “Board”) declared a quarterly dividend per common share of $0.25. The dividend is payable on November 15, 2017 to common shareholders of record on October 31, 2017.
Preferred Stock
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Dividends declared | $ | 93 | $ | 78 | $ | 353 | $ | 312 |
For a description of Series A through Series KL preferred stock issuances, see Note 1516 to the consolidated financial statements in the 20162019 Form10-K. On September 15, 2017, the Firm announced that the Board declared quarterly dividends for preferred stock shareholders of record on September 29, 2017 that were paid on October 16, 2017. The Firm is authorized to issue 30 million shares of preferred stock. 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 13)16).
Series K Preferred Stock.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
in millions | 2020 | 2019 | 2020 | 2019 | ||||
Weighted average common shares outstanding, basic | 1,542 | 1,604 | 1,546 | 1,632 | ||||
Effect of dilutive Stock options, RSUs and PSUs | 24 | 23 | 19 | 21 | ||||
Weighted average common shares outstanding and common stock equivalents, diluted | 1,566 | 1,627 | 1,565 | 1,653 | ||||
Weighted average antidilutive common stock equivalents (excluded from the computation of diluted EPS) | 0 | 0 | 7 | 2 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Repurchases of common stock under the Firm's Share Repurchase Program | $ | 0 | $ | 1,500 | $ | 1,347 | $ | 3,860 |
Preferred Stock Outstanding
Shares Outstanding | Liquidation
| Carrying Value | ||||||||||||||
$ in millions, except per share data | At September 30, 2017 | At September 30, 2017 | At December 31, 2016 | |||||||||||||
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 | ||||||||||||
G | 20,000 | 25,000 | 500 | 500 | ||||||||||||
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 | — | ||||||||||||
Total |
| $ | 8,520 | $ | 7,520 |
$ in millions, except per share data | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | ||||||||||
Per Share1 | Total | Per Share1 | Total | |||||||||
Preferred Stock Series | ||||||||||||
A | $ | 256 | $ | 11 | $ | 256 | $ | 11 | ||||
C | 25 | 13 | 25 | 13 | ||||||||
E | 445 | 15 | 445 | 15 | ||||||||
F | 430 | 15 | 430 | 15 | ||||||||
G2 | 0 | 0 | 414 | 8 | ||||||||
H3 | 248 | 13 | 378 | 20 | ||||||||
I | 398 | 16 | 398 | 16 | ||||||||
J4 | 261 | 16 | 0 | 0 | ||||||||
K | 366 | 15 | 366 | 15 | ||||||||
L | 305 | 6 | 0 | 0 | ||||||||
Total Preferred stock | $ | 120 | $ | 113 | ||||||||
Common stock | 0.35 | $ | 551 | $ | 0.35 | $ | 577 |
September 2020 Form 10-Q | 82 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions, except per share data | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | ||||||||||
Per Share1 | Total | Per Share1 | Total | |||||||||
Preferred Stock Series | ||||||||||||
A | $ | 761 | $ | 33 | $ | 758 | $ | 33 | ||||
C | 75 | 39 | 75 | 39 | ||||||||
E | 1,336 | 45 | 1,336 | 45 | ||||||||
F | 1,289 | 44 | 1,289 | 45 | ||||||||
G2 | 0 | 0 | 1,242 | 24 | ||||||||
H3 | 897 | 47 | 1,059 | 55 | ||||||||
I | 1,195 | 48 | 1,195 | 48 | ||||||||
J4 | 955 | 58 | 694 | 42 | ||||||||
K | 1,097 | 45 | 1,097 | 45 | ||||||||
L | 914 | 18 | 0 | 0 | ||||||||
Total Preferred stock | $ | 377 | $ | 376 | ||||||||
Common stock | 1.05 | $ | 1,662 | $ | 0.95 | $ | 1,594 |
1. |
Common and Preferred Stock |
Comprehensive Income (Loss)
June 30, 2017 OCI during the period September 30, 2017 June 30, 2016 OCI during the period September 30, 2016 December 31, 2016 OCI during the period September 30, 2017 December 31, 2015 Cumulative adjustment for OCI during the period September 30, 2016 Amounts are net of tax and noncontrolling interests.2. Series G preferred stock was redeemed during the first quarter of 2020. For further information, see Note 16 to the financial statements in the 2019 Form 10-K. 3. 4. Nine Months Ended $ in millions September 30, 2020 Financial Instruments—Credit Losses $ (100 ) Nine Months Ended $ in millions September 30, 2019 Leases $ 63 $ in millions Foreign
Currency
Translation
Adjustments AFS
Securities Pensions,
Postretirement
and Other DVA Total $ (856 ) $ (396 ) $ (470 ) $ (766 ) $ (2,488) 61 26 — (143 ) (56) $ (795 ) $ (370 ) $ (470 ) $ (909 ) $ (2,544) $ (779 ) $ 219 $ (378 ) $ 33 $ (905) 25 (99 ) (1 ) (90 ) (165) $ (754 ) $ 120 $ (379 ) $ (57 ) $ (1,070) $ (986 ) $ (588 ) $ (474 ) $ (595 ) $ (2,643) 191 218 4 (314 ) 99 $ (795 ) $ (370 ) $ (470 ) $ (909 ) $ (2,544) $ (963 ) $ (319 ) $ (374 ) $ — $ (1,656)
accounting change
related to DVA2 — — — (312 ) (312) 209 439 (5 ) 255 898 $ (754 ) $ 120 $ (379 ) $ (57 ) $ (1,070) $ in millions CTA DVA Total June 30, 2020 $ (1,017 ) $ 1,827 $ (620 ) $ (189 ) $ 1 OCI during the period 81 (62 ) 5 (562 ) (538 ) September 30, 2020 $ (936 ) $ 1,765 $ (615 ) $ (751 ) $ (537 ) June 30, 2019 $ (865 ) $ 108 $ (574 ) $ (720 ) $ (2,051 ) OCI during the period (96 ) 214 3 332 453 September 30, 2019 $ (961 ) $ 322 $ (571 ) $ (388 ) $ (1,598 ) December 31, 2019 $ (897 ) $ 207 $ (644 ) $ (1,454 ) $ (2,788 ) OCI during the period (39 ) 1,558 29 703 2,251 September 30, 2020 $ (936 ) $ 1,765 $ (615 ) $ (751 ) $ (537 ) December 31, 2018 $ (889 ) $ (930 ) $ (578 ) $ 105 $ (2,292 ) OCI during the period (72 ) 1,252 7 (493 ) 694 September 30, 2019 $ (961 ) $ 322 $ (571 ) $ (388 ) $ (1,598 ) 1. 2.In accordance with the early adoption of a provision of the accounting updateRecognition and Measurement of Financial Assets and Financial Liabilities, a cumulativecatch-up adjustment was recorded as of January 1, 2016 to move the cumulative unrealized DVA amount, net of noncontrolling interests and tax, related to outstanding liabilities under the fair value option election from Retained earnings into AOCI. See Note 2 to the consolidated financial statements in the 2016 Form10-K for further information.
Three Months Ended September 30, 2020 | |||||||||||||||
$ in millions | Pre-tax Gain (Loss) | Income Tax Benefit (Provision) | After-tax Gain (Loss) | Non- controlling Interests | Net | ||||||||||
CTA | |||||||||||||||
OCI activity | $ | 34 | $ | 76 | $ | 110 | $ | 29 | $ | 81 | |||||
Reclassified to earnings | 0 | 0 | 0 | 0 | 0 | ||||||||||
Net OCI | $ | 34 | $ | 76 | $ | 110 | $ | 29 | $ | 81 | |||||
Change in net unrealized gains (losses) on AFS securities | |||||||||||||||
OCI activity | $ | (26 | ) | $ | 6 | $ | (20 | ) | $ | 0 | $ | (20 | ) | ||
Reclassified to earnings | (55 | ) | 13 | (42 | ) | 0 | (42 | ) | |||||||
Net OCI | $ | (81 | ) | $ | 19 | $ | (62 | ) | $ | 0 | $ | (62 | ) | ||
Pension, postretirement and other | |||||||||||||||
OCI activity | $ | (1 | ) | $ | 1 | $ | 0 | $ | 0 | $ | 0 | ||||
Reclassified to earnings | 6 | (1 | ) | 5 | 0 | 5 | |||||||||
Net OCI | $ | 5 | $ | 0 | $ | 5 | $ | 0 | $ | 5 | |||||
Change in net DVA | |||||||||||||||
OCI activity | $ | (747 | ) | $ | 178 | $ | (569 | ) | $ | (1 | ) | $ | (568 | ) | |
Reclassified to earnings | 8 | (2 | ) | 6 | 0 | 6 | |||||||||
Net OCI | $ | (739 | ) | $ | 176 | $ | (563 | ) | $ | (1 | ) | $ | (562 | ) |
Three Months Ended September 30, 2019 | |||||||||||||||
$ in millions | Pre-tax Gain (Loss) | Income Tax Benefit (Provision) | After-tax Gain (Loss) | Non- controlling Interests | Net | ||||||||||
CTA | |||||||||||||||
OCI activity | $ | (26 | ) | $ | (73 | ) | $ | (99 | ) | $ | (3 | ) | $ | (96 | ) |
Reclassified to earnings | 0 | 0 | 0 | 0 | 0 | ||||||||||
Net OCI | $ | (26 | ) | $ | (73 | ) | $ | (99 | ) | $ | (3 | ) | $ | (96 | ) |
Change in net unrealized gains (losses) on AFS securities | |||||||||||||||
OCI activity | $ | 307 | $ | (73 | ) | $ | 234 | $ | 0 | $ | 234 | ||||
Reclassified to earnings | (26 | ) | 6 | (20 | ) | 0 | (20 | ) | |||||||
Net OCI | $ | 281 | $ | (67 | ) | $ | 214 | $ | 0 | $ | 214 | ||||
Pension, postretirement and other | |||||||||||||||
OCI activity | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||
Reclassified to earnings | 4 | (1 | ) | 3 | 0 | 3 | |||||||||
Net OCI | $ | 4 | $ | (1 | ) | $ | 3 | $ | 0 | $ | 3 | ||||
Change in net DVA | |||||||||||||||
OCI activity | $ | 441 | $ | (106 | ) | $ | 335 | $ | 5 | $ | 330 | ||||
Reclassified to earnings | 2 | 0 | 2 | 0 | 2 | ||||||||||
Net OCI | $ | 443 | $ | (106 | ) | $ | 337 | $ | 5 | $ | 332 |
83 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Period Changes in OCI Components
Three Months Ended | ||||||||||||||||||||
September 30, 2017 | ||||||||||||||||||||
$ in millions | Pre-tax gain (loss) | Income tax benefit (provision) | After-tax gain (loss) | Non- controlling | Net | |||||||||||||||
Foreign currency translation adjustments |
| |||||||||||||||||||
OCI activity | $ | 19 | $ | 42 | $ | 61 | $ | — | $ | 61 | ||||||||||
Reclassified to | — | — | — | — | — | |||||||||||||||
Net OCI | $ | 19 | $ | 42 | $ | 61 | $ | — | $ | 61 | ||||||||||
Change in net unrealized gains (losses) on AFS securities
|
| |||||||||||||||||||
OCI activity | $ | 52 | $ | (19 | ) | $ | 33 | $ | — | $ | 33 | |||||||||
Reclassified to | (11 | ) | 4 | (7 | ) | — | (7) | |||||||||||||
Net OCI | $ | 41 | $ | (15 | ) | $ | 26 | $ | — | $ | 26 | |||||||||
Pension, postretirement and other
|
| |||||||||||||||||||
OCI activity | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Reclassified to | 1 | (1 | ) | — | — | — | ||||||||||||||
Net OCI | $ | 1 | $ | (1 | ) | $ | — | $ | — | $ | — | |||||||||
Change in net DVA
|
| |||||||||||||||||||
OCI activity | $ | (220 | ) | $ | 77 | $ | (143 | ) | $ | (6 | ) | $ | (137) | |||||||
Reclassified to | (9 | ) | 3 | (6 | ) | — | (6) | |||||||||||||
Net OCI | $ | (229 | ) | $ | 80 | $ | (149 | ) | $ | (6 | ) | $ | (143) |
Three Months Ended | ||||||||||||||||||||
September 30, 2016 | ||||||||||||||||||||
$ in millions | Pre-tax gain (loss) | Income tax benefit (provision) | After-tax gain (loss) | Non- controlling | Net | |||||||||||||||
Foreign currency translation adjustments |
| |||||||||||||||||||
OCI activity | $ | 13 | $ | 30 | $ | 43 | $ | 18 | $ | 25 | ||||||||||
Reclassified to | — | — | — | — | — | |||||||||||||||
Net OCI | $ | 13 | $ | 30 | $ | 43 | $ | 18 | $ | 25 | ||||||||||
Change in net unrealized gains (losses) on AFS securities |
| |||||||||||||||||||
OCI activity | $ | (112 | ) | $ | 41 | $ | (71 | ) | $ | — | $ | (71) | ||||||||
Reclassified to | (45 | ) | 17 | (28 | ) | — | (28) | |||||||||||||
Net OCI | $ | (157 | ) | $ | 58 | $ | (99 | ) | $ | — | $ | (99) | ||||||||
Pension, postretirement and other |
| |||||||||||||||||||
OCI activity | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Reclassified to | (1 | ) | — | (1 | ) | — | (1) | |||||||||||||
Net OCI | $ | (1 | ) | $ | — | $ | (1 | ) | $ | — | $ | (1) | ||||||||
Change in net DVA |
| |||||||||||||||||||
OCI activity | $ | (149 | ) | $ | 52 | $ | (97 | ) | $ | (3 | ) | $ | (94) | |||||||
Reclassified to | 6 | (2 | ) | 4 | — | 4 | ||||||||||||||
Net OCI | $ | (143 | ) | $ | 50 | $ | (93 | ) | $ | (3 | ) | $ | (90) |
Nine Months Ended | ||||||||||||||||||||
September 30, 2017 | ||||||||||||||||||||
$ in millions | Pre-tax gain (loss) | Income tax benefit (provision) | After-tax gain (loss) | Non- controlling | Net | |||||||||||||||
Foreign currency translation adjustments |
| |||||||||||||||||||
OCI activity | $ | 63 | $ | 160 | $ | 223 | $ | 32 | $ | 191 | ||||||||||
Reclassified to | — | — | — | — | — | |||||||||||||||
Net OCI | $ | 63 | $ | 160 | $ | 223 | $ | 32 | $ | 191 | ||||||||||
Change in net unrealized gains (losses) on AFS securities |
| |||||||||||||||||||
OCI activity | $ | 374 | $ | (139 | ) | $ | 235 | $ | — | $ | 235 | |||||||||
Reclassified to | (27 | ) | 10 | (17 | ) | — | (17) | |||||||||||||
Net OCI | $ | 347 | $ | (129 | ) | $ | 218 | $ | — | $ | 218 | |||||||||
Pension, postretirement and other |
| |||||||||||||||||||
OCI activity | $ | 3 | $ | — | $ | 3 | $ | — | $ | 3 | ||||||||||
Reclassified to | 2 | (1 | ) | 1 | — | 1 | ||||||||||||||
Net OCI | $ | 5 | $ | (1 | ) | $ | 4 | $ | — | $ | 4 | |||||||||
Change in net DVA |
| |||||||||||||||||||
OCI activity | $ | (498 | ) | $ | 175 | $ | (323 | ) | $ | (9 | ) | $ | (314) | |||||||
Reclassified to earnings1 | (1 | ) | 1 | — | — | — | ||||||||||||||
Net OCI | $ | (499 | ) | $ | 176 | $ | (323 | ) | $ | (9 | ) | $ | (314) |
Nine Months Ended | ||||||||||||||||||||
September 30, 20162 | ||||||||||||||||||||
$ in millions | Pre-tax gain (loss) | Income tax benefit (provision) | After-tax gain (loss) | Non- controlling | Net | |||||||||||||||
Foreign currency translation adjustments |
| |||||||||||||||||||
OCI activity | $ | 156 | $ | 204 | $ | 360 | $ | 151 | $ | 209 | ||||||||||
Reclassified to | — | — | — | — | — | |||||||||||||||
Net OCI | $ | 156 | $ | 204 | $ | 360 | $ | 151 | $ | 209 | ||||||||||
Change in net unrealized gains (losses) on AFS securities |
| |||||||||||||||||||
OCI activity | $ | 822 | $ | (303 | ) | $ | 519 | $ | — | $ | 519 | |||||||||
Reclassified to | (127 | ) | 47 | (80 | ) | — | (80) | |||||||||||||
Net OCI | $ | 695 | $ | (256 | ) | $ | 439 | $ | — | $ | 439 | |||||||||
Pension, postretirement and other |
| |||||||||||||||||||
OCI activity | $ | (6 | ) | $ | 3 | $ | (3 | ) | $ | — | $ | (3) | ||||||||
Reclassified to | (3 | ) | 1 | (2 | ) | — | (2) | |||||||||||||
Net OCI | $ | (9 | ) | $ | 4 | $ | (5 | ) | $ | — | $ | (5) | ||||||||
Change in net DVA |
| |||||||||||||||||||
OCI activity | $ | 440 | $ | (163 | ) | $ | 277 | $ | — | $ | 277 | |||||||||
Reclassified to | (35 | ) | 13 | (22 | ) | — | (22) | |||||||||||||
Net OCI | $ | 405 | $ | (150 | ) | $ | 255 | $ | — | $ | 255 |
|
|
Nine Months Ended September 30, 2020 | |||||||||||||||
$ in millions | Pre-tax Gain (Loss) | Income Tax Benefit (Provision) | After-tax Gain (Loss) | Non- controlling Interests | Net | ||||||||||
CTA | |||||||||||||||
OCI activity | $ | 19 | $ | (17 | ) | $ | 2 | $ | 38 | $ | (36 | ) | |||
Reclassified to earnings | (3 | ) | 0 | (3 | ) | 0 | (3 | ) | |||||||
Net OCI | $ | 16 | $ | (17 | ) | $ | (1 | ) | $ | 38 | $ | (39 | ) | ||
Change in net unrealized gains (losses) on AFS securities | |||||||||||||||
OCI activity | $ | 2,142 | $ | (503 | ) | $ | 1,639 | $ | 0 | $ | 1,639 | ||||
Reclassified to earnings | (106 | ) | 25 | (81 | ) | 0 | (81 | ) | |||||||
Net OCI | $ | 2,036 | $ | (478 | ) | $ | 1,558 | $ | 0 | $ | 1,558 | ||||
Pension, postretirement and other | |||||||||||||||
OCI activity | $ | 20 | $ | (4 | ) | $ | 16 | $ | 0 | $ | 16 | ||||
Reclassified to earnings | 16 | (3 | ) | 13 | 0 | 13 | |||||||||
Net OCI | $ | 36 | $ | (7 | ) | $ | 29 | $ | 0 | $ | 29 | ||||
Change in net DVA | |||||||||||||||
OCI activity | $ | 967 | $ | (233 | ) | $ | 734 | $ | 41 | $ | 693 | ||||
Reclassified to earnings | 14 | (4 | ) | 10 | 0 | 10 | |||||||||
Net OCI | $ | 981 | $ | (237 | ) | $ | 744 | $ | 41 | $ | 703 |
|
Noncontrolling Interests
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Noncontrolling interests | $ | 1,136 | $ | 1,127 |
Nine Months Ended
September 30, 2019$ in millions Pre-tax
Gain
(Loss)Income
Tax Benefit
(Provision)After-tax
Gain
(Loss)Non-
controlling
InterestsNet CTA OCI activity $ 2 $ (58 ) $ (56 ) $ 16 $ (72 ) Reclassified to earnings 0 0 0 0 0 Net OCI $ 2 $ (58 ) $ (56 ) $ 16 $ (72 ) Change in net unrealized gains (losses) on AFS securities OCI activity $ 1,726 $ (406 ) $ 1,320 $ 0 $ 1,320 Reclassified to earnings (89 ) 21 (68 ) 0 (68 ) Net OCI $ 1,637 $ (385 ) $ 1,252 $ 0 $ 1,252 Pension, postretirement and other OCI activity $ 0 $ (1 ) $ (1 ) $ 0 $ (1 ) Reclassified to earnings 10 (2 ) 8 0 8 Net OCI $ 10 $ (3 ) $ 7 $ 0 $ 7 Change in net DVA OCI activity $ (713 ) $ 177 $ (536 ) $ (36 ) $ (500 ) Reclassified to earnings 9 (2 ) 7 0 7 Net OCI $ (704 ) $ 175 $ (529 ) $ (36 ) $ (493 )
Calculation of Basic and Diluted Earnings per Common Share (“EPS”)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, |
September 30, | |||||||||||||||
in millions, except for per share data | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Basic EPS | ||||||||||||||||
Income from continuing operations | $ | 1,785 | $ | 1,632 | $ | 5,574 | $ | 4,442 | ||||||||
Income (loss) from discontinued | 6 | 8 | (21 | ) | 1 | |||||||||||
Net income | 1,791 | 1,640 | 5,553 | 4,443 | ||||||||||||
Net income applicable to | 10 | 43 | 85 | 130 | ||||||||||||
Net income applicable to Morgan | 1,781 | 1,597 | 5,468 | 4,313 | ||||||||||||
Less: Preferred stock dividends and other | (93 | ) | (79 | ) | (353 | ) | (314) | |||||||||
Earnings applicable to Morgan | $ | 1,688 | $ | 1,518 | $ | 5,115 | $ | 3,999 | ||||||||
Weighted average common | 1,776 | 1,838 | 1,789 | 1,863 | ||||||||||||
Earnings per basic common share |
| |||||||||||||||
Income from continuing operations | $ | 0.95 | $ | 0.82 | $ | 2.87 | $ | 2.15 | ||||||||
Income (loss) from discontinued | — | 0.01 | (0.01 | ) | — | |||||||||||
Earnings per basic common share | $ | 0.95 | $ | 0.83 | $ | 2.86 | $ | 2.15 | ||||||||
Diluted EPS | ||||||||||||||||
Earnings applicable to Morgan | $ | 1,688 | $ | 1,518 | $ | 5,115 | $ | 3,999 | ||||||||
Weighted average common shares | 1,776 | 1,838 | 1,789 | 1,863 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Stock options and RSUs1 | 42 | 41 | 41 | 35 | ||||||||||||
Weighted average common shares outstanding and common stock equivalents | 1,818 | 1,879 | 1,830 | 1,898 | ||||||||||||
Earnings per diluted common share |
| |||||||||||||||
Income from continuing operations | $ | 0.93 | $ | 0.80 | $ | 2.81 | $ | 2.11 | ||||||||
Income (loss) from discontinued operations | — | 0.01 | (0.02 | ) | — | |||||||||||
Earnings per diluted common share | $ | 0.93 | $ | 0.81 | $ | 2.79 | $ | 2.11 | ||||||||
Weighted average antidilutive RSUs and stock options (excluded from the computation of diluted EPS)1 | — | 14 | — | 15 |
|
16.18. Interest Income and Interest Expense
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, |
September 30, | |||||||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Interest income1 | ||||||||||||||||||||
Investment securities | $ | �� 313 | $ | 289 | $ | 943 | $ | 762 | ||||||||||||
Loans | 853 | 698 | 2,399 | 2,026 | ||||||||||||||||
Interest bearing deposits with banks | 84 | 30 | 206 | 134 | ||||||||||||||||
Securities purchased under | 76 | (118 | ) | 86 | (315) | |||||||||||||||
Trading assets, net | 506 | 526 | 1,461 | 1,651 | ||||||||||||||||
Customer receivables and Other3 | 508 | 309 | 1,316 | 890 | ||||||||||||||||
Total interest income | $ | 2,340 | $ | 1,734 | $ | 6,411 | $ | 5,148 | ||||||||||||
Interest expense1 | ||||||||||||||||||||
Deposits | $ | 63 | $ | 12 | $ | 88 | $ | 48 | ||||||||||||
Short-term and Long-term | 1,109 | 814 | 3,197 | 2,633 | ||||||||||||||||
Securities sold under | 325 | 228 | 912 | 761 | ||||||||||||||||
Customer payables and Other5 | 60 | (323 | ) | (91 | ) | (1,109) | ||||||||||||||
Total interest expense | $ | 1,557 | $ | 731 | $ | 4,106 | $ | 2,333 | ||||||||||||
Net interest | $ | 783 | $ | 1,003 | $ | 2,305 | $ | 2,815 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Interest income | ||||||||||||
Investment securities | $ | 529 | $ | 579 | $ | 1,603 | $ | 1,563 | ||||
Loans | 967 | 1,208 | 3,171 | 3,599 | ||||||||
Securities purchased under agreements to resell and Securities borrowed1 | (187 | ) | 871 | 70 | 2,865 | |||||||
Trading assets, net of Trading liabilities | 537 | 728 | 1,902 | 2,188 | ||||||||
Customer receivables and Other2 | 210 | 964 | 1,171 | 2,931 | ||||||||
Total interest income | $ | 2,056 | $ | 4,350 | $ | 7,917 | $ | 13,146 | ||||
Interest expense | ||||||||||||
Deposits | $ | 178 | $ | 505 | $ | 804 | $ | 1,460 | ||||
Borrowings | 714 | 1,219 | 2,534 | 3,941 | ||||||||
Securities sold under agreements to repurchase and Securities loaned3 | 165 | 681 | 883 | 2,016 | ||||||||
Customer payables and Other4 | (487 | ) | 727 | (746 | ) | 2,468 | ||||||
Total interest expense | $ | 570 | $ | 3,132 | $ | 3,475 | $ | 9,885 | ||||
Net interest | $ | 1,486 | $ | 1,218 | $ | 4,442 | $ | 3,261 |
1. |
|
Includes fees paid on Securities borrowed. |
2. | Includes interest from |
3. | Includes fees received on Securities loaned. |
4. | Includes fees received from prime brokerage customers for stock loan transactions |
|
The Firm sponsors various retirement plans forInterest income and Interest expense are classified in the majority of its U.S. andnon-U.S. employees. The Firm provides certain other postretirement benefits, primarily health care and life insurance, to eligible U.S. employees.
Componentsincome statements based on the nature of the Net Periodic Benefit Expense (Income) for Pensioninstrument and Other Postretirement Plans
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Service cost, benefits earned during the period | $ | 4 | $ | 6 | $ | 12 | $ | 14 | ||||||||
Interest cost on projected benefit | 37 | 38 | 112 | 115 | ||||||||||||
Expected return on plan assets | (29 | ) | (31 | ) | (87 | ) | (91) | |||||||||
Net amortization of prior service | (4 | ) | (4 | ) | (12 | ) | (13) | |||||||||
Net amortization of actuarial loss | 4 | 3 | 12 | 9 | ||||||||||||
Net periodic benefit expense | $ | 12 | $ | 12 | $ | 37 | $ | 34 |
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
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Customer and other receivables | $ | 2,244 | $ | 1,661 | ||
Customer and other payables | 2,545 | 2,223 |
September 2020 Form 10-Q | 84 |
Notes to Consolidated Financial Statements (Unaudited) |
The Firm
The Firm believes that the resolution of the above tax matters will not have a material effect on the annual financial statements, although a resolution could have a material impact on the income statements and effective tax rate for any period in which such resolution occurs.
In March 2017, the Firm filed claims with the IRS to contest certain items associated with tax years 1999-2005, the resolution of which is not expected to have a material impact on the annual financial statements or effective tax rate. Additionally, during 2017, the Firm expects to reach a conclusion with the U.K. tax authorities on substantially all issues through tax year 2010, the resolution of which is not expected to have a material impact on the annual financial statements or effective tax rate.
See Note 11 regarding the Dutch Tax Authority’s challenge, in the District Court in Amsterdam (matters styledCase number15/3637andCase number 15/4353), of the Firm’s entitlement to certain withholding tax credits which may impact the balance of unrecognized tax benefits.
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.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Recurring1 | $ | 0 | $ | 0 | $ | (94 | ) | $ | (127 | ) | ||
Intermittent | (113 | ) | (89 | ) | (10 | ) | (190 | ) |
Three Months Ended September 30, 2020 | |||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||
Investment banking | $ | 1,707 | $ | 135 | $ | 0 | $ | (16 | ) | $ | 1,826 | ||||
Trading | 2,807 | 268 | 2 | 15 | 3,092 | ||||||||||
Investments | 87 | 1 | 258 | 0 | 346 | ||||||||||
Commissions and fees1 | 639 | 477 | 1 | (80 | ) | 1,037 | |||||||||
Asset management1 | 114 | 2,793 | 795 | (38 | ) | 3,664 | |||||||||
Other | 114 | 94 | 1 | (3 | ) | 206 | |||||||||
Total non-interest revenues | 5,468 | 3,768 | 1,057 | (122 | ) | 10,171 | |||||||||
Interest income | 1,086 | 1,065 | 7 | (102 | ) | 2,056 | |||||||||
Interest expense | 492 | 176 | 8 | (106 | ) | 570 | |||||||||
Net interest | 594 | 889 | (1 | ) | 4 | 1,486 | |||||||||
Net revenues | $ | 6,062 | $ | 4,657 | $ | 1,056 | $ | (118 | ) | $ | 11,657 | ||||
Income before provision for income taxes | $ | 2,048 | $ | 1,120 | $ | 315 | $ | 4 | $ | 3,487 | |||||
Provision for income taxes | 385 | 278 | 72 | 1 | 736 | ||||||||||
Net income | 1,663 | 842 | 243 | 3 | 2,751 | ||||||||||
Net income applicable to noncontrolling interests | 16 | 0 | 18 | 0 | 34 | ||||||||||
Net income applicable to Morgan Stanley | $ | 1,647 | $ | 842 | $ | 225 | $ | 3 | $ | 2,717 |
Three Months Ended September 30, 2019 | |||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||
Investment banking | $ | 1,535 | $ | 118 | $ | 0 | $ | (18 | ) | $ | 1,635 | ||||
Trading | 2,533 | 61 | 2 | 12 | 2,608 | ||||||||||
Investments | (18 | ) | 0 | 105 | 0 | 87 | |||||||||
Commissions and fees1 | 643 | 416 | 1 | (70 | ) | 990 | |||||||||
Asset management1 | 100 | 2,639 | 664 | (40 | ) | 3,363 | |||||||||
Other | 51 | 81 | 0 | (1 | ) | 131 | |||||||||
Total non-interest revenues | 4,844 | 3,315 | 772 | (117 | ) | 8,814 | |||||||||
Interest income | 3,112 | 1,378 | 4 | (144 | ) | 4,350 | |||||||||
Interest expense | 2,933 | 335 | 12 | (148 | ) | 3,132 | |||||||||
Net interest | 179 | 1,043 | (8 | ) | 4 | 1,218 | |||||||||
Net revenues | $ | 5,023 | $ | 4,358 | $ | 764 | $ | (113 | ) | $ | 10,032 | ||||
Income before provision for income taxes | $ | 1,307 | $ | 1,238 | $ | 165 | $ | 0 | $ | 2,710 | |||||
Provision for income taxes | 189 | 276 | 27 | 0 | 492 | ||||||||||
Net income | 1,118 | 962 | 138 | 0 | 2,218 | ||||||||||
Net income applicable to noncontrolling interests | 45 | 0 | 0 | 0 | 45 | ||||||||||
Net income applicable to Morgan Stanley | $ | 1,073 | $ | 962 | $ | 138 | $ | 0 | $ | 2,173 |
85 | September 2020 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Nine Months Ended September 30, 2020 | |||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||
Investment banking | $ | 4,902 | $ | 403 | $ | 0 | $ | (66 | ) | $ | 5,239 | ||||
Trading | 10,375 | 413 | (13 | ) | 56 | 10,831 | |||||||||
Investments | 98 | 9 | 552 | 0 | 659 | ||||||||||
Commissions and fees1 | 2,230 | 1,538 | 1 | (270 | ) | 3,499 | |||||||||
Asset management1 | 342 | 7,980 | 2,144 | (120 | ) | 10,346 | |||||||||
Other | (628 | ) | 216 | (39 | ) | (7 | ) | (458 | ) | ||||||
Total non-interest revenues | 17,319 | 10,559 | 2,645 | (407 | ) | 30,116 | |||||||||
Interest income | 4,809 | 3,468 | 22 | (382 | ) | 7,917 | |||||||||
Interest expense | 3,184 | 653 | 33 | (395 | ) | 3,475 | |||||||||
Net interest | 1,625 | 2,815 | (11 | ) | 13 | 4,442 | |||||||||
Net revenues | $ | 18,944 | $ | 13,374 | $ | 2,634 | $ | (394 | ) | $ | 34,558 | ||||
Income before provision for income taxes | $ | 5,991 | $ | 3,317 | $ | 674 | $ | 6 | $ | 9,988 | |||||
Provision for income taxes | 1,326 | 758 | 136 | 1 | 2,221 | ||||||||||
Net income | 4,665 | 2,559 | 538 | 5 | 7,767 | ||||||||||
Net income applicable to noncontrolling interests | 75 | 0 | 81 | 0 | 156 | ||||||||||
Net income applicable to Morgan Stanley | $ | 4,590 | $ | 2,559 | $ | 457 | $ | 5 | $ | 7,611 |
Nine Months Ended September 30, 2019 | |||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||
Investment banking | $ | 4,158 | $ | 365 | $ | (1 | ) | $ | (55 | ) | $ | 4,467 | |||
Trading | 8,221 | 525 | (2 | ) | 37 | 8,781 | |||||||||
Investments | 257 | 1 | 543 | 0 | 801 | ||||||||||
Commissions and fees1 | 1,889 | 1,250 | 1 | (205 | ) | 2,935 | |||||||||
Asset management1 | 310 | 7,544 | 1,893 | (115 | ) | 9,632 | |||||||||
Other | 416 | 281 | (6 | ) | (6 | ) | 685 | ||||||||
Total non-interest revenues | 15,251 | 9,966 | 2,428 | (344 | ) | 27,301 | |||||||||
Interest income | 9,457 | 4,139 | 14 | (464 | ) | 13,146 | |||||||||
Interest expense | 9,376 | 950 | 35 | (476 | ) | 9,885 | |||||||||
Net interest | 81 | 3,189 | (21 | ) | 12 | 3,261 | |||||||||
Net revenues | $ | 15,332 | $ | 13,155 | $ | 2,407 | $ | (332 | ) | $ | 30,562 | ||||
Income before provision for income taxes | $ | 4,365 | $ | 3,669 | $ | 538 | $ | (4 | ) | $ | 8,568 | ||||
Provision for income taxes | 703 | 830 | 104 | (1 | ) | 1,636 | |||||||||
Net income | 3,662 | 2,839 | 434 | (3 | ) | 6,932 | |||||||||
Net income applicable to noncontrolling interests | 97 | 0 | 32 | 0 | 129 | ||||||||||
Net income applicable to Morgan Stanley | $ | 3,565 | $ | 2,839 | $ | 402 | $ | (3 | ) | $ | 6,803 |
1. | Substantially all revenues are from contracts with customers. |
Selected Financial Information by Business Segment
Three Months Ended September 30, 2017 | ||||||||||||||||||||
$ in millions | IS | WM | IM1, 2 | I/E | Total | |||||||||||||||
Totalnon-interest revenues | $ | 4,618 | $ | 3,195 | $ | 676 | $ | (75 | ) | $ | 8,414 | |||||||||
Interest income | 1,421 | 1,155 | 1 | (237 | ) | 2,340 | ||||||||||||||
Interest expense | 1,663 | 130 | 2 | (238 | ) | 1,557 | ||||||||||||||
Net interest | (242 | ) | 1,025 | (1 | ) | 1 | 783 | |||||||||||||
Net revenues | $ | 4,376 | $ | 4,220 | $ | 675 | $ | (74 | ) | $ | 9,197 | |||||||||
Income from continuing operations before income taxes | $ | 1,236 | $ | 1,119 | $ | 131 | $ | (4 | ) | $ | 2,482 | |||||||||
Provision for income taxes | 260 | 421 | 16 | — | 697 | |||||||||||||||
Income from continuing operations | 976 | 698 | 115 | (4 | ) | 1,785 | ||||||||||||||
Income (loss) from discontinued operations, net of income taxes | 6 | — | — | — | 6 | |||||||||||||||
Net income | 982 | 698 | 115 | (4 | ) | 1,791 | ||||||||||||||
Net income applicable to noncontrolling interests | 9 | — | 1 | — | 10 | |||||||||||||||
Net income applicable | $ | 973 | $ | 698 | $ | 114 | $ | (4 | ) | $ | 1,781 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Institutional Securities Advisory | $ | 357 | $ | 550 | $ | 1,181 | $ | 1,462 | ||||
Institutional Securities Underwriting | 1,350 | 985 | 3,721 | 2,696 | ||||||||
Firm Investment banking revenues from contracts with customers | 95 | % | 85 | % | 92 | % | 90 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Interest rate | $ | 511 | $ | 894 | $ | 2,593 | $ | 2,283 | ||||
Foreign exchange | 138 | 69 | 603 | 383 | ||||||||
Equity security and index1 | 1,478 | 1,076 | 4,494 | 4,005 | ||||||||
Commodity and other | 495 | 300 | 1,363 | 986 | ||||||||
Credit | 470 | 269 | 1,778 | 1,124 | ||||||||
Total | $ | 3,092 | $ | 2,608 | $ | 10,831 | $ | 8,781 |
1. | Dividend income is included within equity security and index contracts. |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Net cumulative unrealized performance-based fees at risk of reversing | $ | 761 | $ | 774 |
September 2020 Form 10-Q | 86 |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended September 30, 2016 | ||||||||||||||||||||
$ in millions | IS | WM | IM1, 2 | I/E | Total | |||||||||||||||
Totalnon-interest | $ | 4,436 | $ | 2,996 | $ | 551 | $ | (77 | ) | $ | 7,906 | |||||||||
Interest income | 980 | 979 | 1 | (226 | ) | 1,734 | ||||||||||||||
Interest expense | 863 | 94 | — | (226 | ) | 731 | ||||||||||||||
Net interest | 117 | 885 | 1 | — | 1,003 | |||||||||||||||
Net revenues | $ | 4,553 | $ | 3,881 | $ | 552 | $ | (77 | ) | $ | 8,909 | |||||||||
Income from continuing | $ | 1,383 | $ | 901 | $ | 97 | $ | — | $ | 2,381 | ||||||||||
Provision for income taxes | 381 | 337 | 31 | — | 749 | |||||||||||||||
Income from continuing | 1,002 | 564 | 66 | — | 1,632 | |||||||||||||||
Income (loss) from | 8 | — | — | — | 8 | |||||||||||||||
Net income | 1,010 | 564 | 66 | — | 1,640 | |||||||||||||||
Net income (loss) applicable | 44 | — | (1 | ) | — | 43 | ||||||||||||||
Net income applicable | $ | 966 | $ | 564 | $ | 67 | $ | — | $ | 1,597 | ||||||||||
Nine Months Ended September 30, 2017 | ||||||||||||||||||||
$ in millions | IS3 | WM | IM1, 2 | I/E | Total | |||||||||||||||
Totalnon-interest | $ | 15,017 | $ | 9,401 | $ | 1,949 | $ | (227 | ) | $ | 26,140 | |||||||||
Interest income | 3,788 | 3,348 | 3 | (728 | ) | 6,411 | ||||||||||||||
Interest expense | 4,515 | 320 | 3 | (732 | ) | 4,106 | ||||||||||||||
Net interest | (727 | ) | 3,028 | — | 4 | 2,305 | ||||||||||||||
Net revenues | $ | 14,290 | $ | 12,429 | $ | 1,949 | $ | (223 | ) | $ | 28,445 | |||||||||
Income from continuing | $ | 4,409 | $ | 3,149 | $ | 376 | $ | (2 | ) | $ | 7,932 | |||||||||
Provision for income taxes | 1,132 | 1,139 | 87 | — | 2,358 | |||||||||||||||
Income from continuing | 3,277 | 2,010 | 289 | (2 | ) | 5,574 | ||||||||||||||
Income (loss) from | (21 | ) | — | — | — | (21) | ||||||||||||||
Net income | 3,256 | 2,010 | 289 | (2 | ) | 5,553 | ||||||||||||||
Net income applicable | 77 | — | 8 | — | 85 | |||||||||||||||
Net income applicable | $ | 3,179 | $ | 2,010 | $ | 281 | $ | (2 | ) | $ | 5,468 |
Nine Months Ended September 30, 2016 | ||||||||||||||||||||
$ in millions | IS4 | WM4 | IM1, 2 | I/E | Total | |||||||||||||||
Totalnon-interest | $ | 12,577 | $ | 8,815 | $ | 1,610 | $ | (207 | ) | $ | 22,795 | |||||||||
Interest income | 2,999 | 2,813 | 5 | (669 | ) | 5,148 | ||||||||||||||
Interest expense | 2,731 | 268 | 3 | (669 | ) | 2,333 | ||||||||||||||
Net interest | 268 | 2,545 | 2 | — | 2,815 | |||||||||||||||
Net revenues | $ | 12,845 | $ | 11,360 | $ | 1,612 | $ | (207 | ) | $ | 25,610 | |||||||||
Income from continuing | $ | 3,797 | $ | 2,546 | $ | 259 | $ | — | $ | 6,602 | ||||||||||
Provision for income taxes | 1,109 | 973 | 78 | — | 2,160 | |||||||||||||||
Income from continuing | 2,688 | 1,573 | 181 | — | 4,442 | |||||||||||||||
Income (loss) from | 1 | — | — | — | 1 | |||||||||||||||
Net income | 2,689 | 1,573 | 181 | — | 4,443 | |||||||||||||||
Net income (loss) applicable | 144 | — | (14 | ) | — | 130 | ||||||||||||||
Net income applicable | $ | 2,545 | $ | 1,573 | $ | 195 | $ | — | $ | 4,313 |
IS—Institutional Securities
WM—Wealth Management
IM—
I/E—Intersegment eliminations
|
|
|
|
Asset Management Revenues
—Reduction of Fees Due to Fee WaiversThree Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Fee waivers | $ | 37 | $ | 11 | $ | 70 | $ | 32 |
Reduction of Fees due to
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Fee waivers | $ | 20 | $ | 26 | $ | 66 | $ | 61 |
In
|
agreement. The Firm’s portion of net unrealized cumulative performance-based fees (for which the Firm is not obligated to pay compensation) are at risk of reversing if the fund performance falls below the stated investment management agreement benchmarks. See Note 11 for information regarding general partner guarantees, which include potential obligations to return performance fee distributions previously received.
Net Unrealized Performance-based Fees
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Net unrealized cumulative | $ | 450 | $ | 397 |
Total AssetsRevenues by Business Segment
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Institutional Securities | $ | 668,281 | $ | 629,149 | ||||
Wealth Management | 180,628 | 181,135 | ||||||
Investment Management | 4,784 | 4,665 | ||||||
Total1 | $ | 853,693 | $ | 814,949 |
|
Geographic Information
Region
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Americas | $ | 8,387 | $ | 7,489 | $ | 24,798 | $ | 22,336 | ||||
EMEA | 1,473 | 1,409 | 4,670 | 4,687 | ||||||||
Asia | 1,797 | 1,134 | 5,090 | 3,539 | ||||||||
Total | $ | 11,657 | $ | 10,032 | $ | 34,558 | $ | 30,562 |
Net Revenues by Region
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Americas | $ | 6,833 | $ | 6,624 | $ | 20,667 | $ | 18,914 | ||||||||
EMEA | 1,325 | 1,236 | 4,420 | 3,677 | ||||||||||||
Asia-Pacific | 1,039 | 1,049 | 3,358 | 3,019 | ||||||||||||
Net revenues | $ | 9,197 | $ | 8,909 | $ | 28,445 | $ | 25,610 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||
Non-interest revenues | $ | 556 | $ | 841 | $ | 1,616 | $ | 1,995 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Customer and other receivables | $ | 2,854 | $ | 2,916 |
$ in millions | At September 30, 2020 | At December 31, 2019 | ||||
Institutional Securities | $ | 704,323 | $ | 691,201 | ||
Wealth Management | 244,425 | 197,682 | ||||
Investment Management | 7,192 | 6,546 | ||||
Total1 | $ | 955,940 | $ | 895,429 |
87 | September 2020 Form 10-Q |
Financial Data Supplement (Unaudited)
|
Three Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
$ in millions | Average Daily Balance | Interest | Annualized Average Rate | Average Daily Balance | Interest | Annualized Average Rate | ||||||||||||||||||
Interest earning assets1 | ||||||||||||||||||||||||
Investment securities2 | $ | 73,599 | $ | 313 | 1.7 | % | $ | 79,948 | $ | 289 | 1.4 % | |||||||||||||
Loans2 | 99,655 | 853 | 3.4 | 91,010 | 698 | 3.0 | ||||||||||||||||||
Interest bearing deposits with banks2 | 25,196 | 84 | 1.3 | 23,993 | 30 | 0.5 | ||||||||||||||||||
Securities purchased under agreements | ||||||||||||||||||||||||
U.S. | 128,127 | 190 | 0.6 | 138,420 | (58) | (0.2) | ||||||||||||||||||
Non-U.S. | 99,019 | (114 | ) | (0.5 | ) | 84,881 | (60) | (0.3) | ||||||||||||||||
Trading assets, net of Trading liabilities4: | ||||||||||||||||||||||||
U.S. | 58,000 | 463 | 3.2 | 52,490 | 452 | 3.4 | ||||||||||||||||||
Non-U.S. | 5,826 | 43 | 3.0 | 12,001 | 74 | 2.4 | ||||||||||||||||||
Customer receivables and Other5: | ||||||||||||||||||||||||
U.S. | 47,916 | 364 | 3.0 | 48,637 | 298 | 2.4 | ||||||||||||||||||
Non-U.S. | 25,429 | 144 | 2.2 | 22,162 | 11 | 0.2 | ||||||||||||||||||
Total | $ | 562,767 | $ | 2,340 | 1.7 | % | $ | 553,542 | $ | 1,734 | 1.2 % | |||||||||||||
Interest bearing liabilities1 |
| |||||||||||||||||||||||
Deposits2 | $ | 150,116 | $ | 63 | 0.2 | % | $ | 153,036 | $ | 12 | — % | |||||||||||||
Short-term and Long-term borrowings2, 6 | 192,575 | 1,109 | 2.3 | 166,271 | 814 | 1.9 | ||||||||||||||||||
Securities sold under agreements | ||||||||||||||||||||||||
U.S. | 30,027 | 234 | 3.1 | 33,361 | 133 | 1.6 | ||||||||||||||||||
Non-U.S. | 38,536 | 91 | 0.9 | 33,487 | 95 | 1.1 | ||||||||||||||||||
Customer payables and Other8: | ||||||||||||||||||||||||
U.S. | 129,365 | (13 | ) | — | 125,931 | (217) | (0.7) | |||||||||||||||||
Non-U.S. | 66,697 | 73 | 0.4 | 64,241 | (106) | (0.7) | ||||||||||||||||||
Total | $ | 607,316 | $ | 1,557 | 1.0 | % | $ | 576,327 | $ | 731 | 0.5 % | |||||||||||||
Net interest income | $ | 783 | 0.7 | % | $ | 1,003 | 0.7 % |
Three Months Ended September 30, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
$ in millions | Average Daily Balance | Interest | Annualized Average Rate | Average Daily Balance | Interest | Annualized Average Rate | ||||||||||
Interest earning assets | ||||||||||||||||
Investment securities1 | $ | 133,726 | $ | 529 | 1.6 | % | $ | 104,700 | $ | 579 | 2.2 | % | ||||
Loans1 | 144,985 | 967 | 2.7 | 122,320 | 1,208 | 3.9 | ||||||||||
Securities purchased under agreements to resell and Securities borrowed2: | ||||||||||||||||
U.S. | 123,614 | (99 | ) | (0.3 | ) | 146,578 | 835 | 2.3 | ||||||||
Non-U.S. | 58,567 | (88 | ) | (0.6 | ) | 76,871 | 36 | 0.2 | ||||||||
Trading assets, net of Trading liabilities3: | ||||||||||||||||
U.S. | 78,417 | 443 | 2.2 | 78,169 | 630 | 3.2 | ||||||||||
Non-U.S. | 21,092 | 94 | 1.8 | 17,104 | 98 | 2.3 | ||||||||||
Customer receivables and Other4: | ||||||||||||||||
U.S. | 81,908 | 171 | 0.8 | 62,113 | 703 | 4.5 | ||||||||||
Non-U.S. | 63,657 | 39 | 0.2 | 60,073 | 261 | 1.7 | ||||||||||
Total | $ | 705,966 | $ | 2,056 | 1.2 | % | $ | 667,928 | $ | 4,350 | 2.6 | % | ||||
Interest bearing liabilities | ||||||||||||||||
Deposits1 | $ | 236,119 | $ | 178 | 0.3 | % | $ | 179,715 | $ | 505 | 1.1 | % | ||||
Borrowings1, 5 | 205,166 | 714 | 1.4 | 196,777 | 1,219 | 2.5 | ||||||||||
Securities sold under agreements to repurchase and Securities loaned6: | ||||||||||||||||
U.S. | 30,154 | 81 | 1.1 | 36,335 | 505 | 5.5 | ||||||||||
Non-U.S. | 28,320 | 84 | 1.2 | 30,111 | 176 | 2.3 | ||||||||||
Customer payables and Other7: | ||||||||||||||||
U.S. | 119,846 | (399 | ) | (1.3 | ) | 121,800 | 448 | 1.5 | ||||||||
Non-U.S. | 64,524 | (88 | ) | (0.5 | ) | 65,036 | 279 | 1.7 | ||||||||
Total | $ | 684,129 | $ | 570 | 0.3 | % | $ | 629,774 | $ | 3,132 | 2.0 | % | ||||
Net interest income and net interest rate spread | $ | 1,486 | 0.9 | % | $ | 1,218 | 0.6 | % |
Nine Months Ended September 30, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
$ in millions | Average Daily Balance | Interest | Annualized Average Rate | Average Daily Balance | Interest | Annualized Average Rate | ||||||||||
Interest earning assets | ||||||||||||||||
Investment securities1 | $ | 122,613 | $ | 1,603 | 1.7 | % | $ | 99,782 | $ | 1,563 | 2.1 | % | ||||
Loans1 | 142,261 | 3,171 | 3.0 | 118,926 | 3,599 | 4.0 | ||||||||||
Securities purchased under agreements to resell and Securities borrowed2: | ||||||||||||||||
U.S. | 127,868 | 194 | 0.2 | 144,686 | 2,774 | 2.6 | ||||||||||
Non-U.S. | 59,831 | (124 | ) | (0.3 | ) | 76,814 | 91 | 0.2 | ||||||||
Trading assets, net of Trading liabilities3: | ||||||||||||||||
U.S. | 76,418 | 1,558 | 2.7 | 77,434 | 1,922 | 3.3 | ||||||||||
Non-U.S. | 22,570 | 344 | 2.0 | 14,362 | 266 | 2.5 | ||||||||||
Customer receivables and Other4: | ||||||||||||||||
U.S. | 78,705 | 892 | 1.5 | 61,479 | 2,110 | 4.6 | ||||||||||
Non-U.S. | 61,699 | 279 | 0.6 | 59,033 | 821 | 1.9 | ||||||||||
Total | $ | 691,965 | $ | 7,917 | 1.5 | % | $ | 652,516 | $ | 13,146 | 2.7 | % | ||||
Interest bearing liabilities | ||||||||||||||||
Deposits1 | $ | 223,733 | $ | 804 | 0.5 | % | $ | 178,894 | $ | 1,460 | 1.1 | % | ||||
Borrowings1, 5 | 199,855 | 2,534 | 1.7 | 192,854 | 3,941 | 2.7 | ||||||||||
Securities sold under agreements to repurchase and Securities loaned6: | ||||||||||||||||
U.S. | 30,315 | 501 | 2.2 | 32,479 | 1,489 | 6.1 | ||||||||||
Non-U.S. | 29,315 | 382 | 1.7 | 31,555 | 527 | 2.2 | ||||||||||
Customer payables and Other7: | ||||||||||||||||
U.S. | 123,662 | (693 | ) | (0.7 | ) | 116,383 | 1,587 | 1.8 | ||||||||
Non-U.S. | 64,608 | (53 | ) | (0.1 | ) | 65,331 | 881 | 1.8 | ||||||||
Total | $ | 671,488 | $ | 3,475 | 0.7 | % | $ | 617,496 | $ | 9,885 | 2.1 | % | ||||
Net interest income and net interest rate spread | $ | 4,442 | 0.8 | % | $ | 3,261 | 0.6 | % |
|
Nine Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
$ in millions | Average Daily Balance | Interest | Annualized Average Rate | Average Daily Balance | Interest | Annualized Average Rate | ||||||||||||||||||
Interest earning assets1 | ||||||||||||||||||||||||
Investment securities2 | $ | 76,356 | $ | 943 | 1.7 | % | $ | 77,989 | $ | 762 | 1.3 % | |||||||||||||
Loans2 | 97,099 | 2,399 | 3.3 | 88,995 | 2,026 | 3.0 | ||||||||||||||||||
Interest bearing deposits with banks2 | 21,685 | 206 | 1.3 | 28,329 | 134 | 0.6 | ||||||||||||||||||
Securities purchased under agreements | ||||||||||||||||||||||||
U.S. | 126,738 | 406 | 0.4 | 148,918 | (184) | (0.2) | ||||||||||||||||||
Non-U.S. | 96,419 | (320 | ) | (0.4 | ) | 84,802 | (131) | (0.2) | ||||||||||||||||
Trading assets, net of Trading liabilities4: | ||||||||||||||||||||||||
U.S. | 58,260 | 1,385 | 3.2 | 48,274 | 1,426 | 3.9 | ||||||||||||||||||
Non-U.S. | 3,701 | 76 | 2.7 | 14,706 | 225 | 2.0 | ||||||||||||||||||
Customer receivables and Other5: | ||||||||||||||||||||||||
U.S. | 49,155 | 950 | 2.6 | 47,723 | 838 | 2.3 | ||||||||||||||||||
Non-U.S. | 24,514 | 366 | 2.0 | 22,209 | 52 | 0.3 | ||||||||||||||||||
Total | $ | 553,927 | $ | 6,411 | 1.5 | % | $ | 561,945 | $ | 5,148 | 1.2 % | |||||||||||||
Interest bearing liabilities1 |
| |||||||||||||||||||||||
Deposits2 | $ | 150,244 | $ | 88 | 0.1 | % | $ | 155,598 | $ | 48 | — % | |||||||||||||
Short-term and Long-term borrowings2, 6 | 181,544 | 3,197 | 2.4 | 163,474 | 2,633 | 2.2 | ||||||||||||||||||
Securities sold under agreements | ||||||||||||||||||||||||
U.S. | 31,958 | 651 | 2.7 | 32,183 | 424 | 1.8 | ||||||||||||||||||
Non-U.S. | 39,449 | 261 | 0.9 | 29,970 | 337 | 1.5 | ||||||||||||||||||
Customer payables and Other8: | ||||||||||||||||||||||||
U.S. | 128,420 | (196 | ) | (0.2 | ) | 126,468 | (826) | (0.9) | ||||||||||||||||
Non-U.S. | 64,257 | 105 | 0.2 | 64,221 | (283) | (0.6) | ||||||||||||||||||
Total | $ | 595,872 | $ | 4,106 | 0.9 | % | $ | 571,914 | $ | 2,333 | 0.5 % | |||||||||||||
Net interest income | $ | 2,305 | 0.6 | % | $ | 2,815 | 0.7 % |
1. |
|
Amounts include primarily U.S. balances. |
2. | Includes fees paid on Securities borrowed. |
| |
3. | Excludes non-interest earning assets andnon-interest bearing liabilities, such as equity securities. |
4. | Includes |
| |
5. | Includes borrowings carried at fair value, whose interest expense is considered part of |
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 |
|
Effect of Volume and Rate Changes on Net Interest Income
Three Months Ended September 30, 2017 versus Three Months Ended September 30, 2016 | Nine Months Ended September 30, 2017 versus Nine Months Ended September 30, 2016 | |||||||||||||||||||||||
Increase (decrease) due to change in: | Increase (decrease) due to change in: | |||||||||||||||||||||||
$ in millions | Volume | Rate | Net Change | Volume | Rate | Net Change | ||||||||||||||||||
Interest earning assets |
| |||||||||||||||||||||||
Investment securities | $ | (23 | ) | $ | 47 | $ | 24 | $ | (16 | ) | $ | 197 | $ | 181 | ||||||||||
Loans | 66 | 89 | 155 | 184 | 189 | 373 | ||||||||||||||||||
Interest bearing deposits with banks | 2 | 52 | 54 | (31 | ) | 103 | 72 | |||||||||||||||||
Securities purchased under agreements |
| |||||||||||||||||||||||
U.S. | 4 | 244 | 248 | 27 | 563 | 590 | ||||||||||||||||||
Non-U.S. | (10 | ) | (44 | ) | (54 | ) | (18 | ) | (171 | ) | (189) | |||||||||||||
Trading assets, net of Trading liabilities: | ||||||||||||||||||||||||
U.S. | 47 | (36 | ) | 11 | 295 | (336 | ) | (41) | ||||||||||||||||
Non-U.S. | (38 | ) | 7 | (31 | ) | (168 | ) | 19 | (149) | |||||||||||||||
Customer receivables and Other: |
| |||||||||||||||||||||||
U.S. | (4 | ) | 70 | 66 | 25 | 87 | 112 | |||||||||||||||||
Non-U.S. | 2 | 131 | 133 | 5 | 309 | 314 | ||||||||||||||||||
Change in interest income | $ | 46 | $ | 560 | $ | 606 | $ | 303 | $ | 960 | $ | 1,263 | ||||||||||||
Interest bearing liabilities |
| |||||||||||||||||||||||
Deposits | $ | — | $ | 51 | $ | 51 | $ | (2 | ) | $ | 42 | $ | 40 | |||||||||||
Short-term and Long-term borrowings | 129 | 166 | 295 | 291 | 273 | 564 | ||||||||||||||||||
Securities sold under agreements | ||||||||||||||||||||||||
U.S. | (13 | ) | 114 | 101 | (3 | ) | 230 | 227 | ||||||||||||||||
Non-U.S. | 14 | (18 | ) | (4 | ) | 107 | (183 | ) | (76) | |||||||||||||||
Customer payables and Other: |
| |||||||||||||||||||||||
U.S. | (6 | ) | 210 | 204 | (13 | ) | 643 | 630 | ||||||||||||||||
Non-U.S. | (4 | ) | 183 | 179 | — | 388 | 388 | |||||||||||||||||
Change in interest expense | $ | 120 | $ | 706 | $ | 826 | $ | 380 | $ | 1,393 | $ | 1,773 | ||||||||||||
Change in net interest income | $ | (74 | ) | $ | (146 | ) | $ | (220 | ) | $ | (77 | ) | $ | (433 | ) | $ | (510) |
September |
2019 Form 10-K | Annual report on Form 10-K for year ended December 31, 2019 filed with the SEC |
ABS | Asset-backed securities |
ACL | Allowance for credit losses |
AFS | Available-for-sale |
AML | Anti-money laundering |
AOCI | Accumulated other comprehensive income (loss) |
AUM | Assets under management or supervision |
Balance sheets | Consolidated balance sheets |
BEAT | Base erosion and anti-abuse tax |
BHC | Bank holding company |
bps | Basis points; one basis point equals 1/100th of 1% |
Cash flow statements | Consolidated cash flow statements |
CCAR | Comprehensive Capital Analysis and Review |
CCyB | Countercyclical capital buffer |
CDO | Collateralized debt obligation(s), including Collateralized loan obligation(s) |
CDS | Credit default swaps |
CECL | Current Expected Credit Losses, as calculated under the Financial Instruments—Credit Losses accounting update |
CFTC | U.S. Commodity Futures Trading Commission |
CLN | Credit-linked note(s) |
CLO | Collateralized loan obligation(s) |
CMBS | Commercial mortgage-backed securities |
CMO | Collateralized mortgage obligation(s) |
CVA | Credit valuation adjustment |
DVA | Debt valuation adjustment |
EBITDA | Earnings before interest, taxes, depreciation and amortization |
ELN | Equity-linked note(s) |
EMEA | Europe, Middle East and Africa |
EPS | Earnings per common share |
E.U. | European Union |
FDIC | Federal Deposit Insurance Corporation |
FFELP | Federal Family Education Loan Program |
FFIEC | Federal Financial Institutions Examination Council |
FHC | Financial Holding Company |
FICC | Fixed Income Clearing Corporation |
FICO | Fair Isaac Corporation |
Financial statements | Consolidated financial statements |
FVA | Funding valuation adjustment |
GILTI | Global Intangible Low-Taxed Income |
G-SIB | Global systemically important banks |
HELOC | Home Equity Line of Credit |
HQLA | High-quality liquid assets |
HTM | Held-to-maturity |
I/E | Intersegment eliminations |
IHC | Intermediate holding company |
IM | Investment Management |
Income statements | Consolidated income statements |
IRS | Internal Revenue Service |
IS | Institutional Securities |
LCR | Liquidity coverage ratio, as adopted by the U.S. banking agencies |
LIBOR | London Interbank Offered Rate |
M&A | Merger, acquisition and restructuring transaction |
MSBNA | Morgan Stanley Bank, N.A. |
MS&Co. | Morgan Stanley & Co. LLC |
89 | September 2020 Form 10-Q |
MSIP | Morgan Stanley & Co. International plc |
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 |
N/M | Not Meaningful |
NAV | Net asset value |
Non-GAAP | Non-generally accepted accounting principles |
NSFR | Net stable funding ratio, as proposed by the U.S. banking agencies |
OCC | Office of the Comptroller of the Currency |
OCI | Other comprehensive income (loss) |
OIS | Overnight index swap |
OTC | Over-the-counter |
OTTI | Other-than-temporary impairment |
PRA | Prudential Regulation Authority |
PSU | Performance-based stock unit |
RMBS | Residential mortgage-backed securities |
ROE | Return on average common equity |
ROTCE | Return on average tangible common equity |
ROU | Right-of-use |
RSU | Restricted stock unit |
RWA | Risk-weighted assets |
SEC | U.S. Securities and Exchange Commission |
SLR | Supplementary leverage ratio |
SOFR | Secured Overnight Financing Rate |
S&P | Standard & Poor’s |
SPE | Special purpose entity |
SPOE | Single point of entry |
TDR | Troubled debt restructuring |
TLAC | Total loss-absorbing capacity |
U.K. | United Kingdom |
UPB | Unpaid principal balance |
U.S. | United States of America |
U.S. GAAP | Accounting principles generally accepted in the United States of America |
VaR | Value-at-Risk |
VIE | Variable interest entity |
WACC | Implied weighted average cost of capital |
WM | Wealth Management |
September 2020 Form 10-Q | 90 |
The following new matters and developments have occurred since previously reporting certain matters in the Firm’s Annual Report on2019 Form10-K, for the year ended December 31, 2016 (the “Form10-K”), the Firm’s Quarterly ReportReports on Form10-Q for the quarterly period ended March 31, 20172020 (the “First Quarter Form10-Q”) and the Firm’s Quarterly Report on Form10-Q for thequarterly period endingended June 30, 20172020 (the “Second Quarter Form10-Q”). See also the disclosures set forth under “Legal Proceedings” in Part I, Item 3 of the 2019 Form10-K, and Part II, Item 1 of the First Quarter Form10-Q, and the Second Quarter Form10-Q.
Matter
On August 25, 2017, the parties inMorgan Stanley Mortgage Loan Trust 2006-4SL, et al. v. Morgan Stanley Mortgage Capital Inc. andMorgan Stanley Mortgage Loan Trust 2006-10SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc. entered into agreements to settle the litigations, which are subject to court approval.
On September 11, 2017, the Firm moved to dismiss the second amended complaint inPhoenix Light SF Limited, et al. v. Morgan Stanley, et al.
On October 3, 2017, the Appellate Division, First Department
Other Matters
On September 8, 2017, the court inIn Re Foreign Exchange Benchmark Rates Antitrust Litigation granted an order preliminarily approving the Firm’s settlement.
On October 5, 2017, various institutional investors filed a claim against
On October 12, 2017, the Firm reached a settlement in principle with the Environmental Protection Agency in the amount of approximately $1 million on the Firm’s self-disclosure regarding certain reformulated blendstock the Firm blended and sold during 2013 and 2014.
On
Average Price Paid Per Share Month #1 (July 1, 2017—July 31, 2017) Share Repurchase Program2 Employee transactions3 Month #2 (August 1, 2017—August 31, 2017) Share Repurchase Program2 Employee transactions3 Month #3 (September 1, 2017—September 30, 2017) Share Repurchase Program2 Employee transactions3 Quarter ended at September 30, 2017 Share Repurchase Program2 Employee transactions3 Refers to shares acquired by the Firm in satisfaction of the tax withholding obligations on stock-based awards granted under the Firm’s stock-based compensation plans during the three months ended September 30, 2020.The following table sets forth the information with respect to purchases made by or on behalf of the Firm of its common stock during the quarterly period ended September 30, 2017.$ in millions, except per share data Total Number of
Shares
Purchased Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs1 Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under the Plans or
Programs 2,729,000 $ 47.07 2,729,000 $ 4,872 769,637 $ 46.21 — — 13,740,000 $ 46.56 13,740,000 $ 4,232 96,764 $ 46.66 — — 10,448,247 $ 46.12 10,448,247 $ 3,750 192,674 $ 46.11 — — 26,917,247 $ 46.44 26,917,247 $ 3,750 1,059,075 $ 46.23 — — $ in millions, except per share data Average Price Paid Per Share Dollar Value of Remaining Authorized Repurchase July 30,610 $ 48.10 — $ — August 560,008 $ 48.90 — $ — September 18,360 $ 52.08 — $ — Total 608,978 $ 48.96 — 1. 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 17 to the financial statements for further information on the sales plan. 2.3. . from time to time as conditions warrant and subject to regulatory non-objection. The Share Repurchase Program is a program for capital management purposes that considers, among other things, business segment capital needs, as well as equity-based compensation and benefit plan requirements. The Share Repurchase Program has no set expiration or termination date. Share repurchases by the Firm are subject to regulatory approval. On June 28, 2017, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) announced that they did not object to our 2017 capital plan, which included a share repurchase of up to $5.0 billion of the Firm’s outstanding common stock during the period beginning July 1, 2017 through June 30, 2018. During the quarter ended September 30, 2017, the Firm repurchased approximately $1.25 billion of the Firm’s outstanding common stock as part of its Share Repurchase Program. For further information, see “Liquidity and Capital Resources—Capital Management” in Part I, Item 2.3.Includes shares acquired by the Firm in satisfaction of the tax withholding obligations on stock-based awards and the exercise of stock options granted under the Firm’s stock-based compensation plans.
An exhibit index has been filed as part
91 | September 2020 Form 10-Q |
|
| ||
| |||
| Description | |
3.1 | ||
10.1 | ||
15 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | Interactive | |
104 | Cover Page Interactive Data File (formatted in Inline XBRL and |
September 2020 Form 10-Q | 92 |
MORGAN STANLEY (Registrant) | ||||
| /s/ JONATHAN PRUZAN | |||
| ||||
Jonathan Pruzan Executive Vice President and Chief Financial Officer | ||||
By: | /s/ RAJA J. AKRAM | |||
| ||||
Raja J. Akram Deputy Chief Financial Officer, Chief Accounting Officer and Controller |