0000895421srt:MinimumMemberms:CommodityAndOtherContractsMemberus-gaap:FairValueMeasurementsRecurringMemberms:MeasurementInputCommodityVolatilityMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueOptionPricingModelMember2020-12-310000895421us-gaap:IntersegmentEliminationMember2021-01-012021-06-30
☒
EXCHANGE ACT OF 1934
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
2021
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) |
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Securities registered pursuant to Section 12(b) of the Act: | ||||||||
Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||||||
Common Stock, $0.01 par value | MS | New York Stock Exchange | ||||||
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate | MS/PA | New York Stock Exchange | ||||||
Non-Cumulative Preferred Stock, Series A, $0.01 par value | ||||||||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | MS/PE | New York Stock Exchange | ||||||
Non-Cumulative Preferred Stock, Series E, $0.01 par value | ||||||||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | MS/PF | New York Stock Exchange | ||||||
Non-Cumulative Preferred Stock, Series F, $0.01 par value | ||||||||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | MS/PI | New York Stock Exchange | ||||||
Non-Cumulative Preferred Stock, Series I, $0.01 par value | ||||||||
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate | MS/PK | New York Stock Exchange | ||||||
Non-Cumulative Preferred Stock, Series K, $0.01 par value | ||||||||
Depository Shares, each representing 1/1000th interest in a share of 4.875% | MS/PL | New York Stock Exchange | ||||||
Non-Cumulative Preferred Stock, Series L, $0.01 par value | ||||||||
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026 | MS/26C | New York Stock Exchange | ||||||
of Morgan Stanley Finance LLC (and Registrant’s guarantee with respect thereto) |
Large accelerated filer | ☒ | Accelerated | ☐ |
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| ☐ | Smaller reporting company | |||||||||||||||||||||||||||
| ☐ | Emerging growth company | ☐ |
Table of Contents | Part | Item | Page | |||||
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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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Table of Contents | Part | Item | Page | |||||||||||
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I | 2 | |||||||||||||
I | 3 | |||||||||||||
I | 1 | |||||||||||||
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II | 1 | |||||||||||||
II | 1A | |||||||||||||
II | 2 | |||||||||||||
I | 4 | |||||||||||||
II | 6 | |||||||||||||
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website.
•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; and
•Environmental and Social Policies.
ii
Disclosures reflect the effects of the acquisitions of E*TRADE Financial Corporation (“E*TRADE”) and Eaton Vance Corp. (“Eaton Vance”) prospectively from the acquisition dates, October 2, 2020 and March 1, 2021, respectively. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.
research.
small tomedium-sized businesses/ businesses and institutions coveringcovering: financial advisor-led brokerage and investment advisory services,services; self-directed brokerage services; financial and wealth planning services; workplace services including stock plan administration; annuity and insurance products, creditproducts; securities-based lending, residential real estate loans and other lending products, bankingproducts; banking; and retirement plan services.
June 2021 Form 10-Q | 1 |
Management’s Discussion and Analysis |
Consolidated Results—Three Months Ended June 30, 2021
reflect higher asset management fees, growth in bank lending, as well as net new assets of $71 billion and fee-based flows of $34 billion.
1
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We reported net revenues of $28,445 million$30.5 billion in the ninesix months ended SeptemberJune 30, 20172021 (“current year period,” or “YTD 2017”2021”), compared with $25,610 million$23.4 billion in the nine monthsperiod ended SeptemberJune 30, 20162020 (“prior year period,” or “YTD 2016”2020”). For the current year period, net income applicable to Morgan Stanley was $5,468 million,$7.6 billion, or $2.79$4.04 per diluted common share, compared with $4,313 million,$4.9 billion or $2.11$2.96 per diluted common share, in the prior year period.
2 | June 2021 Form 10-Q |
Management’s Discussion and Analysis |
1, 2
3 |
Management’s Discussion and Analysis |
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Non-compensation expenses were $2,546
Expense Efficiency Ratio
The expense efficiency ratio was 73.0%•Investment Management net revenues of $1,702 million in the current quarter and 72.1% in the current year period. The expense efficiency ratio was 73.3% inincreased 92% from the prior year quarter and 74.2% in the prior year period (see “SelectedNon-Generally Accepted Accounting Principles(“Non-GAAP”) Financial Information” herein).
Return on Average Common Equity
The annualized return on average common equity (“ROE”) was 9.6% in the current quarter and 9.8% in the current year period. The annualized ROE was 8.7% in the prior year quarter and 7.7% in the prior year period (see “SelectedNon-Generally Accepted Accounting Principles(“Non-GAAP”) Financial Information” herein).
Business Segment Results
Net Revenues by Segment1, 2
($ in millions)
4 |
Management’s Discussion and Analysis |
Net Income Applicable to Morgan Stanley by Segment1, 3
($ in millions)
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quarter and |
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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.
Wealth Management net revenues of $4,220 million in the current quarter and $12,429$3,016 million in the current year period increased 91% from the prior year period, both primarily due to higher Asset management and related fees, including incremental revenues related to the Eaton Vance acquisition, as well as higher Performance-based income and other revenues.
Investment ManagementAmericas net revenues of $675 million in the current quarter and $1,949 million in the current year period increased 22%31% from the prior year quarterperiod, primarily driven by the Wealth Management business segment and the Investment banking business within the Institutional Securities business segment. EMEA net revenues increased 21%29% and Asia net revenues increased 26% from the prior year period. The current quarterperiod, both primarily driven by the Equity and Investment banking businesses within the Institutional Securities business segment.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Consolidated results | ||||||||||||||
Net revenues1 | $ | 14,759 | $ | 13,660 | $ | 30,478 | $ | 23,439 | ||||||
Earnings applicable to Morgan Stanley common shareholders | $ | 3,408 | $ | 3,047 | $ | 7,390 | $ | 4,637 | ||||||
Earnings per diluted common share | $ | 1.85 | $ | 1.96 | $ | 4.04 | $ | 2.96 | ||||||
Consolidated financial measures | ||||||||||||||
Expense efficiency ratio1, 2 | 69 | % | 66 | % | 68 | % | 70 | % | ||||||
Adjusted expense efficiency ratio1,2,4 | 68 | % | 66 | % | 67 | % | 70 | % | ||||||
ROE3 | 13.8 | % | 15.7 | % | 15.3 | % | 12.2 | % | ||||||
Adjusted ROE3, 4 | 14.1 | % | 15.7 | % | 15.6 | % | 12.2 | % | ||||||
ROTCE3, 4 | 18.6 | % | 17.8 | % | 19.8 | % | 13.9 | % | ||||||
Adjusted ROTCE3, 4 | 19.0 | % | 17.8 | % | 20.1 | % | 13.9 | % | ||||||
Pre-tax margin1, 5 | 31 | % | 32 | % | 33 | % | 28 | % | ||||||
Effective tax rate | 23.1 | % | 25.7 | % | 22.5 | % | 22.8 | % | ||||||
Pre-tax margin by segment5 | ||||||||||||||
Institutional Securities1 | 35 | % | 37 | % | 37 | % | 29 | % | ||||||
Wealth Management1 | 27 | % | 24 | % | 27 | % | 25 | % | ||||||
Wealth Management, adjusted1, 4 | 28 | % | 24 | % | 28 | % | 25 | % | ||||||
Investment Management | 25 | % | 24 | % | 27 | % | 23 | % | ||||||
Investment Management, adjusted4 | 27 | % | 24 | % | 28 | % | 23 | % |
in millions, except per share and employee data | At June 30, 2021 | At December 31, 2020 | ||||||
Liquidity resources6 | $ | 343,776 | $ | 338,623 | ||||
Loans7 | $ | 166,059 | $ | 150,597 | ||||
Total assets | $ | 1,161,805 | $ | 1,115,862 | ||||
Deposits | $ | 320,358 | $ | 310,782 | ||||
Borrowings | $ | 224,142 | $ | 217,079 | ||||
Common shares outstanding | 1,834 | 1,810 | ||||||
Common shareholders' equity | $ | 99,120 | $ | 92,531 | ||||
Tangible common shareholders’ equity4 | $ | 73,593 | $ | 75,916 | ||||
Book value per common share8 | $ | 54.04 | $ | 51.13 | ||||
Tangible book value per common share4, 8 | $ | 40.12 | $ | 41.95 | ||||
Worldwide employees9 (in thousands) | 72 | 68 | ||||||
Capital Ratios10 | ||||||||
Common Equity Tier 1 capital—Standardized | 16.6 | % | 17.4 | % | ||||
Tier 1 capital—Standardized | 18.3 | % | 19.4 | % | ||||
Common Equity Tier 1 capital—Advanced | 17.7 | % | 17.7 | % | ||||
Tier 1 capital—Advanced | 19.5 | % | 19.8 | % | ||||
Tier 1 leverage | 7.5 | % | 8.4 | % | ||||
SLR11 | 5.9 | % | 7.4 | % |
Net RevenuesRegion1($common shares outstanding.millions)EMEA—Europe, Middle Easteffect until March 31, 2021. For further information, see “Liquidity and Africa
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5 |
Management’s Discussion and Analysis |
Selected Financial Information and Other Statistical Data
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% |
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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 |
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in the following tables. Net income applicable to Morgan Stanley U.S. GAAP Impact of discrete tax provision1 Net income applicable to Morgan Stanley, excluding discrete taxprovision—non-GAAP Earnings per diluted common share U.S. GAAP Impact of discrete tax provision1 Earnings per diluted common share, excluding discrete taxprovision—non-GAAP Effective income tax rate U.S. GAAP Impact of discrete tax provision1 Effective income tax rate from continuing operations, excluding discrete taxprovision—non-GAAPNon-Generally Accepted Accounting Principles(“Non-GAAP”) Non-GAAP Financial Informationaccounting principles generally accepted in the United States of America (“U.S. GAAP”).GAAP. From time to time, we may disclose certain“non-GAAP “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, Definitive Proxy Statementdefinitive proxy statement and otherwise. A“non-GAAP “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider thenon-GAAP financial measures we disclose to be useful to us, investors, analysts and analystsother stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results prospective regulatoryand capital requirements, or capital adequacy.below. Three Months Ended
September 30, Nine Months Ended
September 30, $ in millions, except per share data 2017 2016 2017 2016 $ 1,781 $ 1,597 $ 5,468 $ 4,313 (83 ) — (65 ) — $ 1,698 $ 1,597 $ 5,403 $ 4,313 $ 0.93 $ 0.81 $ 2.79 $ 2.11 (0.05 ) — (0.03 ) — $ 0.88 $ 0.81 $ 2.76 $ 2.11 28.1% 31.5% 29.7% 32.7% 3.3% — 0.8% — 31.4% 31.5% 30.5% 32.7% Three Months Ended
June 30,Six Months Ended
June 30,$ in millions, except per share data 2021 2020 2021 2020 Earnings applicable to Morgan Stanley common shareholders $ 3,408 $ 3,047 $ 7,390 $ 4,637 Impact of adjustments: Integration-related expenses 90 — 165 — Related tax benefit (21) — (38) — $ 3,477 $ 3,047 $ 7,517 $ 4,637 Earnings per diluted common share $ 1.85 $ 1.96 $ 4.04 $ 2.96 Impact of adjustments 0.04 — 0.07 — $ 1.89 $ 1.96 $ 4.11 $ 2.96 69 % 66 % 68 % 70 % Impact of adjustments (1) % — % (1) % — % 68 % 66 % 67 % 70 % 27 % 24 % 27 % 25 % Impact of adjustments 1 % — % 1 % — % 28 % 24 % 28 % 25 % Investment Management Pre-tax margin 25 % 24 % 27 % 23 % Impact of adjustments 2 % — % 1 % — % 27 % 24 % 28 % 23 % $ in millions At
June 30,
2021At
December 31,
2020Tangible equity Common shareholders' equity $ 99,120 $ 92,531 Less: Goodwill and net intangible assets (25,527) (16,615) Tangible common shareholders' equity—non-GAAP $ 73,593 $ 75,916 Average Monthly Balance Three Months Ended
June 30,Six Months Ended
June 30,$ in millions 2021 2020 2021 2020 Tangible equity Common shareholders' equity $ 98,824 $ 77,598 $ 96,309 $ 75,992 Less: Goodwill and net intangible assets (25,611) (9,268) (21,738) (9,246) Tangible common shareholders' equity—non-GAAP $ 73,213 $ 68,330 $ 74,571 $ 66,746 Three Months Ended
June 30,Six Months Ended
June 30,$ in billions 2021 2020 2021 2020 Average common equity Unadjusted—GAAP $ 98.8 $ 77.6 $ 96.3 $ 76.0 98.8 77.6 96.4 76.0 Unadjusted—GAAP 13.8 % 15.7 % 15.3 % 12.2 % 14.1 % 15.7 % 15.6 % 12.2 % Average tangible common equity—Non-GAAP Unadjusted $ 73.2 $ 68.3 $ 74.6 $ 66.7 73.2 68.3 74.6 66.7 Unadjusted 18.6 % 17.8 % 19.8 % 13.9 % 19.0 % 17.8 % 20.1 % 13.9 %
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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 |
ConsolidatedNon-GAAP Financial Measures
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 |
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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 |
Non-GAAP Financial Measures by Business Segment
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 |
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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.
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Management’s Discussion and Analysis |
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in billions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Average common equity4 | ||||||||||||||
Institutional Securities | $ | 43.5 | $ | 42.8 | $ | 43.5 | $ | 42.8 | ||||||
Wealth Management | 28.6 | 18.2 | 28.6 | 18.2 | ||||||||||
Investment Management | 10.7 | 2.6 | 7.1 | 2.6 | ||||||||||
ROE5 | ||||||||||||||
Institutional Securities | 17 | % | 19 | % | 20 | % | 13 | % | ||||||
Wealth Management | 17 | % | 18 | % | 17 | % | 18 | % | ||||||
Investment Management | 13 | % | 23 | % | 17 | % | 18 | % | ||||||
Average tangible common equity4 | ||||||||||||||
Institutional Securities | $ | 42.9 | $ | 42.3 | $ | 42.9 | $ | 42.3 | ||||||
Wealth Management | 13.4 | 10.4 | 13.4 | 10.4 | ||||||||||
Investment Management | 1.0 | 1.7 | 1.0 | 1.7 | ||||||||||
ROTCE5 | ||||||||||||||
Institutional Securities | 17 | % | 20 | % | 20 | % | 13 | % | ||||||
Wealth Management | 37 | % | 32 | % | 36 | % | 32 | % | ||||||
Investment Management | 172 | % | 36 | % | 117 | % | 27 | % |
We have an ROE
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 See Note 20 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.
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 7the 2020 Form 10-K.
Other revenues
Income Statement Information
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
Investment Banking
|
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% |
| 7 |
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 |
Management’s Discussion and Analysis |
Three Months Ended June 30, | |||||||||||
$ in millions | 2021 | 2020 | % Change | ||||||||
Revenues | |||||||||||
Advisory | $ | 664 | $ | 462 | 44 | % | |||||
Equity | 1,072 | 882 | 22 | % | |||||||
Fixed income | 640 | 707 | (9) | % | |||||||
Total Underwriting | 1,712 | 1,589 | 8 | % | |||||||
Total Investment banking | 2,376 | 2,051 | 16 | % | |||||||
Equity1 | 2,827 | 2,627 | 8 | % | |||||||
Fixed income1 | 1,682 | 3,041 | (45) | % | |||||||
Other1 | 207 | 480 | (57) | % | |||||||
Net revenues | $ | 7,092 | $ | 8,199 | (14) | % | |||||
Provision for credit losses1 | 70 | 217 | (68) | % | |||||||
Compensation and benefits | 2,433 | 2,952 | (18) | % | |||||||
Non-compensation expenses1 | 2,091 | 2,037 | 3 | % | |||||||
Total non-interest expenses1 | 4,524 | 4,989 | (9) | % | |||||||
Income before provision for income taxes | 2,498 | 2,993 | (17) | % | |||||||
Provision for income taxes | 574 | 790 | (27) | % | |||||||
Net income | 1,924 | 2,203 | (13) | % | |||||||
Net income applicable to noncontrolling interests | 20 | 17 | 18 | % | |||||||
Net income applicable to Morgan Stanley | $ | 1,904 | $ | 2,186 | (13) | % |
Six Months Ended June 30, | |||||||||||
$ in millions | 2021 | 2020 | % Change | ||||||||
Revenues | |||||||||||
Advisory | $ | 1,144 | $ | 824 | 39 | % | |||||
Equity | 2,574 | 1,218 | 111 | % | |||||||
Fixed income | 1,271 | 1,153 | 10 | % | |||||||
Total Underwriting | 3,845 | 2,371 | 62 | % | |||||||
Total Investment banking | 4,989 | 3,195 | 56 | % | |||||||
Equity1 | 5,702 | 5,076 | 12 | % | |||||||
Fixed income1 | 4,648 | 5,103 | (9) | % | |||||||
Other1 | 330 | 3 | N/M | ||||||||
Net revenues1 | $ | 15,669 | $ | 13,377 | 17 | % | |||||
Provision for credit losses1 | (23) | 605 | (104) | % | |||||||
Compensation and benefits | 5,547 | 4,766 | 16 | % | |||||||
Non-compensation expenses1 | 4,276 | 4,063 | 5 | % | |||||||
Total non-interest expenses1 | 9,823 | 8,829 | 11 | % | |||||||
Income before provision for income taxes | 5,869 | 3,943 | 49 | % | |||||||
Provision for income taxes | 1,310 | 941 | 39 | % | |||||||
Net income | 4,559 | 3,002 | 52 | % | |||||||
Net income applicable to noncontrolling interests | 54 | 59 | (8) | % | |||||||
Net income applicable to Morgan Stanley | $ | 4,505 | $ | 2,943 | 53 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in billions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Completed mergers and acquisitions1 | $ | 141 | $ | 433 | $ | 370 | $ | 552 | ||||||
Equity and equity-related offerings2, 3 | 31 | 36 | 68 | 49 | ||||||||||
Fixed income offerings2, 4 | 100 | 121 | 204 | 214 |
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Investment banking revenues of $1,270$2,376 million in the current quarter increased 16% compared with the prior year quarter, primarily reflecting an increase in advisory and $4,100equity underwriting revenues.
Advisory revenues increased in the current quarter reflecting the higher volumesnumber of completed merger, acquisition and restructuring transactions (“M&A”) (see Investment Banking Volumes table). Advisory revenues decreased in the current year period reflecting the lower volumes of completed M&A, partially offset by the positive impact of higher fee realizations.
•Equity underwriting revenues increased in the current quarter and current year period as a result ofon higher global market volumes, primarily in bothfollow-on and initial public offerings (see Investment Banking Volumes table). In the current year period, equity underwriting revenues also increased as a result of higher levels of deal activity. and secondary block share trades.
Sales and Trading Net Revenues
By Income Statement Line Item
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
8 |
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.
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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 |
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Management’s Discussion and Analysis |
We manage each of the sales
Three Months Ended June 30, 2021 | |||||||||||||||||
Net Interest2 | All Other3 | ||||||||||||||||
$ in millions | Trading | Fees1 | Total | ||||||||||||||
Financing | $ | 1,138 | $ | 121 | $ | 117 | $ | 3 | $ | 1,379 | |||||||
Execution services | 818 | 636 | (45) | 39 | 1,448 | ||||||||||||
Total Equity | $ | 1,956 | $ | 757 | $ | 72 | $ | 42 | $ | 2,827 | |||||||
Total Fixed Income | $ | 1,148 | $ | 72 | $ | 417 | $ | 45 | $ | 1,682 |
Three Months Ended June 30, 20204 | |||||||||||||||||
Net Interest2 | All Other3 | ||||||||||||||||
$ in millions | Trading | Fees1 | Total | ||||||||||||||
Financing | $ | 884 | $ | 115 | $ | 94 | $ | 1 | $ | 1,094 | |||||||
Execution services | 948 | 651 | (73) | 7 | 1,533 | ||||||||||||
Total Equity | $ | 1,832 | $ | 766 | $ | 21 | $ | 8 | $ | 2,627 | |||||||
Total Fixed Income | $ | 2,468 | $ | 67 | $ | 504 | $ | 2 | $ | 3,041 |
Six Months Ended June 30, 2021 | |||||||||||||||||
Net Interest2 | All Other3 | ||||||||||||||||
$ in millions | Trading | Fees1 | Total | ||||||||||||||
Financing | $ | 1,783 | $ | 251 | $ | 299 | $ | 6 | $ | 2,339 | |||||||
Execution services | 1,932 | 1,436 | (107) | 102 | 3,363 | ||||||||||||
Total Equity | $ | 3,715 | $ | 1,687 | $ | 192 | $ | 108 | $ | 5,702 | |||||||
Total Fixed Income | $ | 3,461 | $ | 153 | $ | 856 | $ | 178 | $ | 4,648 |
Six Months Ended June 30, 20204 | |||||||||||||||||
Net Interest2 | All Other3 | ||||||||||||||||
$ in millions | Trading | Fees1 | Total | ||||||||||||||
Financing | $ | 1,919 | $ | 217 | $ | 57 | $ | 4 | $ | 2,197 | |||||||
Execution services | 1,527 | 1,434 | (113) | 31 | 2,879 | ||||||||||||
Total Equity | $ | 3,446 | $ | 1,651 | $ | (56) | $ | 35 | $ | 5,076 | |||||||
Total Fixed Income | $ | 4,241 | $ | 169 | $ | 832 | $ | (139) | $ | 5,103 |
For additional information on total Trading revenues, see the table “Trading Revenues by Product Type” in Note 41 to the financial statements.
Salesstatements for additional information.
Equity sales and trading net
•Financing revenues increased, 8% fromprimarily driven by higher average client balances and higher client activity.
Execution services decreased 6% from the prior year quarter, as reducedwell as the effect of tighter bid-offer spreads and lower client activity in corporate credit products.
Fixed Income
Fixed income net
June 2021 Form 10-Q | 9 |
Management’s Discussion and Analysis |
Credit products, partially offset by credit products.
Global macro products decreased due to lower market and interest rate volatility, which reduced Trading revenues. In addition, Net interest revenues decreasedincreased, primarily due to the impact of market conditions on inventory held to facilitate client activity across all credit products, partially offset by the effect of interest ratetighter bid-offer spreads and lower client activity in corporate credit products inventory management.
•Commodities products and Other remained relatively unchanged from the prior year quarter.
Sales and Trading Net Revenues during the Current Year Period
Equity
Equity sales and trading net revenues of $6,062 million in the current year period were relatively unchanged from the prior year period, reflecting lower results in our financing business, offset by higher results in execution services.
Financingother fixed income revenues decreased, 4% fromprimarily driven by the prior year period as Net interest revenues declined from higher net interest costs, reflecting increased liquidity requirementsimpact of market conditions on inventory held to facilitate client activity and a shiftlower client activity in the mix of financing transactions,Commodities, partially offset by higher client activity in equity swaps reflected in Trading revenues.
Execution services increased 3% from the prior year period primarily due to improved results in cash equity inventorycounterparty credit risk management reflected in Trading revenues, partially offset by lower commissions and fees driven by reduced market volumes in the United States.
Fixed Income
Fixed income net
Credit products increased due to the absence of inventory losses driven by a widening spread environment in the prior year period, which increased Trading revenues. This was partially offset by a lower level of interest realized in securitized products in the current year period, which reduced Net interest revenues.
Global macro products increased due to increased Trading revenues in foreign exchange driven by market volatility, and structured interest rate products driven by higher client activity. This was partially offset by higher interest costs impacting Net interest revenues in the current year period which resulted from interest rate products inventory management.
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 million in the current quarter increased from the prior year quarter primarily as a result of higher gains on real estate investments, partially offset by lower gains on equities business related investments.
Net investment gains of $155$330 million in the current year period increased from the prior year period primarily reflectingdue to gains onfrom investments associated with ourcertain employee deferred compensation plans in the current year period compared with losses in the prior year period and lower mark-to-market losses on corporate loans held for sale, net of related economic hedges.
Other
Other revenuesloans and lending commitments of $143$605 million in the prior year period was primarily driven by deterioration in the expected macroeconomic environment at that time.
Non-interest Expenses
Non-interest expenses of $3,140 million in the current quarter were relatively unchanged from9% compared with the prior year quarter, primarily reflecting an 8%18% decrease in Compensation and benefits expenses and a 6% increase inNon-compensationexpenses.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 decreasesa decrease in discretionary incentive compensation driven mainly by lower revenues,
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•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 investments in technology, professional services and volume-related expenses, partially offset by a decrease in litigation expenses.
•Non-compensation expenses were relatively unchanged in the current quarter.Non-compensation expenses decreasedincreased in the current year period, primarily due to lower litigationinvestments in technology, volume-related expenses and information processing costs,professional services, partially offset by higher deposit insurance expensea decrease in litigation expenses.
Fee-Based Client Assets
10 | June 2021 Form 10-Q |
Management’s Discussion and Analysis |
Three Months Ended June 30, | |||||||||||
$ in millions | 2021 | 2020 | % Change | ||||||||
Revenues | |||||||||||
Asset management | $ | 3,447 | $ | 2,507 | 37 | % | |||||
Transactional1 | 1,172 | 1,075 | 9 | % | |||||||
Net interest | 1,255 | 1,030 | 22 | % | |||||||
Other1,2 | 221 | 92 | 140 | % | |||||||
Net revenues | 6,095 | 4,704 | 30 | % | |||||||
Provision for credit losses2 | 3 | 22 | (86) | % | |||||||
Compensation and benefits | 3,275 | 2,729 | 20 | % | |||||||
Non-compensation expenses | 1,181 | 811 | 46 | % | |||||||
Total non-interest expenses | 4,456 | 3,540 | 26 | % | |||||||
Income before provision for income taxes | $ | 1,636 | $ | 1,142 | 43 | % | |||||
Provision for income taxes | 372 | 289 | 29 | % | |||||||
Net income applicable to Morgan Stanley | $ | 1,264 | $ | 853 | 48 | % |
Six Months Ended June 30, | |||||||||||
$ in millions | 2021 | 2020 | % Change | ||||||||
Revenues | |||||||||||
Asset management | $ | 6,638 | $ | 5,187 | 28 | % | |||||
Transactional1 | 2,400 | 1,474 | 63 | % | |||||||
Net interest | 2,640 | 1,926 | 37 | % | |||||||
Other1,2 | 376 | 173 | 117 | % | |||||||
Net revenues | 12,054 | 8,760 | 38 | % | |||||||
Provision for credit losses2 | (2) | 41 | (105) | % | |||||||
Compensation and benefits | 6,445 | 4,941 | 30 | % | |||||||
Non-compensation expenses | 2,375 | 1,581 | 50 | % | |||||||
Total non-interest expenses | 8,820 | 6,522 | 35 | % | |||||||
Income before provision for income taxes | $ | 3,236 | $ | 2,197 | 47 | % | |||||
Provision for income taxes | 730 | 480 | 52 | % | |||||||
Net income applicable to Morgan Stanley | $ | 2,506 | $ | 1,717 | 46 | % |
$ in billions | At June 30, 2021 | At December 31, 2020 | ||||||
Total client assets | $ | 4,546 | $ | 3,999 | ||||
U.S. Bank Subsidiary loans | $ | 115 | $ | 98 | ||||
Margin and other lending1 | $ | 27 | $ | 23 | ||||
Deposits2 | $ | 319 | $ | 306 | ||||
Weighted average cost of deposits3 | 0.16% | 0.24% |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||
Net new assets4 | $ | 71.2 | $ | 20.4 | $ | 176.1 | $ | 57.5 | ||||||
$ in billions | At June 30, 2021 | At December 31, 2020 | |||||||||
Advisor-led client assets1 | $ | 3,553 | $ | 3,167 | |||||||
Fee-based client assets2 | $ | 1,680 | $ | 1,472 | |||||||
Fee-based client assets as a percentage of advisor-led client assets | 47% | 46% | |||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||
Fee-based asset flows3 | $ | 33.7 | $ | 11.1 | $ | 70.9 | $ | 29.5 | ||||||
$ in billions | At June 30, 2021 | At December 31, 2020 | |||||||||
Self-directed assets1 | $ | 993 | $ | 832 | |||||||
Self-directed households (in millions)2 | 7.4 | 6.7 | |||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||
Daily average revenue trades (“DARTs”) (in thousands)3 | 1,042 | 6 | 1,324 | 6 | ||||||||||
June 2021 Form 10-Q | 11 |
Management’s Discussion and Analysis |
$ in billions | At June 30, 2021 | At December 31, 2020 | |||||||||
Workplace unvested assets2 | $ | 480 | $ | 435 | |||||||
Number of participants (in millions)3 | 5.2 | 4.9 |
12 | June 2021 Form 10-Q |
Management’s Discussion and Analysis |
$ in billions | At March 31, 2021 | Inflows | Outflows | Market Impact | At June 30, 2021 | ||||||||||||
Separately managed1 | $ | 385 | $ | 13 | $ | (4) | $ | 13 | $ | 407 | |||||||
Unified managed | 405 | 25 | (14) | 20 | 436 | ||||||||||||
Advisor | 188 | 10 | (8) | 11 | 201 | ||||||||||||
Portfolio manager | 549 | 29 | (17) | 29 | 590 | ||||||||||||
Subtotal | $ | 1,527 | $ | 77 | $ | (43) | $ | 73 | $ | 1,634 | |||||||
Cash management | 47 | 8 | (9) | — | 46 | ||||||||||||
Total fee-based client assets | $ | 1,574 | $ | 85 | $ | (52) | $ | 73 | $ | 1,680 |
$ in billions | At March 31, 2020 | Inflows | Outflows | Market Impact | At June 30, 2020 | ||||||||||||
Separately managed1 | $ | 329 | $ | 7 | $ | (4) | $ | (19) | $ | 313 | |||||||
Unified managed | 263 | 13 | (10) | 39 | 305 | ||||||||||||
Advisor | 131 | 8 | (8) | 18 | 149 | ||||||||||||
Portfolio manager | 379 | 20 | (15) | 47 | 431 | ||||||||||||
Subtotal | $ | 1,102 | $ | 48 | $ | (37) | $ | 85 | $ | 1,198 | |||||||
Cash management | 32 | 10 | (4) | — | 38 | ||||||||||||
Total fee-based client assets | $ | 1,134 | $ | 58 | $ | (41) | $ | 85 | $ | 1,236 |
$ in billions | At December 31, 2020 | Inflows | Outflows | Market Impact | At June 30, 2021 | ||||||||||||
Separately managed1 | $ | 359 | $ | 26 | $ | (11) | $ | 33 | $ | 407 | |||||||
Unified managed | 379 | 51 | (27) | 33 | 436 | ||||||||||||
Advisor | 177 | 22 | (17) | 19 | 201 | ||||||||||||
Portfolio manager | 509 | 59 | (32) | 54 | 590 | ||||||||||||
Subtotal | $ | 1,424 | $ | 158 | $ | (87) | $ | 139 | $ | 1,634 | |||||||
Cash management | 48 | 15 | (17) | — | 46 | ||||||||||||
Total fee-based client assets | $ | 1,472 | $ | 173 | $ | (104) | $ | 139 | $ | 1,680 |
$ in billions | At December 31, 2019 | Inflows | Outflows | Market Impact | At June 30, 2020 | ||||||||||||
Separately managed1 | $ | 322 | $ | 19 | $ | (10) | $ | (18) | $ | 313 | |||||||
Unified managed | 313 | 29 | (22) | (15) | 305 | ||||||||||||
Advisor | 155 | 16 | (15) | (7) | 149 | ||||||||||||
Portfolio manager | 435 | 44 | (31) | (17) | 431 | ||||||||||||
Subtotal | $ | 1,225 | $ | 108 | $ | (78) | $ | (57) | $ | 1,198 | |||||||
Cash management | 42 | 9 | (13) | — | 38 | ||||||||||||
Total fee-based client assets | $ | 1,267 | $ | 117 | $ | (91) | $ | (57) | $ | 1,236 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
Fee rate in bps | 2021 | 2020 | 2021 | 2020 | ||||||||||
Separately managed | 14 | 14 | 14 | 14 | ||||||||||
Unified managed | 95 | 99 | 96 | 99 | ||||||||||
Advisor | 82 | 86 | 82 | 85 | ||||||||||
Portfolio manager | 93 | 94 | 93 | 94 | ||||||||||
Subtotal | 72 | 72 | 73 | 72 | ||||||||||
Cash management | 5 | 6 | 5 | 5 | ||||||||||
Total fee-based client assets | 71 | 70 | 71 | 70 |
13 |
Management’s Discussion and Analysis |
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
|
|
|
Three Months Ended June 30, | |||||||||||
$ in millions | 2021 | 2020 | % Change | ||||||||
Revenues | |||||||||||
Asset management and related fees | $ | 1,418 | $ | 684 | 107 | % | |||||
Performance-based income and other1 | 284 | 202 | 41 | % | |||||||
Net revenues | 1,702 | 886 | 92 | % | |||||||
Compensation and benefits | 715 | 354 | 102 | % | |||||||
Non-compensation expenses | 557 | 316 | 76 | % | |||||||
Total non-interest expenses | 1,272 | 670 | 90 | % | |||||||
Income before provision for income taxes | 430 | 216 | 99 | % | |||||||
Provision for income taxes | 108 | 39 | 177 | % | |||||||
Net income | 322 | 177 | 82 | % | |||||||
Net income (loss) applicable to noncontrolling interests | (19) | 23 | (183) | % | |||||||
Net income applicable to Morgan Stanley | $ | 341 | $ | 154 | 121 | % |
Six Months Ended June 30, | |||||||||||
$ in millions | 2021 | 2020 | % Change | ||||||||
Revenues | |||||||||||
Asset management and related fees | $ | 2,521 | $ | 1,349 | 87 | % | |||||
Performance-based income and other1 | 495 | 229 | 116 | % | |||||||
Net revenues | 3,016 | 1,578 | 91 | % | |||||||
Compensation and benefits | 1,229 | 611 | 101 | % | |||||||
Non-compensation expenses | 987 | 608 | 62 | % | |||||||
Total non-interest expenses | 2,216 | 1,219 | 82 | % | |||||||
Income before provision for income taxes | 800 | 359 | 123 | % | |||||||
Provision for income taxes | 189 | 64 | 195 | % | |||||||
Net income | 611 | 295 | 107 | % | |||||||
Net income (loss) applicable to noncontrolling interests | (5) | 63 | (108) | % | |||||||
Net income applicable to Morgan Stanley | $ | 616 | $ | 232 | 166 | % |
14 |
Management’s Discussion and Analysis |
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 compared to the prior year period primarily as a result of 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 | Equity | Fixed income | Alternatives and Solutions | Long-term AUM Subtotal | Liquidity and Overlay Services | Total | ||||||||||||||
March 31, 2021 | $ | 371 | $ | 201 | $ | 418 | $ | 990 | $ | 429 | $ | 1,419 | ||||||||
Inflows | 24 | 19 | 29 | 72 | 454 | 526 | ||||||||||||||
Outflows | (21) | (15) | (20) | (56) | (419) | (475) | ||||||||||||||
Market Impact | 31 | 3 | 19 | 53 | 4 | 57 | ||||||||||||||
Other | (1) | (1) | (1) | (3) | — | (3) | ||||||||||||||
June 30, 2021 | $ | 404 | $ | 207 | $ | 445 | $ | 1,056 | $ | 468 | $ | 1,524 |
$ in billions | Equity | Fixed income | Alternatives and Solutions | Long-term AUM Subtotal | Liquidity and Overlay Services | Total | ||||||||||||||
March 31, 2020 | $ | 121 | $ | 75 | $ | 141 | $ | 337 | $ | 247 | $ | 584 | ||||||||
Inflows | 18 | 11 | 7 | 36 | 409 | 445 | ||||||||||||||
Outflows | (9) | (6) | (4) | (19) | (388) | (407) | ||||||||||||||
Market Impact | 37 | 4 | 2 | 43 | — | 43 | ||||||||||||||
Other | 1 | — | (1) | — | — | — | ||||||||||||||
June 30, 2020 | $ | 168 | $ | 84 | $ | 145 | $ | 397 | $ | 268 | $ | 665 |
$ in billions | Equity | Fixed income | Alternatives and Solutions | Long-term AUM Subtotal | Liquidity and Overlay Services | Total | ||||||||||||||
December 31, 2020 | $ | 242 | $ | 98 | $ | 153 | $ | 493 | $ | 288 | $ | 781 | ||||||||
Inflows | 55 | 32 | 44 | 131 | 913 | 1,044 | ||||||||||||||
Outflows | (44) | (24) | (30) | (98) | (852) | (950) | ||||||||||||||
Market Impact | 35 | 1 | 29 | 65 | 4 | 69 | ||||||||||||||
Acquired1 | 119 | 103 | 251 | 473 | 116 | 589 | ||||||||||||||
Other | (3) | (3) | (2) | (8) | (1) | (9) | ||||||||||||||
June 30, 2021 | $ | 404 | $ | 207 | $ | 445 | $ | 1,056 | $ | 468 | $ | 1,524 |
$ in billions | Equity | Fixed income | Alternatives and Solutions | Long-term AUM Subtotal | Liquidity and Overlay Services | Total | ||||||||||||||
December 31, 2019 | $ | 138 | $ | 79 | $ | 139 | $ | 356 | $ | 196 | $ | 552 | ||||||||
Inflows | 32 | 21 | 15 | 68 | 855 | 923 | ||||||||||||||
Outflows | (21) | (15) | (8) | (44) | (783) | (827) | ||||||||||||||
Market Impact | 19 | — | (5) | 14 | 1 | 15 | ||||||||||||||
Other | — | (1) | 4 | 3 | (1) | 2 | ||||||||||||||
June 30, 2020 | $ | 168 | $ | 84 | $ | 145 | $ | 397 | $ | 268 | $ | 665 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in billions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Equity | $ | 389 | $ | 146 | $ | 329 | $ | 142 | ||||||
Fixed income | 205 | 80 | 159 | 80 | ||||||||||
Alternatives and Solutions | 434 | 143 | 314 | 141 | ||||||||||
Long-term AUM subtotal | 1028 | 369 | 802 | 363 | ||||||||||
Liquidity and Overlay Services | 449 | 266 | 384 | 235 | ||||||||||
Total AUM | $ | 1,477 | $ | 635 | $ | 1,186 | $ | 598 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
Fee rate in bps | 2021 | 2020 | 2021 | 2020 | ||||||||||
Equity | 72 | 76 | 77 | 75 | ||||||||||
Fixed income | 38 | 29 | 38 | 30 | ||||||||||
Alternatives and Solutions | 33 | 58 | 40 | 59 | ||||||||||
Long-term AUM | 49 | 59 | 55 | 59 | ||||||||||
Liquidity and Overlay Services | 5 | 16 | 6 | 16 | ||||||||||
Total AUM | 35 | 41 | 39 | 42 |
15 |
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
|
Management’s Discussion and Analysis |
At 2017 U.S. Bank Subsidiaries assets1 U.S. Bank Subsidiaries investment securities portfolio: Investment securities—AFS Investment securities—HTM Total investment securities Deposits2 Wealth Management U.S. Bank Subsidiaries data Securities-based lending and other loans3 Residential real estate loans Total Institutional Securities U.S. Bank Subsidiaries data Corporate loans Wholesale real estate loans Total and affiliates. From continuing operations deposits, see “Liquidity and Capital Resources—Funding Management—Unsecured Financing” herein. and DisclosuresWe provide loans to a variety of customers, from large corporate and institutional clients to high net worth individuals, primarily through our and, Morgan Stanley Private Bank, National Association (“MSPBNA”), E*TRADE Bank (“ETB”), and E*TRADE Savings Bank (“ETSB”) (collectively, “U.S. Bank Subsidiaries”). The lending activities accept deposits, provide loans to a variety of customers, including large corporate and institutional clients as well as high to ultra-high net worth individuals, and invest in securities. Lending activity recorded in the U.S. Bank Subsidiaries from the Institutional Securities business segment primarily include loans orincludes Secured lending commitments to corporate clients. The lending activitiesfacilities and Commercial real estate loans. Lending activity recorded in the U.S. Bank Subsidiaries from the Wealth Management business segment primarily include securities-basedincludes Securities-based lending, thatwhich allows clients to borrow money against the value of qualifying securities, and also include residentialResidential real estate loans. We expect our lending activities to continue to grow through further market penetration of the client base within the Institutional Securities and Wealth Management business segments. Market Risk—Risk Management—Credit Risk.” For a further discussion about loans and lending commitments, see Notes 710 and 1114 to the financial statements. Excluding Transactions with1$ in billions At
June 30,
2021At
December 31,
2020Investment securities portfolio: Investment securities—AFS $ 73.4 $ 90.3 Investment securities—HTM 62.8 52.6 Total investment securities $ 136.2 $ 142.9 Residential real estate $ 38.9 $ 35.2 75.8 62.9 Total, net of ACL $ 114.7 $ 98.1 Corporate $ 5.5 $ 7.9 Secured lending facilities 30.5 27.4 Commercial and Residential real estate 9.8 10.1 Securities-based lending and Other 7.1 5.4 Total, net of ACL $ 52.9 $ 50.8 Total Assets $ 357.5 $ 346.5 $ 318.7 $ 309.7 $ in billions
September 30, At
December 31,
2016 $ 182.2 $ 176.8 42.7 50.3 18.1 13.6 $ 60.8 $ 63.9 $ 154.2 $ 154.7 $ 40.1 $ 36.0 26.2 24.4 $ 66.3 $ 60.4 $ 22.3 $ 20.3 10.1 9.9 $ 32.4 $ 30.2 AFS—Available for saleHTM—Held to maturity1.Certain revisions have been made to prior periods to conform to the current presentation.2. information on deposits, see “Liquidity and Capital Resources—Funding Management—Unsecured Financing” herein.3.Other loans primarily include tailored lending.Income Tax MattersEffective Tax Rate Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 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.that apply to us butwhich we have either determined are not yet effective for the Firm. Accounting updates not listed below were assessed and determined to be either not applicable or are not expected to have a significant impact on our financial statements.The following accounting updates are currently being evaluated to determine the potential impact of adoption:•Revenue from Contracts with Customers. This accounting update aims to clarify the principles of revenue recognition, develop a common revenue recognition standard across all industries for U.S. GAAP and provide enhanced disclosures for users of the financial statements. The core principle of this guidance is that an entity should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The update is not applicable to financial instruments. We will adopt the guidance on January 1, 2018 and apply the modified retrospective method 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
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.
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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.
acquisition method of accounting and the subsequent valuation of intangible assets as part of impairment assessments are subjective and based, in part, on inputs that are unobservable. These inputs include, but are not limited to, forecasted cash flows, revenue growth rates, attrition rates and discount rates.consolidated financial statements in the 20162020 Form10-K and Note 2 to the financial statements), the fair value, goodwill and intangible assets, legal and regulatory contingencies and income taxes policies involve a higher degree of judgment and complexity. For a further discussion about our critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in Part II, Item 7the 2020 Form 10-K. As discussed in Note 2 to the financial statements, our acquisition of Eaton Vance on March 1, 2021 included indefinite lived intangible assets. The initial valuation of an intangible asset, including indefinite lived intangible assets, as part of the 2016 Form10-K.TheOur Treasury Department,department, Firm Risk Committee, Asset and Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and controlling the impact that our business activities have on our balance sheets,sheet, liquidity and capital structure. Liquidity and capital matters are reported regularly to the Board of Directors (the “Board”) and the Board’s Risk Committee.Committee of the Board.
The Balance Sheet
16 | June 2021 Form 10-Q |
Management’s Discussion and Analysis |
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 |
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At June 30, 2021 $ in millions IS WM IM Total Assets Cash and cash equivalents $ 88,778 $ 37,124 $ 578 $ 126,480 Trading assets at fair value 314,961 1,180 5,004 321,145 Investment securities 40,310 135,032 — 175,342 Securities purchased under agreements to resell 79,414 16,516 — 95,930 Securities borrowed 125,358 1,345 — 126,703 Customer and other receivables 66,965 32,714 1,242 100,921 51,329 114,708 22 166,059 15,142 22,517 11,566 49,225 Total assets $ 782,257 $ 361,136 $ 18,412 $ 1,161,805
At December 31, 2020 | ||||||||||||||
$ in millions | IS | WM | IM | Total | ||||||||||
Assets | ||||||||||||||
Cash and cash equivalents | $ | 74,281 | $ | 31,275 | $ | 98 | $ | 105,654 | ||||||
Trading assets at fair value | 308,413 | 280 | 4,045 | 312,738 | ||||||||||
Investment securities | 41,630 | 140,524 | — | 182,154 | ||||||||||
Securities purchased under agreements to resell | 84,998 | 31,236 | — | 116,234 | ||||||||||
Securities borrowed | 110,480 | 1,911 | — | 112,391 | ||||||||||
Customer and other receivables | 67,085 | 29,781 | 871 | 97,737 | ||||||||||
Loans1 | 52,449 | 98,130 | 18 | 150,597 | ||||||||||
Other assets2 | 13,986 | 22,458 | 1,913 | 38,357 | ||||||||||
Total assets | $ | 753,322 | $ | 355,595 | $ | 6,945 | $ | 1,115,862 |
Securities Repurchase Agreements and Securities Lending
Securities borrowed or securities purchased under agreements to resell and securities loaned or securities sold under agreements to repurchase are treated as collateralized financings (see Note 2 to the consolidated financial statements in the 2016 Form10-K and Note 6 to the financial statements).
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 |
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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.
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 June 30, 2021 | At December 31, 2020 | ||||||
Cash deposits with central banks | $ | 67,662 | $ | 49,669 | ||||
Unencumbered HQLA Securities1: | ||||||||
U.S. government obligations | 127,603 | 136,555 | ||||||
U.S. agency and agency mortgage-backed securities | 109,294 | 99,659 | ||||||
Non-U.S. sovereign obligations2 | 29,204 | 39,745 | ||||||
Other investment grade securities | 793 | 2,053 | ||||||
Total HQLA1 | $ | 334,556 | $ | 327,681 | ||||
Cash deposits with banks (non-HQLA) | 9,220 | 10,942 | ||||||
Total Liquidity Resources | $ | 343,776 | $ | 338,623 |
At June 30, 2021 | At December 31, 2020 | Average Daily Balance Three Months Ended | |||||||||
$ in millions | June 30, 2021 | ||||||||||
Bank legal entities | |||||||||||
U.S. | $ | 172,944 | $ | 178,033 | $ | 176,625 | |||||
Non-U.S. | 9,845 | 7,670 | 8,473 | ||||||||
Total Bank legal entities | 182,789 | 185,703 | 185,098 | ||||||||
Non-Bank legal entities | |||||||||||
U.S.: | |||||||||||
Parent Company | 67,997 | 59,468 | 63,911 | ||||||||
Non-Parent Company | 41,037 | 33,368 | 43,511 | ||||||||
Total U.S. | 109,034 | 92,836 | 107,422 | ||||||||
Non-U.S. | 51,953 | 60,084 | 59,394 | ||||||||
Total Non-Bank legal entities | 160,987 | 152,920 | 166,816 | ||||||||
Total Liquidity Resources | $ | 343,776 | $ | 338,623 | $ | 351,914 |
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June 2021 Form 10-Q | 17 |
Management’s Discussion and |
At September 30, At December 31, Daily Average Three Months Bank legal entities Domestic Foreign Total Bank legal entities Non-Bank legal entities Domestic: Parent Company Non-Parent Company Total Domestic Foreign TotalNon-Bank legal entities Total composition of our balance sheet, the maturity profile of our unsecured debt and estimates of funding needs in a stressed environment, among other factors. At September 30, At December 31, Daily Average Balance Three Months Ended September 30, 2017 HQLA Cash deposits with central banks Securities1 Total LCRGLR Managed by BankNon-Bank Legal Entities
2017
2016
Balance
Ended $ in millions September 30,
2017 $ 72,567 $ 74,411 $ 68,746 4,248 4,238 4,297 76,815 78,649 73,043 39,747 66,514 50,893 31,754 18,801 33,934 71,501 85,315 84,827 41,650 38,333 44,244 113,151 123,648 129,071 $ 189,966 $ 202,297 $ 202,114 Basel Committee on Banking Supervision’s (“Basel Committee”) Liquidity Coverage Ratio (“LCR”) standardFirm, MSBNA and MSPBNA are required to maintain a minimum LCR of 100% and ETB is subject to this requirement beginning in July 2021. The LCR requirements are designed to ensure that banking organizations have sufficient high-quality liquid assets (“HQLA”)Eligible HQLA to cover net cash outflows arising from significant stress over 30 calendar days. The standard’s objective is to promotedays, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. WeIn determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and our U.S. Bank Subsidiaries are subject tocertain HQLA held in subsidiaries is excluded.LCR requirements issued by U.S. banking regulators (“U.S. LCR”), which are based on the Basel Committee’s LCR, including a requirement to calculate each entity’s U.S. LCR on each business day. WeFirm, MSBNA and our U.S. Bank SubsidiariesMSPBNA are compliant with the minimum required U.S. LCR of 100%.HQLA by Type of Asset andAverage Daily Balance
Three Months Ended$ in millions June 30, 2021 March 31, 2021 Cash deposits with central banks $ 56,430 $ 50,815 171,729 166,060 $ 228,159 $ 216,875 LCR 126 % 125 %
2017
2016 $ in millions $ 33,614 $ 30,569 $ 40,841 125,426 129,524 134,363 $ 159,040 $ 160,093 $ 175,204 130% 1.Primarily includes U.S. Treasuries; U.S. agency mortgage-backed securities; sovereign bonds; investment-grade corporate bonds; and publicly traded common equities.21September 2017 Form 10-Q
The regulatory definition of rule, Eligible HQLA is substantially the same as our GLR. GLRcalculated using weightings and excluding certain HQLA held in subsidiaries.
bonds.
The Basel Committee finalizedthese individual entities are compliant with the 100% minimum NSFR framework in 2014. In May 2016, the U.S. banking regulators issued a proposal to implement the NSFR in the U.S., which would apply to us and our U.S. Bank Subsidiaries. Our preliminary estimates, based on the current proposal, indicate that actions will be necessary to meet the requirement, which we expect to accomplish byas of July 1, 2021, 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.
requirements.
At September 30, 2017
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Securities purchased under agreements to resell and Securities borrowed | $ | 222,633 | $ | 228,625 | ||||
Securities sold under agreements to repurchase and Securities loaned | $ | 67,219 | $ | 58,318 | ||||
Securities received as collateral1 | $ | 7,166 | $ | 4,277 |
Average Daily Balance Three Months Ended | ||||||||
$ in millions | June 30, 2021 | December 31, 2020 | ||||||
Securities purchased under agreements to resell and Securities borrowed | $ | 225,988 | $ | 195,376 | ||||
Securities sold under agreements to repurchase and Securities loaned | $ | 67,568 | $ | 54,528 |
Unsecured Financing
18 | June 2021 Form 10-Q |
Management’s Discussion and Analysis |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Savings and demand deposits: | ||||||||
Brokerage sweep deposits1 | $ | 256,730 | $ | 232,071 | ||||
Savings and other | 42,951 | 47,150 | ||||||
Total Savings and demand deposits | 299,681 | 279,221 | ||||||
Time deposits | 20,677 | 31,561 | ||||||
Total2 | $ | 320,358 | $ | 310,782 |
Deposits
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Savings and demand deposits: Brokerage sweep deposits1 | $ | 135,152 |
| $ | 153,042 |
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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 |
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December 31, 2020, respectively. This client cash held by third parties is not reflected in our balance sheets and is not immediately available for liquidity purposes.
$ in millions | Parent Company | Subsidiaries | Total | ||||||||
Original maturities of one year or less | $ | — | $ | 5,538 | $ | 5,538 | |||||
Original maturities greater than one year | |||||||||||
2021 | $ | 7,320 | $ | 2,600 | $ | 9,920 | |||||
2022 | 11,181 | 6,853 | 18,034 | ||||||||
2023 | 17,043 | 5,484 | 22,527 | ||||||||
2024 | 20,839 | 8,194 | 29,033 | ||||||||
2025 | 14,839 | 6,802 | 21,641 | ||||||||
Thereafter | 91,456 | 25,993 | 117,449 | ||||||||
Total | $ | 162,678 | $ | 55,926 | $ | 218,604 | |||||
Total Borrowings | $ | 162,678 | $ | 61,464 | $ | 224,142 | |||||
Maturities over next 12 months2 | $ | 16,891 |
Short-Term Borrowings
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Short-term borrowings | $ | 1,087 | $ | 941 |
Our unsecured short-termthe table is generally based on contractual final maturity. For borrowings primarily consist of structured notes, bank loans and bank noteswith put options, remaining maturity represents the earliest put date.
Long-Term Borrowings
$224 billion as of June 30, 2021 increased slightly when compared with $217 billion at December 31, 2020.
We mayalso engage in, various transactionsand may continue to
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 asordinary course 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 |
business.
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, MSBNA and MSBNA’s Senior UnsecuredMSPBNA 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 | Stable | ||||||||||||||
Moody’s Investors Service, Inc. | P-1 | Stable | ||||||||||||||
Rating and Investment Information, Inc. | a-1 | Stable | ||||||||||||||
| A-2 | Positive |
Short-Term Debt | Long-Term Debt | Rating Outlook | ||||||||||||||
Fitch Ratings, Inc. | F1 | Stable | ||||||||||||||
Moody’s Investors Service, Inc. | P-1 | Stable | ||||||||||||||
| A-1 | 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 |
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.
June 2021 Form 10-Q | 19 |
Management’s Discussion and Analysis |
Capital Management
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
in millions, except for per share data | 2021 | 2020 | 2021 | 2020 | ||||||||||
Number of shares | 34 | — | 62 | 29 | ||||||||||
Average price per share | $ | 86.21 | $ | — | $ | 82.31 | $ | 46.01 | ||||||
Total | $ | 2,939 | $ | — | $ | 5,074 | $ | 1,347 |
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 our share repurchase program. financial statements.
The Board determines the declaration and payment of dividends on a quarterly basis. On October 17, 2017, we announced that 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.
For a description of our 2017 capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Tests.”
PreferredCapital Buffer” herein.
On September 15, 2017, we announced that the Board declared quarterly dividends for preferred stock shareholders of record on September 29, 2017 that were paid on October 16, 2017.
Dividend Announcement
Announcement date | July 15, 2021 | ||||
Amount per share | $0.70 | ||||
Date to be paid | August 13, 2021 | ||||
Shareholders of record as of | July 30, 2021 |
For a further discussion of our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending Commitments” herein.
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.
20 | June 2021 Form 10-Q |
Management’s Discussion and Analysis |
At June 30, 2021 and December 31, 2020 | |||||||||||||||||
Standardized | Advanced | ||||||||||||||||
Capital buffers | |||||||||||||||||
Capital conservation buffer | — | 2.5% | |||||||||||||||
SCB1 | 5.7% | N/A | |||||||||||||||
G-SIB capital surcharge2 | 3.0% | 3.0% | |||||||||||||||
CCyB3 | 0% | 0% | |||||||||||||||
Capital buffer requirement4 | 8.7% | 5.5% | |||||||||||||||
At June 30, 2021 and December 31, 2020 | |||||||||||||||||
Regulatory Minimum | Standardized | Advanced | |||||||||||||||
Required ratios5 | |||||||||||||||||
Common Equity Tier 1 capital ratio | 4.5 | % | 13.2% | 10.0% | |||||||||||||
Tier 1 capital ratio | 6.0 | % | 14.7% | 11.5% | |||||||||||||
Total capital ratio | 8.0 | % | 16.7% | 13.5% |
In addition to2.5%, but is currently set by the minimum risk-basedU.S. banking agencies at zero.
A greater than 2.5%buffer requirement represents the amount of Common Equity Tier 1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Our Standardized Approach capital buffer requirement is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our Advanced Approach capital buffer requirement is equal to our 2.5% capital conservation buffer;
5.Required ratios represent the regulatory minimum plus the capital buffer requirement.
Up an SLR. We are required to a 2.5% Common Equity Tier 1 countercyclicalmaintain an SLR of 5%, inclusive of an enhanced SLR capital buffer (“CCyB”), currently set by U.S. banking regulatorsof at zero (collectively,least 2%.
In 2017, thephase-in amount for eacheffect of the adoption of CECL based on our election to defer this effect over a five-year transition period which began on January 1, 2020. For further information, see “Liquidity and Capital Resources—
$ in millions | Required Ratio1 | At June 30, 2021 | At December 31, 2020 | ||||||||||||||||||||
Risk-based capital— Standardized | |||||||||||||||||||||||
Common Equity Tier 1 capital | $ | 76,815 | $ | 78,650 | |||||||||||||||||||
Tier 1 capital | 84,612 | 88,079 | |||||||||||||||||||||
Total capital | 92,782 | 97,213 | |||||||||||||||||||||
Total RWA | 462,808 | 453,106 | |||||||||||||||||||||
Common Equity Tier 1 capital ratio | 13.2 | % | 16.6 | % | 17.4 | % | |||||||||||||||||
Tier 1 capital ratio | 14.7 | % | 18.3 | % | 19.4 | % | |||||||||||||||||
Total capital ratio | 16.7 | % | 20.0 | % | 21.5 | % | |||||||||||||||||
$ in millions | Required Ratio1 | At June 30, 2021 | At December 31, 2020 | |||||||||||
Risk-based capital— Advanced | ||||||||||||||
Common Equity Tier 1 capital | $ | 76,815 | $ | 78,650 | ||||||||||
Tier 1 capital | 84,612 | 88,079 | ||||||||||||
Total capital | 92,550 | 96,994 | ||||||||||||
Total RWA | 434,741 | 445,151 | ||||||||||||
Common Equity Tier 1 capital ratio | 10.0 | % | 17.7 | % | 17.7 | % | ||||||||
Tier 1 capital ratio | 11.5 | % | 19.5 | % | 19.8 | % | ||||||||
Total capital ratio | 13.5 | % | 21.3 | % | 21.8 | % | ||||||||
$ in millions | Required Ratio1 | At June 30, 2021 | At December 31, 2020 | |||||||||||
Leverage-based capital | ||||||||||||||
Adjusted average assets2 | $ | 1,135,262 | $ | 1,053,510 | ||||||||||
Tier 1 leverage ratio | 4.0 | % | 7.5 | % | 8.4 | % | ||||||||
Supplementary leverage exposure3,4 | $ | 1,439,971 | $ | 1,192,506 | ||||||||||
SLR4 | 5.0 | % | 5.9 | % | 7.4 | % |
tainmaintain 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.
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 changesResources—Regulatory Requirements—Regulatory Developments" in the level of one or more market prices, rates, indices, volatilities, correlations or other market factors, such as market liquidity; and
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For a further discussion of our market, credit and operational risks, see “Quantitative and Qualitative Disclosures about Market Risk.”
Our 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”). The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWAs using prescribed risk weights, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At September 30, 2017, our ratios are based on the Standardized Approach transitional rules. For prior periods, the ratios were based on the Advanced Approach transitional rules.
The methods for calculating each of our 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 our reported capital ratios from one reporting period to the next that are independent of changes to our capital base, asset composition,off-balance sheet exposures or risk profile.
Minimum Risk-Based Capital Ratios: Transitional Provisions
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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
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21 |
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: |
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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 |
Management’s Discussion and Analysis |
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
$ in millions | At June 30, 2021 | At December 31, 2020 | Change | |||||||||||
Common Equity Tier 1 capital | ||||||||||||||
Common stock and surplus | $ | 16,852 | $ | 15,799 | $ | 1,053 | ||||||||
Retained earnings | 85,043 | 78,978 | 6,065 | |||||||||||
AOCI | (2,523) | (1,962) | (561) | |||||||||||
Regulatory adjustments and deductions: | ||||||||||||||
Net goodwill | (16,693) | (11,527) | (5,166) | |||||||||||
Net intangible assets | (7,032) | (4,165) | (2,867) | |||||||||||
Other adjustments and deductions1 | 1,168 | 1,527 | (359) | |||||||||||
Total Common Equity Tier 1 capital | $ | 76,815 | $ | 78,650 | $ | (1,835) | ||||||||
Additional Tier 1 capital | ||||||||||||||
Preferred stock | $ | 7,750 | $ | 9,250 | $ | (1,500) | ||||||||
Noncontrolling interests | 561 | 619 | (58) | |||||||||||
Additional Tier 1 capital | $ | 8,311 | $ | 9,869 | $ | (1,558) | ||||||||
Deduction for investments in covered funds | (514) | (440) | (74) | |||||||||||
Total Tier 1 capital | $ | 84,612 | $ | 88,079 | $ | (3,467) | ||||||||
Standardized Tier 2 capital | ||||||||||||||
Subordinated debt | $ | 7,107 | $ | 7,737 | $ | (630) | ||||||||
Eligible ACL | 1,168 | 1,265 | (97) | |||||||||||
Other adjustments and deductions | (105) | 132 | (237) | |||||||||||
Total Standardized Tier 2 capital | $ | 8,170 | $ | 9,134 | $ | (964) | ||||||||
Total Standardized capital | $ | 92,782 | $ | 97,213 | $ | (4,431) | ||||||||
Advanced Tier 2 capital | ||||||||||||||
Subordinated debt | $ | 7,107 | $ | 7,737 | $ | (630) | ||||||||
Eligible credit reserves | 936 | 1,046 | (110) | |||||||||||
Other adjustments and deductions | (105) | 132 | (237) | |||||||||||
Total Advanced Tier 2 capital | $ | 7,938 | $ | 8,915 | $ | (977) | ||||||||
Total Advanced capital | $ | 92,550 | $ | 96,994 | $ | (4,444) |
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 |
Six Months Ended June 30, 2021 | ||||||||
$ in millions | Standardized | Advanced | ||||||
Credit risk RWA | ||||||||
Balance at December 31, 2020 | $ | 387,066 | $ | 284,930 | ||||
Change related to the following items: | ||||||||
Derivatives | 3,182 | (18,766) | ||||||
Securities financing transactions | 4,750 | 350 | ||||||
Investment securities | (2,422) | (257) | ||||||
Commitments, guarantees and loans | 415 | 5,862 | ||||||
Equity investments | 1,696 | 1,754 | ||||||
Other credit risk1 | 4,992 | 4,444 | ||||||
Total change in credit risk RWA | $ | 12,613 | $ | (6,613) | ||||
Balance at June 30, 2021 | $ | 399,679 | $ | 278,317 | ||||
Market risk RWA | ||||||||
Balance at December 31, 2020 | $ | 66,040 | $ | 66,040 | ||||
Change related to the following items: | ||||||||
Regulatory VaR | (6,687) | (6,687) | ||||||
Regulatory stressed VaR | 768 | 768 | ||||||
Incremental risk charge | (720) | (720) | ||||||
Comprehensive risk measure | (303) | (343) | ||||||
Specific risk | 4,031 | 4,031 | ||||||
Total change in market risk RWA | $ | (2,911) | $ | (2,951) | ||||
Balance at June 30, 2021 | $ | 63,129 | $ | 63,089 | ||||
Operational risk RWA | ||||||||
Balance at December 31, 2020 | N/A | $ | 94,181 | |||||
Change in operational risk RWA | N/A | (846) | ||||||
Balance at June 30, 2021 | N/A | $ | 93,335 | |||||
Total RWA | $ | 462,808 | $ | 434,741 |
N/A—Not Applicable
1.Amounts reflect assets not in a defined category, |
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The decrease of $15,306 million in operationalexposures and unsettled transactions.
Regulatory stressed VaR increased $11,304 millionRWA decreased in the current year period under both the Standardized and the Advanced Approaches. These increases wereApproaches primarily driven by increasesdue to a decrease 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 effectiveRegulatory VaR mainly as a capital standard on January 1, 2018. By January 1, 2018, we must also maintain a Tier 1 supplementary leverage capital bufferresult of at least 2%reduced volatility as the peak COVID-19 market stress in addition2020 is no longer included in VaR. This was partially offset by an increase in non-securitization charges due 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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The pro forma fullyphased-in supplementary leverage exposure and ratios, shown in the previous table, are based on our current understanding of rules and other factors.
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.
Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements
On December 15, 2016, the
22 | June 2021 Form 10-Q |
Management’s Discussion and Analysis |
Actual Amount/Ratio | |||||||||||||||||
$ in millions | Regulatory Minimum | Required Ratio1 | At June 30, 2021 | At December 31, 2020 | |||||||||||||
External TLAC2 | $ | 225,830 | $ | 216,129 | |||||||||||||
External TLAC as a % of RWA | 18.0 | % | 21.5 | % | 49.0 | % | 47.7 | % | |||||||||
External TLAC as a % of leverage exposure | 7.5 | % | 9.5 | % | 15.7 | % | 18.1 | % | |||||||||
Eligible LTD3 | $ | 131,951 | $ | 120,561 | |||||||||||||
Eligible LTD as a % of RWA | 9.0 | % | 9.0 | % | 28.5 | % | 26.6 | % | |||||||||
Eligible LTD as a % of leverage exposure | 4.5 | % | 4.5 | % | 9.2 | % | 10.1 | % |
June 30, 2021 and December 31, 2020. 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 20162020 Form10-K. For discussions about the interaction between the single point of entry resolution strategy
Stress Capital Plans and Stress Tests
Buffer
Wethe Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy. As banks with less than $250 billion of total assets, our U.S. Bank Subsidiaries are not subject to company-run stress test regulatory requirements.
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$0.70 per share from $0.20$0.35 per share beginning with the common stock dividend declaredannounced on July 19, 2017. We disclosed a summary15, 2021, and authorized the repurchase of up to $12 billion of outstanding common stock from July 1, 2021 through June 30, 2022, from time to time as conditions warrant, which supersedes the results ofprevious common stock repurchase authorization.
The Dodd-Frank Act also requires each of our U.S. Bank Subsidiaries to conduct an annual stress test. MSBNA and MSPBNA submitted their 2017 annualcompany-run stress tests to the OCC on April 5, 2017 and published a summary of their stress test results on June 23, 2017 on our Investor Relations website.
For a further discussion of our capital plans and stress tests,SCB, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Tests”Capital Buffer” in Part II, Item 7the 2020 Form 10-K.
June 2021 Form 10-Q | 23 |
Management’s Discussion and Analysis |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in billions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Institutional Securities | $ | 43.5 | $ | 42.8 | $ | 43.5 | $ | 42.8 | ||||||
Wealth Management2 | 28.6 | 18.2 | 28.6 | 18.2 | ||||||||||
Investment Management3 | 10.7 | 2.6 | 7.1 | 2.6 | ||||||||||
Parent | 16.0 | 14.0 | 17.1 | 12.4 | ||||||||||
Total | $ | 98.8 | $ | 77.6 | $ | 96.3 | $ | 76.0 |
allocatedaverage common equity to the business segments is set ata non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.
Theits Required Capital framework is expected to evolve over time in response to changes in the businessfor 2021 and regulatory environment. We will continuecontinues to evaluate the framework with respect to the impact of futureevolving regulatory requirements, as appropriate.
Average Common Equity Attribution
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 |
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Regulatory Developments
Our preferred resolution strategy, which is set out in our 2017 resolution plan, is a single point of entry strategy.
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 7the 2020 Form 10-K.
Legacy Covered Funds underSupplementary Leverage Ratio Interim Final Rule
The Volcker Rule prohibits “banking entities,”Federal Reserve announced that the temporary change to the SLR for bank holding companies, which allowed for the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks, would expire as scheduled on March 31, 2021. As a result, this exclusion was eliminated beginning in the second quarter of 2021. For a summary of the impact of this interim final rule, see “Regulatory Capital Requirements” herein.
24 | June 2021 Form 10-Q |
Management’s Discussion and Analysis |
exemptions include robust fallbacks for underwriting, market-making-related activities, risk-mitigating hedgingderivatives linked to LIBOR and certain other activities.interest rate benchmarks, and the ISDA 2020 IBOR Fallbacks Protocol, which incorporates the fallbacks into legacy non-cleared derivatives entered into between Protocol adherents. The Volcker RuleFCA’s announcement therefore triggered a fixing of the ISDA fallback spread adjustments for all LIBOR benchmarks, to be effective when the contractual fallbacks are implemented. The Alternative Reference Rates Committee (“ARRC”) also prohibitsconfirmed that the ICE Benchmark Administration and FCA announcements also constituted a “Benchmark Transition Event” with respect to all U.S. dollar LIBOR settings pursuant to the ARRC’s fallback recommendations for new issuances or originations of certain investmentscash products.
For more information about Volcker Rule requirements and our activities in these areas, including the conformance periods applicable to certain covered funds and our application for a statutory extension,other matters, see “Business—Supervision and Regulation—Financial Holding Company—Activities Restrictions under the Volcker Rule” in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Developments—Legacy Covered Funds under the Volcker Rule” in Part II, Item 7 of the 2016 Form10-K.
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—SupervisionRequirements—Regulatory Developments” 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 2016 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.”
Expected Replacement of LIBOR
Central banks around the world, including the Federal Reserve, have commissioned working groups of market participants and others with the goal of finding suitable replacements for the London Interbank Offered Rate (“LIBOR”) based more fully on observable market transactions. It is expected that a transition away from the widespread use of LIBOR to alternative rates will occur over the course of the next several years.
Effects of Inflation and Changes in Interest and Foreign Exchange Rates
For a discussion of the effects of inflation and changes in interest and foreign exchange rates on our business and financial results and strategies to mitigate potential exposures, see “Management’s Discussion
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.”
25 |
Table of Contents | |||||
Quantitative and Qualitative Disclosures about Risk Management
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
Three Months Ended | ||||||||||||||
June 30, 2021 | ||||||||||||||
$ in millions | Period End | Average | High2 | Low2 | ||||||||||
Interest rate and credit spread | $ | 29 | $ | 31 | $ | 39 | $ | 28 | ||||||
Equity price | 21 | 24 | 32 | 19 | ||||||||||
Foreign exchange rate | 8 | 8 | 15 | 5 | ||||||||||
Commodity price | 10 | 11 | 16 | 8 | ||||||||||
Less: Diversification benefit1 | (28) | (29) | N/A | N/A | ||||||||||
Primary Risk Categories | $ | 40 | $ | 45 | $ | 58 | $ | 37 | ||||||
Credit Portfolio | 12 | 13 | 17 | 11 | ||||||||||
Less: Diversification benefit1 | (9) | (10) | N/A | N/A | ||||||||||
Total Management VaR | $ | 43 | $ | 48 | $ | 60 | $ | 41 |
Three Months Ended | ||||||||||||||
March 31, 2021 | ||||||||||||||
$ in millions | Period End | Average | High2 | Low2 | ||||||||||
Interest rate and credit spread | $ | 31 | $ | 33 | $ | 41 | $ | 29 | ||||||
Equity price | 30 | 31 | 170 | 19 | ||||||||||
Foreign exchange rate | 11 | 14 | 24 | 8 | ||||||||||
Commodity price | 14 | 18 | 27 | 13 | ||||||||||
Less: Diversification benefit1 | (36) | (38) | N/A | N/A | ||||||||||
Primary Risk Categories | $ | 50 | $ | 58 | $ | 171 | $ | 44 | ||||||
Credit Portfolio | 17 | 24 | 31 | 17 | ||||||||||
Less: Diversification benefit1 | (15) | (13) | N/A | N/A | ||||||||||
Total Management VaR | $ | 52 | $ | 69 | $ | 175 | $ | 50 |
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
Average total Management VaR and |
|
The average 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 average Management VaR for the Primary Risk Categories decreased in the current quarter from the three months ended March 31, 2021 primarily as a result of reduced volatility as the peak COVID-19 market stress in 2020 is no longer included in VaR. Additionally, the high for the current quarter was $38 million compared with $46 million last quarter. These decreases were primarily driven by reduced market volatility and decreasesfrom the peak day in trading inventory across the equities andthree months ended March 31, 2021, as increased equity exposure in the first quarter of 2021 resulted from the aforementioned credit businesses within Institutional Securities.
event for a single client.
The distribution of VaR Statistics and Net Revenues is presentedresult
Total Trading.As shown in the95%/One-Day Management VaR table on the preceding page, the average95%/one-day total Management VaR for the current quarter was $43 million. The following histogram presents the distribution of the daily95%/one-day total Management VaR for the current quarter, which was in a range between $35 million and $50 million for approximately 97% of trading days duringdid not exceed the current quarter.
Firm’s VaR.
26 | June 2021 Form 10-Q |
Risk Disclosures |
Current Quarter
Daily Net Trading Revenues for the Three Months Ended September 30, 2017
($ in millions)
Counterparty Exposure Related to Our Own
$ in millions | At June 30, 2021 | At March 31, 2021 | ||||||
Derivatives | $ | 7 | $ | 7 | ||||
Borrowings carried at fair value | 48 | 47 |
Funding Liabilities.spread.
$ in millions | At June 30, 2021 | At March 31, 2021 | ||||||
Basis point change | ||||||||
+100 | $ | 1,463 | $ | 1,671 | ||||
-100 | (498) | (560) |
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.
Loss from 10% Decline | ||||||||
$ in millions | At June 30, 2021 | At March 31, 2021 | ||||||
Investments related to Investment Management activities | $ | 477 | $ | 472 | ||||
Other investments: | ||||||||
MUMSS | 172 | 174 | ||||||
Other Firm investments | 232 | 223 |
Investmentsperformance-based income, as applicable.
June 2021 Form 10-Q | 27 |
Risk Disclosures |
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.
At June 30, 2021 | ||||||||||||||
$ in millions | HFI | HFS | FVO | Total | ||||||||||
Institutional Securities: | ||||||||||||||
Corporate | $ | 4,724 | $ | 7,098 | $ | 13 | $ | 11,835 | ||||||
Secured lending facilities | 28,217 | 3,951 | 666 | 32,834 | ||||||||||
Commercial and Residential real estate | 6,707 | 620 | 4,270 | 11,597 | ||||||||||
Securities-based lending and Other | 586 | 5 | 9,353 | 9,944 | ||||||||||
Total Institutional Securities | 40,234 | 11,674 | 14,302 | 66,210 | ||||||||||
Wealth Management: | ||||||||||||||
Residential real estate | 38,917 | 10 | — | 38,927 | ||||||||||
Securities-based lending and Other | 75,877 | 12 | — | 75,889 | ||||||||||
Total Wealth Management | 114,794 | 22 | — | 114,816 | ||||||||||
Total Investment Management1 | 5 | 17 | 843 | 865 | ||||||||||
Total loans2 | 155,033 | 11,713 | 15,145 | 181,891 | ||||||||||
ACL | (687) | (687) | ||||||||||||
Total loans, net of ACL | $ | 154,346 | $ | 11,713 | $ | 15,145 | $ | 181,204 | ||||||
Lending commitments3 | $ | 139,257 | ||||||||||||
Total exposure | $ | 320,461 |
At December 31, 2020 | ||||||||||||||
$ in millions | HFI | HFS | FVO | Total | ||||||||||
Institutional Securities: | ||||||||||||||
Corporate | $ | 6,046 | $ | 8,580 | $ | 13 | $ | 14,639 | ||||||
Secured lending facilities | 25,727 | 3,296 | 648 | 29,671 | ||||||||||
Commercial and Residential real estate | 7,346 | 859 | 3,061 | 11,266 | ||||||||||
Securities-based lending and Other | 1,279 | 55 | 7,001 | 8,335 | ||||||||||
Total Institutional Securities | 40,398 | 12,790 | 10,723 | 63,911 | ||||||||||
Wealth Management: | ||||||||||||||
Residential real estate | 35,268 | 11 | — | 35,279 | ||||||||||
Securities-based lending and Other | 62,947 | — | — | 62,947 | ||||||||||
Total Wealth Management | 98,215 | 11 | — | 98,226 | ||||||||||
Total Investment Management1 | 6 | 12 | 425 | 443 | ||||||||||
Total loans2 | 138,619 | 12,813 | 11,148 | 162,580 | ||||||||||
ACL | (835) | (835) | ||||||||||||
Total loans, net of ACL | $ | 137,784 | $ | 12,813 | $ | 11,148 | $ | 161,745 | ||||||
Lending commitments3 | $ | 127,855 | ||||||||||||
Total exposure | $ | 289,600 |
Lending Activities included in Loans and Trading Assets
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.
28 | June 2021 Form 10-Q |
Risk Disclosures |
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
| |||||
$ in |
ACL—Loans | $ | 835 | |||
ACL—Lending Commitments | 396 | ||||
Total at December 31, 2020 | 1,231 | ||||
Gross charge-offs | (102) | ||||
Provision for credit losses | (25) | ||||
Other | (5) | ||||
Total at June 30, 2021 | $ | 1,099 | |||
ACL—Loans | $ | 687 | |||
ACL—Lending commitments | 412 |
| |||||
|
Our creditProvision for Credit Losses by Business Segment
Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||||||||||||||
$ in millions | IS | WM | Total | IS | WM | Total | ||||||||||||||
Loans | $ | 12 | $ | 4 | $ | 16 | $ | (41) | $ | (1) | $ | (42) | ||||||||
Lending commitments | 58 | (1) | 57 | 18 | (1) | 17 | ||||||||||||||
Total | $ | 70 | $ | 3 | $ | 73 | $ | (23) | $ | (2) | $ | (25) |
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 |
See Note 2 to the financial statements in the 2020 Form 10-K for 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% |
|
Institutional Securities
In connection with certain
At June 30, 2021 | At December 31, 2020 | |||||||||||||
IS | WM | IS | WM | |||||||||||
Accrual | 98.8 | % | 99.3 | % | 99.2 | % | 99.7 | % | ||||||
Nonaccrual1 | 1.2 | % | 0.7 | % | 0.8 | % | 0.3 | % |
We also participate in securitization activities whereby we extend short-term or long-term funding to clients through
At June 30, 2021 | |||||||||||||||||
Contractual Years to Maturity | |||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||||
Loans | |||||||||||||||||
AA | $ | 38 | $ | 9 | $ | — | $ | 69 | $ | 116 | |||||||
A | 824 | 707 | 408 | 370 | 2,309 | ||||||||||||
BBB | 6,297 | 5,113 | 2,287 | 578 | 14,275 | ||||||||||||
BB | 11,581 | 9,095 | 4,234 | 1,285 | 26,195 | ||||||||||||
Other NIG | 5,370 | 6,134 | 4,161 | 3,223 | 18,888 | ||||||||||||
Unrated2 | 194 | 587 | 485 | 2,582 | 3,848 | ||||||||||||
Total loans, net of ACL | 24,304 | 21,645 | 11,575 | 8,107 | 65,631 | ||||||||||||
Lending commitments | |||||||||||||||||
AAA | — | 50 | — | — | 50 | ||||||||||||
AA | 3,173 | 1,118 | 2,240 | — | 6,531 | ||||||||||||
A | 4,822 | 6,600 | 10,180 | 584 | 22,186 | ||||||||||||
BBB | 10,168 | 19,803 | 18,561 | 659 | 49,191 | ||||||||||||
BB | 3,017 | 12,323 | 7,837 | 152 | 23,329 | ||||||||||||
Other NIG | 1,649 | 6,663 | 8,292 | 6,915 | 23,519 | ||||||||||||
Unrated2 | — | 14 | 66 | 2 | 82 | ||||||||||||
Total lending commitments | 22,829 | 46,571 | 47,176 | 8,312 | 124,888 | ||||||||||||
Total exposure | $ | 47,133 | $ | 68,216 | $ | 58,751 | $ | 16,419 | $ | 190,519 |
29 |
Risk Disclosures |
loans and lending commitments that
At December 31, 2020 | |||||||||||||||||
Contractual Years to Maturity | |||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||||
Loans | |||||||||||||||||
AA | $ | 279 | $ | 10 | $ | — | $ | — | $ | 289 | |||||||
A | 759 | 798 | 36 | 391 | 1,984 | ||||||||||||
BBB | 5,043 | 5,726 | 2,746 | 469 | 13,984 | ||||||||||||
BB | 10,963 | 7,749 | 5,324 | 503 | 24,539 | ||||||||||||
Other NIG | 5,214 | 6,956 | 4,002 | 3,269 | 19,441 | ||||||||||||
Unrated2 | 141 | 142 | 330 | 2,322 | 2,935 | ||||||||||||
Total loans, net of ACL | 22,399 | 21,381 | 12,438 | 6,954 | 63,172 | ||||||||||||
Lending commitments | |||||||||||||||||
AAA | — | 50 | — | — | 50 | ||||||||||||
AA | 4,047 | 1,038 | 2,135 | — | 7,220 | ||||||||||||
A | 6,025 | 8,359 | 9,808 | 425 | 24,617 | ||||||||||||
BBB | 6,783 | 17,782 | 15,500 | 460 | 40,525 | ||||||||||||
BB | 4,357 | 8,958 | 7,958 | 3,103 | 24,376 | ||||||||||||
Other NIG | 664 | 7,275 | 6,077 | 2,652 | 16,668 | ||||||||||||
Unrated2 | 4 | — | — | — | 4 | ||||||||||||
Total lending commitments | 21,880 | 43,462 | 41,478 | 6,640 | 113,460 | ||||||||||||
Total exposure | $ | 44,279 | $ | 64,843 | $ | 53,916 | $ | 13,594 | $ | 176,632 |
Institutional SecuritiesCRM.
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Industry | ||||||||
Financials | $ | 50,318 | $ | 44,358 | ||||
Real estate | 30,622 | 25,484 | ||||||
Healthcare | 17,471 | 12,650 | ||||||
Industrials | 17,069 | 15,861 | ||||||
Communications services | 12,481 | 12,600 | ||||||
Information technology | 11,704 | 11,358 | ||||||
Consumer discretionary | 10,626 | 11,177 | ||||||
Utilities | 10,355 | 9,504 | ||||||
Energy | 8,603 | 10,064 | ||||||
Consumer staples | 8,464 | 9,088 | ||||||
Materials | 5,808 | 6,084 | ||||||
Insurance | 4,583 | 3,889 | ||||||
Other | 2,415 | 4,515 | ||||||
Total exposure | $ | 190,519 | $ | 176,632 |
Lending Commitments
At June 30, 2021 | |||||||||||||||||
Contractual Years to Maturity | |||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||||
Loans, net of ACL | $ | 1,415 | $ | 382 | $ | 498 | $ | 2,217 | $ | 4,512 | |||||||
Lending commitments | 4,865 | 6,254 | 3,359 | 6,844 | 21,322 | ||||||||||||
Total exposure | $ | 6,280 | $ | 6,636 | $ | 3,857 | $ | 9,061 | $ | 25,834 |
At December 31, 2020 | |||||||||||||||||
Contractual Years to Maturity | |||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||||
Loans, net of ACL | $ | 1,241 | $ | 907 | $ | 873 | $ | 2,090 | $ | 5,111 | |||||||
Lending commitments | 2,810 | 4,649 | 2,678 | 4,650 | 14,787 | ||||||||||||
Total exposure | $ | 4,051 | $ | 5,556 | $ | 3,551 | $ | 6,740 | $ | 19,898 |
Institutional Securities Loans and Lending Commitments by Credit Rating1
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 |
|
|
Institutional Securities Loans and Lending Commitments by Industry
$ 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 |
|
|
30 | June 2021 Form 10-Q |
Risk Disclosures |
Event-Driven
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 |
Held for Investment
At June 30, 2021 | |||||||||||||||||
$ in millions | Loans | Lending Commitments | Total | ||||||||||||||
Corporate | $ | 4,724 | $ | 72,175 | $ | 76,899 | |||||||||||
Secured lending facilities | 28,217 | 11,387 | 39,604 | ||||||||||||||
Commercial real estate | 6,707 | 308 | 7,015 | ||||||||||||||
Other | 586 | 661 | 1,247 | ||||||||||||||
Total, before ACL | $ | 40,234 | $ | 84,531 | $ | 124,765 | |||||||||||
ACL | $ | (579) | $ | (397) | $ | (976) |
At December 31, 2020 | |||||||||||||||||
$ in millions | Loans | Lending Commitments | Total | ||||||||||||||
Corporate | $ | 6,046 | $ | 69,488 | $ | 75,534 | |||||||||||
Secured lending facilities | 25,727 | 8,312 | 34,039 | ||||||||||||||
Commercial real estate | 7,346 | 334 | 7,680 | ||||||||||||||
Other | 1,279 | 1,135 | 2,414 | ||||||||||||||
Total, before ACL | $ | 40,398 | $ | 79,269 | $ | 119,667 | |||||||||||
ACL | $ | (739) | $ | (391) | $ | (1,130) |
$ in millions | Corporate | Secured lending facilities | Commercial real estate | Other | Total | ||||||||||||
ACL—Loans | $ | 309 | $ | 198 | $ | 211 | $ | 21 | $ | 739 | |||||||
ACL—Lending commitments | 323 | 38 | 11 | 19 | 391 | ||||||||||||
Total at December 31, 2020 | $ | 632 | $ | 236 | $ | 222 | $ | 40 | $ | 1,130 | |||||||
Gross charge-offs | (14) | (67) | (21) | — | (102) | ||||||||||||
Provision for credit losses | (77) | 49 | 5 | — | (23) | ||||||||||||
Other1 | (2) | (1) | (2) | (24) | (29) | ||||||||||||
Total at June 30, 2021 | $ | 539 | $ | 217 | $ | 204 | $ | 16 | $ | 976 | |||||||
ACL—Loans | $ | 199 | $ | 177 | $ | 194 | $ | 9 | $ | 579 | |||||||
ACL—Lending commitments | 340 | 40 | 10 | 7 | 397 | ||||||||||||
At June 30, 2021 | At December 31, 2020 | |||||||
Corporate | 4.2 | % | 5.1 | % | ||||
Secured lending facilities | 0.6 | % | 0.8 | % | ||||
Commercial real estate | 2.9 | % | 2.9 | % | ||||
Other | 1.5 | % | 1.7 | % | ||||
Total Institutional Securities loans | 1.4 | % | 1.8 | % |
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
Lending Commitments
At June 30, 2021 | |||||||||||||||||
Contractual Years to Maturity | |||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||||
Securities-based lending and Other | $ | 65,156 | $ | 6,641 | $ | 2,236 | $ | 1,804 | $ | 75,837 | |||||||
Residential real estate | 7 | — | 6 | 38,858 | 38,871 | ||||||||||||
Total loans, net of ACL | $ | 65,163 | $ | 6,641 | $ | 2,242 | $ | 40,662 | $ | 114,708 | |||||||
Lending commitments | 11,104 | 2,771 | 170 | 324 | 14,369 | ||||||||||||
Total exposure | $ | 76,267 | $ | 9,412 | $ | 2,412 | $ | 40,986 | $ | 129,077 |
At December 31, 2020 | |||||||||||||||||
Contractual Years to Maturity | |||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||||
Securities-based lending and Other | $ | 54,483 | $ | 4,587 | $ | 2,167 | $ | 1,672 | $ | 62,909 | |||||||
Residential real estate | 9 | 1 | 1 | 35,210 | 35,221 | ||||||||||||
Total loans, net of ACL | $ | 54,492 | $ | 4,588 | $ | 2,168 | $ | 36,882 | $ | 98,130 | |||||||
Lending commitments | 11,666 | 2,356 | 120 | 253 | 14,395 | ||||||||||||
Total exposure | $ | 66,158 | $ | 6,944 | $ | 2,288 | $ | 37,135 | $ | 112,525 |
For
June 2021 Form 10-Q | 31 |
Risk Disclosures |
$ in millions | |||||
ACL—Loans | $ | 96 | |||
ACL—Lending commitments | 5 | ||||
Total at December 31, 2020 | 101 | ||||
Provision for credit losses | (2) | ||||
Other1 | 24 | ||||
Total at June 30, 2021 | $ | 123 | |||
ACL—Loans | $ | 108 | |||
ACL—Lending commitments | 15 | ||||
the second quarter of 2021.
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 |
|
Lending Activities included in subject to daily client margining, which includes requiring customers to deposit additional collateral, or reduce debt positions, when necessary.
At September 30, 2017 | ||||||||||||
$ in millions | Institutional Securities | Wealth Management | Total | |||||||||
Net customer receivables representing margin loans | $ | 16,613 | $ | 11,996 | $ | 28,609 |
At December 31, 2016 | ||||||||||||
$ in millions | Institutional Securities | Wealth Management | Total | |||||||||
Net customer receivables representing margin loans | $ | 11,876 | $ | 12,483 | $ | 24,359 |
and Other lending
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Institutional Securities | $ | 46,020 | $ | 51,570 | ||||
Wealth Management | 26,922 | 23,144 | ||||||
Total | $ | 72,942 | $ | 74,714 |
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 |
EmployeeFor information on employee loans are generally granted to retain and recruit certain employees, are full recourse and generally require periodic repayments. We establish an allowance for loan amounts to terminated employees that we do not consider recoverable, which is recorded in Compensation and benefits expense. Seerelated ACL, see Note 710 to the financial statements for a further descriptionstatements.
Credit Exposure—Derivatives
OTC Derivative Assets
Counterparty Credit Rating1 | ||||||||||||||||||||
$ in millions | AAA | AA | A | BBB | NIG | Total | ||||||||||||||
At June 30, 2021 | ||||||||||||||||||||
Less than 1 year | $ | 1,344 | $ | 12,729 | $ | 36,065 | $ | 20,945 | $ | 11,900 | $ | 82,983 | ||||||||
1-3 years | 633 | 4,916 | 14,962 | 12,941 | 8,197 | 41,649 | ||||||||||||||
3-5 years | 471 | 4,702 | 8,440 | 8,095 | 3,690 | 25,398 | ||||||||||||||
Over 5 years | 4,237 | 26,890 | 66,977 | 48,258 | 10,438 | 156,800 | ||||||||||||||
Total, gross | $ | 6,685 | $ | 49,237 | $ | 126,444 | $ | 90,239 | $ | 34,225 | $ | 306,830 | ||||||||
Counterparty netting | (3,141) | (36,880) | (98,646) | (66,879) | (16,635) | (222,181) | ||||||||||||||
Cash and securities collateral | (3,064) | (8,779) | (22,973) | (17,233) | (8,166) | (60,215) | ||||||||||||||
Total, net | $ | 480 | $ | 3,578 | $ | 4,825 | $ | 6,127 | $ | 9,424 | $ | 24,434 |
Counterparty Credit Rating1 | ||||||||||||||||||||
$ in millions | AAA | AA | A | BBB | NIG | Total | ||||||||||||||
At December 31, 2020 | ||||||||||||||||||||
Less than 1 year | $ | 1,179 | $ | 16,166 | $ | 52,164 | $ | 26,088 | $ | 12,175 | $ | 107,772 | ||||||||
1-3 years | 572 | 5,225 | 17,560 | 13,750 | 8,134 | 45,241 | ||||||||||||||
3-5 years | 359 | 4,326 | 11,328 | 8,363 | 4,488 | 28,864 | ||||||||||||||
Over 5 years | 4,545 | 32,049 | 84,845 | 63,084 | 13,680 | 198,203 | ||||||||||||||
Total, gross | $ | 6,655 | $ | 57,766 | $ | 165,897 | $ | 111,285 | $ | 38,477 | $ | 380,080 | ||||||||
Counterparty netting | (3,269) | (44,306) | (134,310) | (84,171) | (22,227) | (288,283) | ||||||||||||||
Cash and securities collateral | (3,124) | (10,973) | (26,712) | (20,708) | (8,979) | (70,496) | ||||||||||||||
Total, net | $ | 262 | $ | 2,487 | $ | 4,875 | $ | 6,406 | $ | 7,271 | $ | 21,301 |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Industry | ||||||||
Financials | $ | 7,613 | $ | 6,195 | ||||
Utilities | 4,750 | 3,954 | ||||||
Consumer discretionary | 2,314 | 1,866 | ||||||
Energy | 2,040 | 965 | ||||||
Healthcare | 1,011 | 1,494 | ||||||
Industrials | 953 | 1,291 | ||||||
Information technology | 929 | 1,104 | ||||||
Regional governments | 843 | 806 | ||||||
Not-for-profit organizations | 661 | 701 | ||||||
Real estate | 600 | 378 | ||||||
Communications services | 496 | 529 | ||||||
Insurance | 451 | 518 | ||||||
Sovereign governments | 373 | 650 | ||||||
Materials | 329 | 430 | ||||||
Consumer staples | 291 | 339 | ||||||
Other | 780 | 81 | ||||||
Total | $ | 24,434 | $ | 21,301 |
Fair values as shown below represent2020 Form 10-K and Note 7 to the Firm’s net exposure to counterparties related to its OTC derivative products. Obligor credit ratings are determined internally by 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 |
|
|
32 | June 2021 Form 10-Q |
Risk Disclosures |
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 |
|
|
|
|
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 discussion of our credit exposure and related credit derivative contracts, see “Quantitative and Qualitative Disclosures about Market Risk–Risk Management–Credit Risk–Credit Exposure–Derivatives” in Part II, Item 7A of the 2016 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 4 to the financial statements.
Our sovereign exposures consist of financial instruments entered into with sovereign and local governments. Ournon-sovereign exposures consist of exposures to primarily corporations and financial institutions. The following table shows our 10 largestnon-U.S. country risk net exposures at September 30, 2017. Index credit derivatives are includedOther Risks” in the country risk2020 Form 10-K.
$ in millions | United Kingdom | Japan | Germany | France | Spain | ||||||||||||
Sovereign | |||||||||||||||||
Net inventory1 | $ | (43) | $ | 5,101 | $ | 54 | $ | (471) | $ | (197) | |||||||
Net counterparty exposure2 | 1 | 45 | 85 | 6 | 29 | ||||||||||||
Exposure before hedges | (42) | 5,146 | 139 | (465) | (168) | ||||||||||||
Hedges3 | (310) | (79) | (287) | (6) | — | ||||||||||||
Net exposure | $ | (352) | $ | 5,067 | $ | (148) | $ | (471) | $ | (168) | |||||||
Non-sovereign | |||||||||||||||||
Net inventory1 | $ | 1,084 | $ | 615 | $ | 7 | $ | (338) | $ | 72 | |||||||
Net counterparty exposure2 | 11,117 | 4,257 | 2,788 | 3,068 | 391 | ||||||||||||
Loans | 3,648 | 381 | 1,725 | 513 | 3,351 | ||||||||||||
Lending commitments | 6,165 | 180 | 5,979 | 6,118 | 1,313 | ||||||||||||
Exposure before hedges | 22,014 | 5,433 | 10,499 | 9,361 | 5,127 | ||||||||||||
Hedges3 | (1,388) | (162) | (1,015) | (734) | (266) | ||||||||||||
Net exposure | $ | 20,626 | $ | 5,271 | $ | 9,484 | $ | 8,627 | $ | 4,861 | |||||||
Total net exposure | $ | 20,274 | $ | 10,338 | $ | 9,336 | $ | 8,156 | $ | 4,693 |
$ in millions | China | India | Australia | Canada | Brazil | ||||||||||||
Sovereign | |||||||||||||||||
Net inventory1 | $ | (89) | $ | 1,178 | $ | 570 | $ | (447) | $ | 2,115 | |||||||
Net counterparty exposure2 | 102 | 2 | 45 | 21 | — | ||||||||||||
Exposure before hedges | 13 | 1,180 | 615 | (426) | 2,115 | ||||||||||||
Hedges3 | (82) | — | — | — | (12) | ||||||||||||
Net exposure | $ | (69) | $ | 1,180 | $ | 615 | $ | (426) | $ | 2,103 | |||||||
Non-sovereign | |||||||||||||||||
Net inventory1 | $ | 1,548 | $ | 850 | $ | 228 | $ | 228 | $ | 233 | |||||||
Net counterparty exposure2 | 780 | 891 | 1,061 | 1,713 | 320 | ||||||||||||
Loans | 744 | 235 | 489 | 141 | 188 | ||||||||||||
Lending commitments | 1,489 | — | 905 | 1,483 | 183 | ||||||||||||
Exposure before hedges | 4,561 | 1,976 | 2,683 | 3,565 | 924 | ||||||||||||
Hedges3 | (131) | — | (185) | (85) | (25) | ||||||||||||
Net exposure | $ | 4,430 | $ | 1,976 | $ | 2,498 | $ | 3,480 | $ | 899 | |||||||
Total net exposure | $ | 4,361 | $ | 3,156 | $ | 3,113 | $ | 3,054 | $ | 3,002 |
$ in millions |
At June 30, 2021 | ||||||||
Country of Risk | Collateral2 | |||||||
Italy, Croatia and Spain |
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 |
|
|
|
11,765 | ||||||||
U.K., U.S. and Spain | ||||||||
Other | Japan, Italy, and France | 17,737 |
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 as follows:
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 the1.The benefit of collateral received which is typically composedreflected in the Top 10 Non-U.S. Country Exposures at June 30, 2021.
Benefitobligations of Collateral Received Against Counterparty Credit Exposure
$ in millions | At September 30, 2017 | |||
U.K.1 | $ | 8,334 | ||
Japan2 | 4,824 | |||
Other3 | 5,133 |
|
|
|
the countries listed.
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.
June 2021 Form 10-Q | 33 |
Risk Disclosures |
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 2020 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 Financial Condition and Results of Operations—Executive Summary—Coronavirus Disease (COVID-19) Pandemic” herein and “Risk Factors” in the 20162020 Form10-K.
general, see “Risk Factors” in the 2020 Form 10-K.
34 |
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.
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.
| ||
New York, New York
| ||
August 2, 2021 |
35 |
Consolidated Financial Statements and Notes
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 June 30, | Six Months Ended June 30, | |||||||||||||
in millions, except per share data | 2021 | 2020 | 2021 | 2020 | ||||||||||
Revenues | ||||||||||||||
Investment banking | $ | 2,560 | $ | 2,142 | $ | 5,400 | $ | 3,413 | ||||||
Trading | 3,330 | 4,803 | 7,555 | 7,604 | ||||||||||
Investments | 381 | 275 | 699 | 313 | ||||||||||
Commissions and fees | 1,308 | 1,102 | 2,934 | 2,462 | ||||||||||
Asset management | 4,973 | 3,265 | 9,371 | 6,682 | ||||||||||
Other | 342 | 473 | 626 | 9 | ||||||||||
Total non-interest revenues | 12,894 | 12,060 | 26,585 | 20,483 | ||||||||||
Interest income | 2,212 | 2,358 | 4,649 | 5,861 | ||||||||||
Interest expense | 347 | 758 | 756 | 2,905 | ||||||||||
Net interest | 1,865 | 1,600 | 3,893 | 2,956 | ||||||||||
Net revenues | 14,759 | 13,660 | 30,478 | 23,439 | ||||||||||
Provision for credit losses | 73 | 239 | (25) | 646 | ||||||||||
Non-interest expenses | ||||||||||||||
Compensation and benefits | 6,423 | 6,035 | 13,221 | 10,318 | ||||||||||
Brokerage, clearing and exchange fees | 795 | 716 | 1,705 | 1,456 | ||||||||||
Information processing and communications | 765 | 589 | 1,498 | 1,152 | ||||||||||
Professional services | 746 | 535 | 1,370 | 984 | ||||||||||
Occupancy and equipment | 414 | 365 | 819 | 730 | ||||||||||
Marketing and business development | 146 | 63 | 292 | 195 | ||||||||||
Other | 831 | 763 | 1,688 | 1,457 | ||||||||||
Total non-interest expenses | 10,120 | 9,066 | 20,593 | 16,292 | ||||||||||
Income before provision for income taxes | 4,566 | 4,355 | 9,910 | 6,501 | ||||||||||
Provision for income taxes | 1,054 | 1,119 | 2,230 | 1,485 | ||||||||||
Net income | $ | 3,512 | $ | 3,236 | $ | 7,680 | $ | 5,016 | ||||||
Net income applicable to noncontrolling interests | 1 | 40 | 49 | 122 | ||||||||||
Net income applicable to Morgan Stanley | $ | 3,511 | $ | 3,196 | $ | 7,631 | $ | 4,894 | ||||||
Preferred stock dividends | 103 | 149 | 241 | 257 | ||||||||||
Earnings applicable to Morgan Stanley common shareholders | $ | 3,408 | $ | 3,047 | $ | 7,390 | $ | 4,637 | ||||||
Earnings per common share | ||||||||||||||
Basic | $ | 1.88 | $ | 1.98 | $ | 4.10 | $ | 3.00 | ||||||
Diluted | $ | 1.85 | $ | 1.96 | $ | 4.04 | $ | 2.96 | ||||||
Average common shares outstanding | ||||||||||||||
Basic | 1,814 | 1,541 | 1,804 | 1,548 | ||||||||||
Diluted | 1,841 | 1,557 | 1,829 | 1,565 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Net income | $ | 3,512 | $ | 3,236 | $ | 7,680 | $ | 5,016 | ||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||
Foreign currency translation adjustments | 41 | 21 | (178) | (111) | ||||||||||
Change in net unrealized gains (losses) on available-for-sale securities | (7) | 295 | (783) | 1,620 | ||||||||||
Pension and other | 12 | (1) | 17 | 24 | ||||||||||
Change in net debt valuation adjustment | 186 | (2,496) | 323 | 1,307 | ||||||||||
Total other comprehensive income (loss) | $ | 232 | $ | (2,181) | $ | (621) | $ | 2,840 | ||||||
Comprehensive income | $ | 3,744 | $ | 1,055 | $ | 7,059 | $ | 7,856 | ||||||
Net income applicable to noncontrolling interests | 1 | 40 | 49 | 122 | ||||||||||
Other comprehensive income (loss) applicable to noncontrolling interests | 1 | (87) | (60) | 51 | ||||||||||
Comprehensive income applicable to Morgan Stanley | $ | 3,742 | $ | 1,102 | $ | 7,070 | $ | 7,683 |
|
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 |
June 2021 Form 10-Q | 36 | See Notes to Consolidated Financial Statements |
$ 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 |
Consolidated Balance Sheets |
$ in millions, except share data | (Unaudited) At June 30, 2021 | At December 31, 2020 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 126,480 | $ | 105,654 | ||||
Trading assets at fair value ($108,288 and $132,578 were pledged to various parties) | 321,145 | 312,738 | ||||||
Investment securities (includes $93,222 and $110,383 at fair value) | 175,342 | 182,154 | ||||||
Securities purchased under agreements to resell (includes $10 and $15 at fair value) | 95,930 | 116,234 | ||||||
Securities borrowed | 126,703 | 112,391 | ||||||
Customer and other receivables | 100,921 | 97,737 | ||||||
Loans: | ||||||||
Held for investment (net of allowance for credit losses of $687 and $835) | 154,346 | 137,784 | ||||||
Held for sale | 11,713 | 12,813 | ||||||
Goodwill | 16,838 | 11,635 | ||||||
Intangible assets (net of accumulated amortization of $3,518 and $3,265) | 8,690 | 4,980 | ||||||
Other assets | 23,697 | 21,742 | ||||||
Total assets | $ | 1,161,805 | $ | 1,115,862 | ||||
Liabilities | ||||||||
Deposits (includes $2,672 and $3,521 at fair value) | $ | 320,358 | $ | 310,782 | ||||
Trading liabilities at fair value | 169,074 | 157,631 | ||||||
Securities sold under agreements to repurchase (includes $1,028 and $1,115 at fair value) | 57,645 | 50,587 | ||||||
Securities loaned | 9,574 | 7,731 | ||||||
Other secured financings (includes $6,574 and $11,701 at fair value) | 11,232 | 15,863 | ||||||
Customer and other payables | 233,810 | 227,437 | ||||||
Other liabilities and accrued expenses | 27,808 | 25,603 | ||||||
Borrowings (includes $75,508 and $73,701 at fair value) | 224,142 | 217,079 | ||||||
Total liabilities | 1,053,643 | 1,012,713 | ||||||
Commitments and contingent liabilities (see Note 14) | ||||||||
0Equity | ||||||||
Morgan Stanley shareholders’ equity: | ||||||||
Preferred stock | 7,750 | 9,250 | ||||||
Common stock, $0.01 par value: | ||||||||
Shares authorized: 3,500,000,000; Shares issued: 2,038,893,979; Shares outstanding: 1,834,370,291 and 1,809,624,144 | 20 | 20 | ||||||
Additional paid-in capital | 28,030 | 25,546 | ||||||
Retained earnings | 84,791 | 78,694 | ||||||
Employee stock trusts | 3,768 | 3,043 | ||||||
Accumulated other comprehensive income (loss) | (2,523) | (1,962) | ||||||
Common stock held in treasury at cost, $0.01 par value (204,523,688 and 229,269,835 shares) | (11,198) | (9,767) | ||||||
Common stock issued to employee stock trusts | (3,768) | (3,043) | ||||||
Total Morgan Stanley shareholders’ equity | 106,870 | 101,781 | ||||||
Noncontrolling interests | 1,292 | 1,368 | ||||||
Total equity | 108,162 | 103,149 | ||||||
Total liabilities and equity | $ | 1,161,805 | $ | 1,115,862 |
See Notes to Consolidated Financial Statements | 37 | June 2021 Form 10-Q |
Consolidated Statements of Changes in Total Equity
|
$ 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 June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Preferred Stock | ||||||||||||||
Beginning balance | $ | 7,750 | $ | 8,520 | $ | 9,250 | $ | 8,520 | ||||||
Redemption of Series J preferred stock | — | — | (1,500) | — | ||||||||||
Ending balance | 7,750 | 8,520 | 7,750 | 8,520 | ||||||||||
Common Stock | ||||||||||||||
Beginning and ending balance | 20 | 20 | 20 | 20 | ||||||||||
Additional Paid-in Capital | ||||||||||||||
Beginning balance | 27,406 | 23,428 | 25,546 | 23,935 | ||||||||||
Share-based award activity | 624 | 354 | 292 | (153) | ||||||||||
Issuance of common stock for the acquisition of Eaton Vance | — | — | 2,185 | — | ||||||||||
Other net increases (decreases) | — | — | 7 | — | ||||||||||
Ending balance | 28,030 | 23,782 | 28,030 | 23,782 | ||||||||||
Retained Earnings | ||||||||||||||
Beginning balance | 82,034 | 71,518 | 78,694 | 70,589 | ||||||||||
Cumulative adjustment related to the adoption of financial instruments-credit losses accounting update1 | 0 | 0 | 0 | (100) | ||||||||||
Net income applicable to Morgan Stanley | 3,511 | 3,196 | 7,631 | 4,894 | ||||||||||
Preferred stock dividends2 | (103) | (149) | (241) | (257) | ||||||||||
Common stock dividends2 | (651) | (550) | (1,286) | (1,111) | ||||||||||
Other net increases (decreases) | — | — | (7) | — | ||||||||||
Ending balance | 84,791 | 74,015 | 84,791 | 74,015 | ||||||||||
Employee Stock Trusts | ||||||||||||||
Beginning balance | 3,861 | 3,088 | 3,043 | 2,918 | ||||||||||
Share-based award activity | (93) | (70) | 725 | 100 | ||||||||||
Ending balance | 3,768 | 3,018 | 3,768 | 3,018 | ||||||||||
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Beginning balance | (2,754) | 2,095 | (1,962) | (2,788) | ||||||||||
Net change in Accumulated other comprehensive income (loss) | 231 | (2,094) | (561) | 2,789 | ||||||||||
Ending balance | (2,523) | 1 | (2,523) | 1 | ||||||||||
Common Stock Held in Treasury at Cost | ||||||||||||||
Beginning balance | (8,197) | (19,721) | (9,767) | (18,727) | ||||||||||
Share-based award activity | 17 | 56 | 1,037 | 844 | ||||||||||
Repurchases of common stock and employee tax withholdings | (3,018) | (28) | (5,600) | (1,810) | ||||||||||
Issuance of common stock for the acquisition of Eaton Vance | — | — | 3,132 | — | ||||||||||
Ending balance | (11,198) | (19,693) | (11,198) | (19,693) | ||||||||||
Common Stock Issued to Employee Stock Trusts | ||||||||||||||
Beginning balance | (3,861) | (3,088) | (3,043) | (2,918) | ||||||||||
Share-based award activity | 93 | 70 | (725) | (100) | ||||||||||
Ending balance | (3,768) | (3,018) | (3,768) | (3,018) | ||||||||||
Noncontrolling Interests | ||||||||||||||
Beginning balance | 1,329 | 1,368 | 1,368 | 1,148 | ||||||||||
Net income applicable to noncontrolling interests | 1 | 40 | 49 | 122 | ||||||||||
Net change in Accumulated other comprehensive income (loss) applicable to noncontrolling interests | 1 | (87) | (60) | 51 | ||||||||||
Other net increases (decreases) | (39) | 43 | (65) | 43 | ||||||||||
Ending balance | 1,292 | 1,364 | 1,292 | 1,364 | ||||||||||
Total Equity | $ | 108,162 | $ | 88,009 | $ | 108,162 | $ | 88,009 |
|
|
|
June 2021 Form 10-Q | 38 | See Notes to Consolidated Financial Statements |
|
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.
Consolidated Cash Flow Statements (Unaudited) |
Six Months Ended June 30, | ||||||||
$ in millions | 2021 | 2020 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | 7,680 | $ | 5,016 | ||||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||||||
Stock-based compensation expense | 1,136 | 548 | ||||||
Depreciation and amortization | 1,944 | 1,510 | ||||||
Provision for credit losses | (25) | 646 | ||||||
Other operating adjustments | (165) | 599 | ||||||
Changes in assets and liabilities: | ||||||||
Trading assets, net of Trading liabilities | (1,526) | 17,539 | ||||||
Securities borrowed | (14,312) | (285) | ||||||
Securities loaned | 1,843 | 1,987 | ||||||
Customer and other receivables and other assets | (2,360) | (7,789) | ||||||
Customer and other payables and other liabilities | 9,917 | (1,005) | ||||||
Securities purchased under agreements to resell | 20,304 | (8,388) | ||||||
Securities sold under agreements to repurchase | 7,058 | (3,352) | ||||||
Net cash provided by (used for) operating activities | 31,494 | 7,026 | ||||||
Cash flows from investing activities | ||||||||
Proceeds from (payments for): | ||||||||
Other assets—Premises, equipment and software, net | (1,039) | (782) | ||||||
Changes in loans, net | (17,426) | (8,700) | ||||||
Investment securities: | ||||||||
Purchases | (40,125) | (33,195) | ||||||
Proceeds from sales | 17,546 | 3,581 | ||||||
Proceeds from paydowns and maturities | 24,479 | 5,616 | ||||||
Cash paid as part of the Eaton Vance acquisition, net of cash acquired | (2,648) | 0 | ||||||
Other investing activities | (231) | (138) | ||||||
Net cash provided by (used for) investing activities | (19,444) | (33,618) | ||||||
Cash flows from financing activities | ||||||||
Net proceeds from (payments for): | ||||||||
Other secured financings | (1,107) | 332 | ||||||
Deposits | 9,643 | 46,287 | ||||||
Proceeds from issuance of Borrowings | 49,100 | 32,914 | ||||||
Payments for: | ||||||||
Borrowings | (40,300) | (24,632) | ||||||
Repurchases of common stock and employee tax withholdings | (5,600) | (1,810) | ||||||
Cash dividends | (1,501) | (1,328) | ||||||
Other financing activities | (186) | (164) | ||||||
Net cash provided by (used for) financing activities | 10,049 | 51,599 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (1,273) | (902) | ||||||
Net increase (decrease) in cash and cash equivalents | 20,826 | 24,105 | ||||||
Cash and cash equivalents, at beginning of period | 105,654 | 82,171 | ||||||
Cash and cash equivalents, at end of period | $ | 126,480 | $ | 106,276 | ||||
Supplemental Disclosure of Cash Flow Information | ||||||||
Cash payments for: | ||||||||
Interest | $ | 881 | $ | 2,742 | ||||
Income taxes, net of refunds | 2,033 | 679 |
See Notes to Consolidated Financial Statements | 39 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements
|
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
date of this report and has not identified any recordable or disclosable events not otherwise reported in these financial statements or the notes thereto.
June 2021 Form 10-Q | 40 |
Notes to Consolidated Financial Statements (Unaudited) |
sheets.
|
Accounting Standards Adopted
policies, other than as described below and in Note 1 to the financial statements.
|
Beginning2021, the Firm completed the acquisition of 100% of Eaton Vance in 2017,a stock and cash transaction, which increases the income tax consequences related to share-based payments are required to be recognized in Provision for income taxes in the income statements upon the conversion of employee share-based awards instead of additionalpaid-in capital. The impactscale and breadth of the income tax consequences upon conversionInvestment Management business segment. Total consideration for the transaction was approximately $8.7 billion, which consists of the awards may be either a benefit or a provision. Conversion$5.3 billion fair value of employee share-based awards69 million common shares issued from Common stock held in treasury and cash of approximately $3.4 billion.
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. The Firm has elected to account for forfeitures on an actual basis as they occur. This change is required to be applied using a modified retrospective approach, and upon adoption, the Firm recorded a cumulativecatch-up adjustment, decreasing Retained earnings by approximately $30 million net of tax, increasing Additionalpaid-in capital by approximately $45 million and increasing deferred tax assets by approximately $15 million.
Goodwill
The Firm completed its annual goodwill impairment testing as of July 1, 2017. The Firm’s impairment testing did not indicate any goodwill impairment, as each of the Firm’s reporting units with goodwill had a fair value that was substantially in excess of its carrying value.
At March 1, 2021 | |||||
Assets | |||||
Cash and cash equivalents | $ | 691 | |||
Trading assets at fair value: | |||||
Loans and lending commitments | 445 | ||||
Investments | 299 | ||||
Corporate and other debt | 52 | ||||
Customer and other receivables | 331 | ||||
Goodwill | 5,270 | ||||
Intangible assets | 3,956 | ||||
Other assets | 836 | ||||
Total assets | $ | 11,880 | |||
Liabilities | |||||
Other secured financings | $ | 399 | |||
Other liabilities and accrued expenses | 2,147 | ||||
Borrowings | 678 | ||||
Total liabilities | $ | 3,224 |
$ in millions | Weighted average life (years) | At March 1, 2021 | ||||||
Non-amortizable | ||||||||
Management contracts | indefinite | $ | 2,120 | |||||
Amortizable | ||||||||
Customer relationships | 16 | 1,455 | ||||||
Tradenames | 23 | 221 | ||||||
Management contracts | 16 | 160 | ||||||
Total acquired Intangible assets | $ | 3,956 |
$ in millions | Three Months Ended June 30, 2021 | Six Months Ended June 30, 20211 | ||||||
Net revenues | $ | 535 | $ | 709 | ||||
Net income | 119 | 150 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 20211 | 2020 | 2021 | 2020 | ||||||||||
Net revenues | $ | 14,759 | $ | 14,076 | $ | 30,774 | $ | 24,241 | ||||||
Net income | 3,512 | 3,282 | 7,780 | 4,691 |
41 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements
|
Measurements Assets at Fair Value Trading assets: U.S. Treasury and Other sovereign Corporate and other debt: State and municipal MABS Corporate bonds CDO Loans and lending Other debt Total corporate Corporate equities4 Derivative and Interest rate Credit Foreign exchange Equity Commodity and Netting1 Total derivative and Investments5 Physical commodities Total trading assets5 Investment securities— AFS Securities purchased Intangible assets Total assets Liabilities at Fair Value Deposits Short-term borrowings Trading liabilities: U.S. Treasury and Other sovereign Corporate and other debt: Corporate bonds Other debt Total corporate and other debt Corporate equities4 Derivative and other contracts: Interest rate Credit Foreign exchange Equity Commodity and Netting1 Total derivative and Total trading liabilities Securities sold under agreements to repurchase Other secured Long-term borrowings Total liabilities3.$ in millions At
June 30,
2021At
December 31,
2020Cash and due from banks $ 8,943 $ 9,792 Interest bearing deposits with banks 117,537 95,862 Total Cash and cash equivalents $ 126,480 $ 105,654 Restricted cash $ 41,203 $ 38,202 Measurement At September 30, 2017 $ in millions Level 1 Level 2 Level 3 Netting1 Total
agency securities $ 27,538 $ 23,186 $ — $ — $ 50,724
government
obligations2 25,428 6,201 104 — 31,733
securities — 2,123 10 — 2,133 — 2,399 274 — 2,673 — 14,164 419 — 14,583 — 313 76 — 389
commitments3 — 3,423 4,865 — 8,288 — 1,041 193 — 1,234
and other debt — 23,463 5,837 — 29,300 137,028 425 296 — 137,749
other contracts: 581 183,561 1,658 — 185,800 — 8,527 377 — 8,904 93 53,842 47 — 53,982 1,056 44,986 3,402 — 49,444
other 1,240 4,929 4,107 — 10,276 (2,896 ) (225,857 ) (1,853 ) (46,425 ) (277,031 )
other contracts 74 69,988 7,738 (46,425 ) 31,375 316 257 925 — 1,498 — 157 — — 157 190,384 123,677 14,900 (46,425 ) 282,536 25,022 29,932 — — 54,954
under agreements
to resell — 101 — — 101 — 3 — — 3
at fair value $ 215,406 $ 153,713 $ 14,900 $ (46,425 ) $ 337,594 At September 30, 2017 $ in millions Level 1 Level 2 Level 3 Netting1 Total $ — $ 68 $ 106 $ — $ 174 — 658 — — 658
agency securities 14,574 61 — — 14,635
government
obligations2 24,351 1,432 — — 25,783 — 7,044 6 — 7,050 — 342 2 — 344 — 7,386 8 — 7,394 54,778 157 51 — 54,986 478 165,399 582 — 166,459 — 9,353 680 — 10,033 52 54,198 125 — 54,375 1,252 47,603 2,171 — 51,026
other 1,233 3,879 2,573 — 7,685 (2,896 ) (225,857 ) (1,853 ) (34,533 ) (265,139 )
other contracts 119 54,575 4,278 (34,533 ) 24,439 93,822 63,611 4,337 (34,533 ) 127,237 — 661 149 — 810
financings — 6,264 250 — 6,514 35 43,593 2,603 — 46,231
at fair value $ 93,857 $ 114,855 $ 7,445 $ (34,533 ) $ 181,624 At June 30, 2021 $ in millions Level 1 Level 2 Level 3 Total Assets at fair value Trading assets: U.S. Treasury and agency securities $ 48,097 $ 28,134 $ 25 $ — $ 76,256 Other sovereign government obligations 32,496 5,020 78 — 37,594 State and municipal securities 0 2,002 4 — 2,006 MABS 0 1,424 357 — 1,781 0 10,249 4,896 — 15,145 Corporate and other debt 0 31,781 1,801 — 33,582 104,834 508 150 — 105,492 Derivative and other contracts: Interest rate 1,805 174,122 1,241 — 177,168 Credit 0 7,673 636 — 8,309 Foreign exchange 41 70,710 95 — 70,846 Equity 1,051 68,919 387 — 70,357 Commodity and other 4,932 17,576 2,557 — 25,065 (6,406) (250,928) (975) (52,481) (310,790) Total derivative and other contracts 1,423 88,072 3,941 (52,481) 40,955 638 571 978 — 2,187 Physical commodities 0 2,106 0 — 2,106 187,488 169,867 12,230 (52,481) 317,104 Investment securities—AFS 46,234 46,988 0 — 93,222 Securities purchased under agreements to resell 0 10 0 — 10 Total assets at fair value $ 233,722 $ 216,865 $ 12,230 $ (52,481) $ 410,336
At June 30, 2021 | |||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||||
Liabilities at fair value | |||||||||||||||||
Deposits | $ | 0 | $ | 2,586 | $ | 86 | $ | — | $ | 2,672 | |||||||
Trading liabilities: | |||||||||||||||||
U.S. Treasury and agency securities | 14,504 | 377 | 0 | — | 14,881 | ||||||||||||
Other sovereign government obligations | 27,980 | 2,030 | 0 | — | 30,010 | ||||||||||||
Corporate and other debt | 0 | 12,367 | 9 | — | 12,376 | ||||||||||||
Corporate equities3 | 73,195 | 471 | 50 | — | 73,716 | ||||||||||||
Derivative and other contracts: | |||||||||||||||||
Interest rate | 1,855 | 158,946 | 573 | — | 161,374 | ||||||||||||
Credit | 0 | 8,354 | 839 | — | 9,193 | ||||||||||||
Foreign exchange | 32 | 66,144 | 62 | — | 66,238 | ||||||||||||
Equity | 1,274 | 79,795 | 1,224 | — | 82,293 | ||||||||||||
Commodity and other | 4,750 | 16,103 | 1,127 | — | 21,980 | ||||||||||||
Netting1 | (6,406) | (250,928) | (975) | (44,678) | (302,987) | ||||||||||||
Total derivative and other contracts | 1,505 | 78,414 | 2,850 | (44,678) | 38,091 | ||||||||||||
Total trading liabilities | 117,184 | 93,659 | 2,909 | (44,678) | 169,074 | ||||||||||||
Securities sold under agreements to repurchase | 0 | 579 | 449 | — | 1,028 | ||||||||||||
Other secured financings | 0 | 6,173 | 401 | — | 6,574 | ||||||||||||
Borrowings | 0 | 73,533 | 1,975 | — | 75,508 | ||||||||||||
Total liabilities at fair value | $ | 117,184 | $ | 176,530 | $ | 5,820 | $ | (44,678) | $ | 254,856 |
At December 31, 2020 | |||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||||
Assets at fair value | |||||||||||||||||
Trading assets: | |||||||||||||||||
U.S. Treasury and agency securities | $ | 43,084 | $ | 31,524 | $ | 9 | $ | — | $ | 74,617 | |||||||
Other sovereign government obligations | 26,174 | 5,048 | 268 | — | 31,490 | ||||||||||||
State and municipal securities | 0 | 1,135 | 0 | — | 1,135 | ||||||||||||
MABS | 0 | 1,070 | 322 | — | 1,392 | ||||||||||||
Loans and lending commitments2 | 0 | 5,389 | 5,759 | — | 11,148 | ||||||||||||
Corporate and other debt | 0 | 30,093 | 3,435 | — | 33,528 | ||||||||||||
Corporate equities3 | 111,575 | 1,142 | 86 | — | 112,803 | ||||||||||||
Derivative and other contracts: | |||||||||||||||||
Interest rate | 4,458 | 227,818 | 1,210 | — | 233,486 | ||||||||||||
Credit | 0 | 6,840 | 701 | — | 7,541 | ||||||||||||
Foreign exchange | 29 | 93,770 | 260 | — | 94,059 | ||||||||||||
Equity | 1,132 | 65,943 | 1,369 | — | 68,444 | ||||||||||||
Commodity and other | 1,818 | 10,108 | 2,723 | — | 14,649 | ||||||||||||
Netting1 | (5,488) | (310,534) | (1,351) | (62,956) | (380,329) | ||||||||||||
Total derivative and other contracts | 1,949 | 93,945 | 4,912 | (62,956) | 37,850 | ||||||||||||
Investments4 | 624 | 234 | 828 | — | 1,686 | ||||||||||||
Physical commodities | 0 | 3,260 | 0 | — | 3,260 | ||||||||||||
Total trading assets4 | 183,406 | 172,840 | 15,619 | (62,956) | 308,909 | ||||||||||||
Investment securities—AFS | 46,354 | 61,225 | 2,804 | — | 110,383 | ||||||||||||
Securities purchased under agreements to resell | 0 | 12 | 3 | — | 15 | ||||||||||||
Total assets at fair value | $ | 229,760 | $ | 234,077 | $ | 18,426 | $ | (62,956) | $ | 419,307 |
42 |
|
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—Mortgage- and asset-backed securities
AFS—Available for sale
CDO—Collateralized debt obligations, including collateralized loan obligations
|
|
|
|
|
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 |
Notes to Consolidated Financial Statements
|
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 |
|
At December 31, 2020 | |||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | ||||||||||||
Liabilities at fair value | |||||||||||||||||
Deposits | $ | 0 | $ | 3,395 | $ | 126 | $ | — | $ | 3,521 | |||||||
Trading liabilities: | |||||||||||||||||
U.S. Treasury and agency securities | 10,204 | 1 | 0 | — | 10,205 | ||||||||||||
Other sovereign government obligations | 24,209 | 1,738 | 16 | — | 25,963 | ||||||||||||
Corporate and other debt | 0 | 8,468 | 0 | — | 8,468 | ||||||||||||
Corporate equities3 | 67,822 | 172 | 63 | — | 68,057 | ||||||||||||
Derivative and other contracts: | |||||||||||||||||
Interest rate | 4,789 | 213,321 | 528 | — | 218,638 | ||||||||||||
Credit | 0 | 7,500 | 652 | — | 8,152 | ||||||||||||
Foreign exchange | 11 | 94,698 | 199 | — | 94,908 | ||||||||||||
Equity | 1,245 | 81,683 | 3,600 | — | 86,528 | ||||||||||||
Commodity and other | 1,758 | 9,418 | 1,014 | — | 12,190 | ||||||||||||
Netting1 | (5,488) | (310,534) | (1,351) | (58,105) | (375,478) | ||||||||||||
Total derivative and other contracts | 2,315 | 96,086 | 4,642 | (58,105) | 44,938 | ||||||||||||
Total trading liabilities | 104,550 | 106,465 | 4,721 | (58,105) | 157,631 | ||||||||||||
Securities sold under agreements to repurchase | 0 | 671 | 444 | — | 1,115 | ||||||||||||
Other secured financings | 0 | 11,185 | 516 | — | 11,701 | ||||||||||||
Borrowings | 0 | 69,327 | 4,374 | — | 73,701 | ||||||||||||
Total liabilities at fair value | $ | 104,550 | $ | 191,043 | $ | 10,181 | $ | (58,105) | $ | 247,669 |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Corporate | $ | 13 | $ | 13 | ||||
Secured lending facilities | 666 | 648 | ||||||
Commercial Real Estate | 2,441 | 916 | ||||||
Residential Real Estate | 1,829 | 2,145 | ||||||
Securities-based lending and Other loans | 10,196 | 7,426 | ||||||
Total | $ | 15,145 | $ | 11,148 |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Customer and other receivables, net | $ | 323 | $ | 434 |
Changes in
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
U.S. Treasury and agency securities | ||||||||||||||
Beginning balance | $ | 12 | $ | 99 | $ | 9 | $ | 22 | ||||||
Realized and unrealized gains (losses) | 44 | (3) | 59 | (20) | ||||||||||
Purchases | 22 | 81 | 25 | 108 | ||||||||||
Sales | (68) | (38) | (68) | (23) | ||||||||||
Net transfers | 15 | (42) | 0 | 10 | ||||||||||
Ending balance | $ | 25 | $ | 97 | $ | 25 | $ | 97 | ||||||
Unrealized gains (losses) | $ | 44 | $ | (1) | $ | 58 | $ | (21) | ||||||
Other sovereign government obligations | ||||||||||||||
Beginning balance | $ | 17 | $ | 17 | $ | 268 | $ | 5 | ||||||
Realized and unrealized gains (losses) | 0 | (1) | 0 | 0 | ||||||||||
Purchases | 75 | 0 | 76 | 9 | ||||||||||
Sales | (16) | (3) | (260) | (4) | ||||||||||
Net transfers | 2 | (2) | (6) | 1 | ||||||||||
Ending balance | $ | 78 | $ | 11 | $ | 78 | $ | 11 | ||||||
Unrealized gains (losses) | $ | 0 | $ | (1) | $ | 0 | $ | 0 | ||||||
State and municipal securities | ||||||||||||||
Beginning balance | $ | 0 | $ | 1 | $ | 0 | $ | 1 | ||||||
Purchases | 4 | 0 | 4 | 0 | ||||||||||
Net transfers | 0 | (1) | 0 | (1) | ||||||||||
Ending balance | $ | 4 | $ | 0 | $ | 4 | $ | 0 | ||||||
Unrealized gains (losses) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||
MABS | ||||||||||||||
Beginning balance | $ | 374 | $ | 483 | $ | 322 | $ | 438 | ||||||
Realized and unrealized gains (losses) | 8 | 11 | 59 | (62) | ||||||||||
Purchases | 21 | 274 | 128 | 384 | ||||||||||
Sales | (58) | (401) | (123) | (418) | ||||||||||
Net transfers | 12 | 12 | (29) | 37 | ||||||||||
Ending balance | $ | 357 | $ | 379 | $ | 357 | $ | 379 | ||||||
Unrealized gains (losses) | $ | 6 | $ | 8 | $ | 1 | $ | (60) | ||||||
Loans and lending commitments | ||||||||||||||
Beginning balance | $ | 5,045 | $ | 5,980 | $ | 5,759 | $ | 5,073 | ||||||
Realized and unrealized gains (losses) | 22 | (2) | 3 | (119) | ||||||||||
Purchases and originations | 1,527 | 808 | 2,673 | 1,160 | ||||||||||
Sales | (1,438) | (672) | (2,569) | (755) | ||||||||||
Settlements | (712) | (901) | (933) | (1,508) | ||||||||||
Net transfers1 | 452 | (1,145) | (37) | 217 | ||||||||||
Ending balance | $ | 4,896 | $ | 4,068 | $ | 4,896 | $ | 4,068 | ||||||
Unrealized gains (losses) | $ | 38 | $ | 5 | $ | 9 | $ | (116) | ||||||
Corporate and other debt | ||||||||||||||
Beginning balance | $ | 3,319 | $ | 1,708 | $ | 3,435 | $ | 1,396 | ||||||
Realized and unrealized gains (losses) | 207 | 55 | 135 | (87) | ||||||||||
Purchases and originations | 883 | 2,859 | 1,413 | 2,522 | ||||||||||
Sales | (908) | (1,726) | (1,087) | (861) | ||||||||||
Settlements | 0 | (232) | 0 | (311) | ||||||||||
Net transfers2 | (1,700) | 22 | (2,095) | 27 | ||||||||||
Ending balance | $ | 1,801 | $ | 2,686 | $ | 1,801 | $ | 2,686 | ||||||
Unrealized gains (losses) | $ | 264 | $ | 46 | $ | 248 | $ | (92) |
43 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Corporate equities | ||||||||||||||
Beginning balance | $ | 114 | $ | 146 | $ | 86 | $ | 97 | ||||||
Realized and unrealized gains (losses) | 12 | (12) | 26 | (100) | ||||||||||
Purchases | 25 | 13 | 50 | 24 | ||||||||||
Sales | (36) | (25) | (38) | (127) | ||||||||||
Net transfers | 35 | (39) | 26 | 189 | ||||||||||
Ending balance | $ | 150 | $ | 83 | $ | 150 | $ | 83 | ||||||
Unrealized gains (losses) | $ | 15 | $ | (9) | $ | 28 | $ | (91) | ||||||
Investments | ||||||||||||||
Beginning balance | $ | 924 | $ | 725 | $ | 828 | $ | 858 | ||||||
Realized and unrealized gains (losses) | 47 | (23) | 107 | (49) | ||||||||||
Purchases | 28 | 14 | 92 | 17 | ||||||||||
Sales | (9) | (11) | (24) | (20) | ||||||||||
Net transfers | (12) | 54 | (25) | (47) | ||||||||||
Ending balance | $ | 978 | $ | 759 | $ | 978 | $ | 759 | ||||||
Unrealized gains (losses) | $ | 47 | $ | (22) | $ | 94 | $ | (50) | ||||||
Investment securities —AFS | ||||||||||||||
Beginning balance | $ | 127 | $ | 0 | $ | 2,804 | $ | 0 | ||||||
Realized and unrealized gains (losses) | 0 | 0 | (4) | 0 | ||||||||||
Sales | (11) | 0 | (203) | 0 | ||||||||||
Net transfers3 | (116) | 0 | (2,597) | 0 | ||||||||||
Ending balance | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||
Unrealized gains (losses) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||
Securities purchased under agreements to resell | ||||||||||||||
Beginning balance | $ | 0 | $ | 0 | $ | 3 | $ | 0 | ||||||
Net transfers | 0 | 0 | (3) | 0 | ||||||||||
Ending balance | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||
Unrealized gains (losses) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||
Net derivatives: Interest rate | ||||||||||||||
Beginning balance | $ | 691 | $ | 873 | $ | 682 | $ | 777 | ||||||
Realized and unrealized gains (losses) | (43) | (126) | (388) | 70 | ||||||||||
Purchases | 41 | 11 | 57 | 129 | ||||||||||
Issuances | (52) | (24) | (66) | (27) | ||||||||||
Settlements | 18 | (12) | 103 | (26) | ||||||||||
Net transfers | 13 | 38 | 280 | (163) | ||||||||||
Ending balance | $ | 668 | $ | 760 | $ | 668 | $ | 760 | ||||||
Unrealized gains (losses) | $ | (40) | $ | (160) | $ | (370) | $ | 27 | ||||||
Net derivatives: Credit | ||||||||||||||
Beginning balance | $ | (82) | $ | 198 | $ | 49 | $ | 124 | ||||||
Realized and unrealized gains (losses) | (88) | (74) | (75) | (60) | ||||||||||
Purchases | 17 | 13 | 25 | 44 | ||||||||||
Issuances | (24) | (22) | (38) | (39) | ||||||||||
Settlements | 36 | 54 | (60) | 102 | ||||||||||
Net transfers | (62) | (38) | (104) | (40) | ||||||||||
Ending balance | $ | (203) | $ | 131 | $ | (203) | $ | 131 | ||||||
Unrealized gains (losses) | $ | (76) | $ | (143) | $ | (75) | $ | (63) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Net derivatives: Foreign exchange | ||||||||||||||
Beginning balance | $ | (110) | $ | (150) | $ | 61 | $ | (31) | ||||||
Realized and unrealized gains (losses) | 96 | 122 | (26) | 94 | ||||||||||
Purchases | 2 | 0 | 4 | 3 | ||||||||||
Issuances | 0 | 0 | (2) | (9) | ||||||||||
Settlements | 1 | 2 | (67) | (11) | ||||||||||
Net transfers | 44 | 43 | 63 | (29) | ||||||||||
Ending balance | $ | 33 | $ | 17 | $ | 33 | $ | 17 | ||||||
Unrealized gains (losses) | $ | (49) | $ | 44 | $ | 25 | $ | 35 | ||||||
Net derivatives: Equity | ||||||||||||||
Beginning balance | $ | (2,117) | $ | (1,376) | $ | (2,231) | $ | (1,684) | ||||||
Realized and unrealized gains (losses) | 283 | (135) | 344 | 181 | ||||||||||
Purchases | 28 | 149 | 71 | 237 | ||||||||||
Issuances | (143) | (391) | (461) | (595) | ||||||||||
Settlements | 105 | 10 | 5 | (52) | ||||||||||
Net transfers2 | 1,007 | (141) | 1,435 | 29 | ||||||||||
Ending balance | $ | (837) | $ | (1,884) | $ | (837) | $ | (1,884) | ||||||
Unrealized gains (losses) | $ | (36) | $ | (156) | $ | (25) | $ | (4) | ||||||
Net derivatives: Commodity and other | ||||||||||||||
Beginning balance | $ | 1,944 | $ | 1,849 | $ | 1,709 | $ | 1,612 | ||||||
Realized and unrealized gains (losses) | 122 | 338 | 348 | 448 | ||||||||||
Purchases | 0 | 3 | 10 | 21 | ||||||||||
Issuances | 0 | (2) | (13) | (17) | ||||||||||
Settlements | (170) | (119) | (222) | 7 | ||||||||||
Net transfers | (466) | 18 | (402) | 16 | ||||||||||
Ending balance | $ | 1,430 | $ | 2,087 | $ | 1,430 | $ | 2,087 | ||||||
Unrealized gains (losses) | $ | (63) | $ | 182 | $ | 69 | $ | 257 | ||||||
Deposits | ||||||||||||||
Beginning balance | $ | 177 | $ | 117 | $ | 126 | $ | 179 | ||||||
Realized and unrealized losses (gains) | 4 | 6 | 2 | 3 | ||||||||||
Settlements | (2) | (4) | (2) | (9) | ||||||||||
Net transfers | (93) | (29) | (40) | (83) | ||||||||||
Ending balance | $ | 86 | $ | 90 | $ | 86 | $ | 90 | ||||||
Unrealized losses (gains) | $ | 4 | $ | 7 | $ | 2 | $ | 3 | ||||||
Nonderivative trading liabilities | ||||||||||||||
Beginning balance | $ | 62 | $ | 64 | $ | 79 | $ | 37 | ||||||
Realized and unrealized losses (gains) | (4) | 5 | 4 | (10) | ||||||||||
Purchases | (38) | (42) | (43) | (45) | ||||||||||
Sales | 16 | 24 | 16 | 22 | ||||||||||
Settlements | 0 | 0 | 0 | 3 | ||||||||||
Net transfers | 23 | 23 | 3 | 67 | ||||||||||
Ending balance | $ | 59 | $ | 74 | $ | 59 | $ | 74 | ||||||
Unrealized losses (gains) | $ | (2) | $ | 5 | $ | 4 | $ | (10) | ||||||
Securities sold under agreements to repurchase | ||||||||||||||
Beginning balance | $ | 441 | $ | 0 | $ | 444 | $ | 0 | ||||||
Realized and unrealized losses (gains) | 8 | (31) | 6 | (31) | ||||||||||
Issuances | 0 | 471 | 0 | 471 | ||||||||||
Net transfers | 0 | 0 | (1) | 0 | ||||||||||
Ending balance | $ | 449 | $ | 440 | $ | 449 | $ | 440 | ||||||
Unrealized losses (gains) | $ | 8 | $ | (31) | $ | 6 | $ | (31) |
June 2021 Form 10-Q | 44 |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Other secured financings | ||||||||||||||
Beginning balance | $ | 555 | $ | 389 | $ | 516 | $ | 109 | ||||||
Realized and unrealized losses (gains) | 9 | 0 | 4 | (12) | ||||||||||
Issuances | 37 | 5 | 407 | 7 | ||||||||||
Settlements | (176) | (88) | (498) | (203) | ||||||||||
Net transfers | (24) | (6) | (28) | 399 | ||||||||||
Ending balance | $ | 401 | $ | 300 | $ | 401 | $ | 300 | ||||||
Unrealized losses (gains) | $ | 10 | $ | 0 | $ | 4 | $ | (12) | ||||||
Borrowings | ||||||||||||||
Beginning balance | $ | 4,262 | $ | 3,998 | $ | 4,374 | $ | 4,088 | ||||||
Realized and unrealized losses (gains) | 125 | 500 | 36 | (202) | ||||||||||
Issuances | 146 | 385 | 276 | 766 | ||||||||||
Settlements | (217) | (92) | (326) | (283) | ||||||||||
Net transfers2 | (2,341) | (656) | (2,385) | (234) | ||||||||||
Ending balance | $ | 1,975 | $ | 4,135 | $ | 1,975 | $ | 4,135 | ||||||
Unrealized losses (gains) | $ | 121 | $ | 496 | $ | 29 | $ | (200) | ||||||
Portion of Unrealized losses (gains) recorded in OCI—Change in net DVA | (4) | 281 | (8) | (125) |
(“current quarter”), the three months ended September 30, 2016 (“prior year quarter”),3.Net transfers in the current year period also reflect the transfer in the first quarter of $2.5 billion of AFS securities from Level 3 to Level 2 due to increased trading activity and the nine months ended September 30, 2016 (“prior year period”). observability of pricing inputs.
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
RollforwardAdditionally, in the previous tables, consolidations of Level 3 AssetsVIEs are included in Purchases, 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 | ) |
|
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|
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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|
Valuation Techniques and Unobservable Inputs
Balance / Range (Average1) | ||||||||
$ in millions, except inputs | At June 30, 2021 | At December 31, 2020 | ||||||
Assets at Fair Value on a Recurring Basis | ||||||||
Other sovereign government obligations | $ | 78 | $ | 268 | ||||
Comparable pricing: | ||||||||
Bond price | 132 to 153 points (143 points) | 106 points | ||||||
MABS | $ | 357 | $ | 322 | ||||
Comparable pricing: | ||||||||
Bond price | 0 to 81 points (55 points) | 0 to 80 points (50 points) | ||||||
Loans and lending commitments | $ | 4,896 | $ | 5,759 | ||||
Margin loan model: | ||||||||
Margin loan rate | 0% to 4% (2%) | 1% to 5% (3%) | ||||||
Comparable pricing: | ||||||||
Loan price | 75 to 101 points (98 points) | 75 to 102 points (93 points) | ||||||
Corporate and other debt | $ | 1,801 | $ | 3,435 | ||||
Comparable pricing: | ||||||||
Bond price | 90 to 102 points (98 points) | 10 to 133 points (101 points) | ||||||
Discounted cash flow: | ||||||||
Recovery rate | 40% to 62% (46% / 40%) | 40% to 62% (46% / 40%) | ||||||
Option model: | ||||||||
Equity volatility | 37% to 47% (41%) | 18% to 21% (19%) | ||||||
Corporate equities | $ | 150 | $ | 86 | ||||
Comparable pricing: | ||||||||
Equity price | 100% | 100% | ||||||
Investments | $ | 978 | $ | 828 | ||||
Discounted cash flow: | ||||||||
WACC | 10% to 16% (15%) | 8% to 18% (15%) | ||||||
Exit multiple | 8 to 17 times (12 times) | 7 to 17 times (12 times) | ||||||
Market approach: | ||||||||
EBITDA multiple | 8 to 40 times (10 times) | 8 to 32 times (11 times) | ||||||
Comparable pricing: | ||||||||
Equity price | 43% to 100% (99%) | 45% to 100% (99%) | ||||||
Investment securities —AFS | $ | 0 | $ | 2,804 | ||||
Comparable pricing: | ||||||||
Bond price | N/A | 97 to 107 points (101 points) | ||||||
Net derivative and other contracts: | ||||||||
Interest rate | $ | 668 | $ | 682 | ||||
Option model: | ||||||||
IR volatility skew | 25% to 104% (60% / 59%) | 0% to 349% (62% / 59%) | ||||||
IR curve correlation | 69% to 98% (84% / 83%) | 54% to 99% (87% / 89%) | ||||||
Bond volatility | 4% to 25% (10% / 6%) | 6% to 24% (13% / 13%) | ||||||
Inflation volatility | 25% to 66% (45% / 43%) | 25% to 66% (45% / 43%) | ||||||
IR curve | 1% to 2% (2%) | 1% |
45 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Balance / Range (Average1) | ||||||||
$ in millions, except inputs | At June 30, 2021 | At December 31, 2020 | ||||||
Credit | $ | (203) | $ | 49 | ||||
Credit default swap model: | ||||||||
Cash-synthetic basis | 7 points | 7 points | ||||||
Bond price | 0 to 85 points (46 points) | 0 to 85 points (47 points) | ||||||
Credit spread | 14 to 474 bps (90 bps) | 20 to 435 bps (74 bps) | ||||||
Funding spread | 21 to 95 bps (62 bps) | 65 to 118 bps (86 bps) | ||||||
Correlation model: | ||||||||
Credit correlation | 26% to 42% (29%) | 27% to 44% (32%) | ||||||
Foreign exchange2 | $ | 33 | $ | 61 | ||||
Option model: | ||||||||
IR - FX correlation | 53% to 57% (55% 55%) | 55% to 59% (56% / 56%) | ||||||
IR volatility skew | 25% to 104% (60% / 59%) | 0% to 349% (62% / 59%) | ||||||
IR curve | 6% to 7% (7% / 7%) | 6% to 8% (7% / 8%) | ||||||
Foreign exchange volatility skew | -6% to -3% (-5% / -5%) | -22% to 28% (3% / 1%) | ||||||
Contingency probability | 95% | 50% to 95% (83% / 93%) | ||||||
Equity2 | $ | (837) | $ | (2,231) | ||||
Option model: | ||||||||
Equity volatility | 5% to 91% (23%) | 16% to 97% (43%) | ||||||
Equity volatility skew | -3% to 0% (-1%) | -3% to 0% (-1%) | ||||||
Equity correlation | 35% to 98% (68%) | 24% to 96% (74%) | ||||||
FX correlation | -85% to 65% (-35%) | -79% to 60% (-16%) | ||||||
IR correlation | 15% to 40% (38%) | -13% to 47% (21% / 20%) | ||||||
Commodity and other | $ | 1,430 | $ | 1,709 | ||||
Option model: | ||||||||
Forward power price | $-1 to $258 ($33) per MWh | $-1 to $157 ($28) per MWh | ||||||
Commodity volatility | 8% to 176% (19%) | 8% to 183% (19%) | ||||||
Cross-commodity correlation | 43% to 100% (94%) | 43% to 99% (92%) | ||||||
Liabilities Measured at Fair Value on a Recurring Basis | ||||||||
Deposits | $ | 86 | $ | 126 | ||||
Option model: | ||||||||
Equity volatility | 7% | 7% to 22% (8%) | ||||||
Nonderivative trading liabilities —Corporate equities | $ | 50 | $ | 63 | ||||
Comparable pricing: | ||||||||
Equity price | 100% | 100% | ||||||
Securities sold under agreements to repurchase | $ | 449 | $ | 444 | ||||
Discounted cash flow: | ||||||||
Funding spread | 100 to 116 bps (111 bps) | 107 to 127 bps (115 bps) | ||||||
Other secured financings | $ | 401 | $ | 516 | ||||
Discounted cash flow: | ||||||||
Funding spread | N/A | 111 bps (111 bps) | ||||||
Comparable pricing: | ||||||||
Loan price | 30 to 101 points (82 points) | 30 to 101 points (56 points) | ||||||
Balance / Range (Average1) | ||||||||
$ in millions, except inputs | At June 30, 2021 | At December 31, 2020 | ||||||
Borrowings | $ | 1,975 | $ | 4,374 | ||||
Option model: | ||||||||
Equity volatility | 7% to 61% (17%) | 6% to 66% (23%) | ||||||
Equity volatility skew | -1% to 0% (0%) | -2% to 0% (0%) | ||||||
Equity correlation | 39% to 95% (81%) | 37% to 95% (78%) | ||||||
Equity - FX correlation | -32% to 10% (-23%) | -72% to 13% (-24%) | ||||||
IR FX Correlation | -28% to 7% (-5% / -5%) | -28% to 6% (-6% / -6%) | ||||||
Discounted cash flow: | ||||||||
Recovery rate | 40% to 62% (46% / 40%) | N/M | ||||||
Nonrecurring Fair Value Measurement | ||||||||
Loans | $ | 1,202 | $ | 3,134 | ||||
Corporate loan model: | ||||||||
Credit spread | 45 to 526 bps (237 bps) | 36 to 636 bps (336 bps) | ||||||
Comparable pricing: | ||||||||
Loan price | 40 to 88 points (76 points) | N/M | ||||||
Warehouse model: | ||||||||
Credit spread | 217 to 309 bps (291 bps) | 200 to 413 bps (368 bps) | ||||||
Comparable pricing: | ||||||||
Bond Price | N/A | 88 to 99 bps (94 bps) |
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 there is no significant difference between the minimum, maximum and average (weighted average or simple average / median).
|
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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|
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 35 to the consolidated financial statements in the 20162020 Form10-K. The following During the current quarter, there were no significant revisions made to the descriptions of the Firm’s significant unobservable inputs were addedinputs.
June 2021 Form 10-Q | 46 |
Notes to Consolidated Financial Statements (Unaudited) |
At June 30, 2021 | At December 31, 2020 | |||||||||||||
$ in millions | Carrying Value | Commitment | Carrying Value | Commitment | ||||||||||
Private equity | $ | 2,448 | $ | 576 | $ | 2,367 | $ | 644 | ||||||
Real estate | 1,518 | 216 | 1,403 | 136 | ||||||||||
Hedge1 | 75 | 3 | 59 | 0 | ||||||||||
Total | $ | 4,041 | $ | 795 | $ | 3,829 | $ | 780 |
Amounts in the previous table represent the Firm’s carrying value |
|
Fair Value of Investments Measured atgeneral and limited partnership interests in fund investments, as well as any related performance-based income in the form of carried interest. The carrying amounts are measured based on the NAV
of the fund taking into account the distribution terms applicable to the interest held. This same measurement applies whether the fund investments are accounted for under the equity method or fair value.
Investments in Certain Funds Measured
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 |
|
risk of reversal.
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 June 30, 2021 | ||||||||
$ in millions | Private Equity | Real Estate | ||||||
Less than 5 years | $ | 1,148 | $ | 434 | ||||
5-10 years | 1,087 | 401 | ||||||
Over 10 years | 213 | 683 | ||||||
Total | $ | 2,448 | $ | 1,518 |
At June 30, 2021 | |||||||||||
Fair Value | |||||||||||
$ in millions | Level 2 | Level 31 | Total | ||||||||
Assets | |||||||||||
Loans | $ | 3,787 | $ | 1,202 | $ | 4,989 | |||||
Other assets—Other investments | 0 | 79 | 79 | ||||||||
Total | $ | 3,787 | $ | 1,281 | $ | 5,068 | |||||
Liabilities | |||||||||||
Other liabilities and accrued expenses—Lending commitments | $ | 154 | $ | 69 | $ | 223 | |||||
Total | $ | 154 | $ | 69 | $ | 223 |
At December 31, 2020 | |||||||||||
Fair Value | |||||||||||
$ in millions | Level 2 | Level 31 | Total | ||||||||
Assets | |||||||||||
Loans | $ | 2,566 | $ | 3,134 | $ | 5,700 | |||||
Other assets—Other investments | $ | 0 | $ | 16 | $ | 16 | |||||
Other assets—ROU assets | 21 | 0 | 21 | ||||||||
Total | $ | 2,587 | $ | 3,150 | $ | 5,737 | |||||
Liabilities | |||||||||||
Other liabilities and accrued expenses—Lending commitments | $ | 193 | $ | 72 | $ | 265 | |||||
Total | $ | 193 | $ | 72 | $ | 265 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Assets | ||||||||||||||
Loans2 | $ | (38) | $ | (13) | $ | (55) | $ | (488) | ||||||
Goodwill | 0 | 0 | (8) | 0 | ||||||||||
Intangibles | (1) | 0 | (3) | 0 | ||||||||||
Other assets—Other investments3 | (2) | (52) | (53) | (52) | ||||||||||
Other assets—Premises, equipment and software4 | (2) | (3) | (4) | (6) | ||||||||||
Total | $ | (43) | $ | (68) | $ | (123) | $ | (546) | ||||||
Liabilities | ||||||||||||||
Other liabilities and accrued expenses—Lending commitments2 | $ | 5 | $ | 130 | $ | 40 | $ | (88) | ||||||
Total | $ | 5 | $ | 130 | $ | 40 | $ | (88) |
47 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
At June 30, 2021 | |||||||||||||||||
Carrying Value | Fair Value | ||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | |||||||||||||||||
Cash and cash equivalents | $ | 126,480 | $ | 126,480 | $ | 0 | $ | 0 | $ | 126,480 | |||||||
Investment securities—HTM | 82,120 | 30,623 | 51,282 | 972 | 82,877 | ||||||||||||
Securities purchased under agreements to resell | 95,920 | 0 | 94,399 | 1,526 | 95,925 | ||||||||||||
Securities borrowed | 126,703 | 0 | 126,703 | 0 | 126,703 | ||||||||||||
Customer and other receivables | 97,370 | 0 | 94,071 | 3,218 | 97,289 | ||||||||||||
Loans1 | 166,059 | 0 | 21,535 | 145,503 | 167,038 | ||||||||||||
Other assets | 504 | 0 | 504 | 0 | 504 | ||||||||||||
Financial liabilities | |||||||||||||||||
Deposits | $ | 317,686 | $ | 0 | $ | 318,107 | $ | 0 | $ | 318,107 | |||||||
Securities sold under agreements to repurchase | 56,617 | 0 | 56,666 | 0 | 56,666 | ||||||||||||
Securities loaned | 9,574 | 0 | 9,575 | 0 | 9,575 | ||||||||||||
Other secured financings | 4,658 | 0 | 4,661 | 0 | 4,661 | ||||||||||||
Customer and other payables | 233,810 | 0 | 233,810 | 0 | 233,810 | ||||||||||||
Borrowings | 148,634 | 0 | 155,115 | 5 | 155,120 | ||||||||||||
Commitment Amount | |||||||||||||||||
Lending commitments2 | $ | 137,508 | $ | 0 | $ | 680 | $ | 406 | $ | 1,086 |
At December 31, 2020 | |||||||||||||||||
Carrying Value | Fair Value | ||||||||||||||||
$ in millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | |||||||||||||||||
Cash and cash equivalents | $ | 105,654 | $ | 105,654 | $ | 0 | $ | 0 | $ | 105,654 | |||||||
Investment securities—HTM | 71,771 | 31,239 | 42,281 | 900 | 74,420 | ||||||||||||
Securities purchased under agreements to resell | 116,219 | 0 | 114,046 | 2,173 | 116,219 | ||||||||||||
Securities borrowed | 112,391 | 0 | 112,392 | 0 | 112,392 | ||||||||||||
Customer and other receivables | 92,907 | 0 | 89,832 | 3,041 | 92,873 | ||||||||||||
Loans1 | 150,597 | 0 | 16,635 | 135,277 | 151,912 | ||||||||||||
Other assets | 485 | 0 | 485 | 0 | 485 | ||||||||||||
Financial liabilities | |||||||||||||||||
Deposits | $ | 307,261 | $ | 0 | $ | 307,807 | $ | 0 | $ | 307,807 | |||||||
Securities sold under agreements to repurchase | 49,472 | 0 | 49,315 | 195 | 49,510 | ||||||||||||
Securities loaned | 7,731 | 0 | 7,731 | 0 | 7,731 | ||||||||||||
Other secured financings | 4,162 | 0 | 4,162 | 0 | 4,162 | ||||||||||||
Customer and other payables | 224,951 | 0 | 224,951 | 0 | 224,951 | ||||||||||||
Borrowings | 143,378 | 0 | 150,824 | 5 | 150,829 | ||||||||||||
Commitment Amount | |||||||||||||||||
Lending commitments2 | $ | 125,498 | $ | 0 | $ | 709 | $ | 395 | $ | 1,104 |
Earnings Impact of Instruments under the Fair Value Option
$ 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) |
Gains (losses) are mainly attributable to changes in foreign currency rates or interest rates or movements in the reference price or index for short-term and long-term borrowings before the impact of related hedges.
The amounts in the previous table are included within Net revenues and do not reflect any gains 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.
|
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) |
|
|
|
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$ in millions At
June 30,
2021At
December 31,
2020Business Unit Responsible for Risk Management Equity $ 35,924 $ 33,952 Interest rates 29,684 31,222 Commodities 6,373 5,078 Credit 1,211 1,344 Foreign exchange 2,316 2,105 Total $ 75,508 $ 73,701
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Trading revenues | $ | (2,931) | $ | (3,439) | $ | (446) | $ | 8 | ||||||
Interest expense | 84 | 81 | 157 | 164 | ||||||||||
Net revenues1 | $ | (3,015) | $ | (3,520) | $ | (603) | $ | (156) |
Three Months Ended June 30, | ||||||||||||||
2021 | 2020 | |||||||||||||
$ in millions | Trading Revenues | OCI | Trading Revenues | OCI | ||||||||||
Loans and other debt1 | $ | 95 | $ | 0 | $ | (40) | $ | 0 | ||||||
Lending commitments | 1 | 0 | (1) | 0 | ||||||||||
Deposits | 0 | 10 | 0 | (63) | ||||||||||
Borrowings | (10) | 237 | (1) | (3,237) | ||||||||||
June 2021 Form 10-Q | 48 |
Notes to Consolidated Financial Statements (Unaudited) |
Six Months Ended June 30, | ||||||||||||||
2021 | 2020 | |||||||||||||
$ in millions | Trading Revenues | OCI | Trading Revenues | OCI | ||||||||||
Loans and other debt1 | $ | 253 | $ | 0 | $ | (239) | $ | 0 | ||||||
Lending commitments | 1 | 0 | 1 | 0 | ||||||||||
Deposits | 0 | 9 | 0 | 9 | ||||||||||
Borrowings | (27) | 422 | (6) | 1,711 | ||||||||||
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Cumulative pre-tax DVA gain (loss) recognized in AOCI | $ | (2,926) | $ | (3,357) |
$ 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 |
|
1.Amounts indicate contractual principal greater than or (less than) fair value. 2.The majority of the difference between principal and fair value amounts for loans and other debt relates to distressed debt positions purchased at amounts well below par. 3.Excludes borrowings |
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 |
changes in a reference price or index.
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Nonaccrual loans | $ | 770 | $ | 1,407 | ||||
Nonaccrual loans 90 or more days past due | $ | 203 | $ | 239 |
Assets at June 30, 2021 | ||||||||||||||
$ in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||
Designated as accounting hedges | ||||||||||||||
Interest rate | $ | 654 | $ | 11 | $ | 0 | $ | 665 | ||||||
Foreign exchange | 219 | 18 | 0 | 237 | ||||||||||
Total | 873 | 29 | 0 | 902 | ||||||||||
Not designated as accounting hedges | ||||||||||||||
Economic loan hedges | ||||||||||||||
Credit | 1 | 16 | 0 | 17 | ||||||||||
Other derivatives | ||||||||||||||
Interest rate | 168,475 | 7,702 | 326 | 176,503 | ||||||||||
Credit | 5,356 | 2,936 | 0 | 8,292 | ||||||||||
Foreign exchange | 69,108 | 1,425 | 76 | 70,609 | ||||||||||
Equity | 32,308 | 0 | 38,049 | 70,357 | ||||||||||
Commodity and other | 18,601 | 0 | 6,464 | 25,065 | ||||||||||
Total | 293,849 | 12,079 | 44,915 | 350,843 | ||||||||||
Total gross derivatives | $ | 294,722 | $ | 12,108 | $ | 44,915 | $ | 351,745 | ||||||
Amounts offset | ||||||||||||||
Counterparty netting | (212,181) | (10,000) | (41,074) | (263,255) | ||||||||||
Cash collateral netting | (45,922) | (1,613) | 0 | (47,535) | ||||||||||
Total in Trading assets | $ | 36,619 | $ | 495 | $ | 3,841 | $ | 40,955 | ||||||
Amounts not offset1 | ||||||||||||||
Financial instruments collateral | (12,680) | 0 | 0 | (12,680) | ||||||||||
Net amounts | $ | 23,939 | $ | 495 | $ | 3,841 | $ | 28,275 | ||||||
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable | $ | 4,132 | ||||||||||||
Liabilities at June 30, 2021 | ||||||||||||||
$ in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||
Designated as accounting hedges | ||||||||||||||
Interest rate | $ | 0 | $ | 5 | $ | 0 | $ | 5 | ||||||
Foreign exchange | 5 | 15 | 0 | 20 | ||||||||||
Total | 5 | 20 | 0 | 25 | ||||||||||
Not designated as accounting hedges | ||||||||||||||
Economic loan hedges | ||||||||||||||
Credit | 15 | 246 | 0 | 261 | ||||||||||
Other derivatives | ||||||||||||||
Interest rate | 154,804 | 6,154 | 411 | 161,369 | ||||||||||
Credit | 5,428 | 3,504 | 0 | 8,932 | ||||||||||
Foreign exchange | 64,788 | 1,333 | 97 | 66,218 | ||||||||||
Equity | 43,053 | 0 | 39,240 | 82,293 | ||||||||||
Commodity and other | 15,510 | 0 | 6,470 | 21,980 | ||||||||||
Total | 283,598 | 11,237 | 46,218 | 341,053 | ||||||||||
Total gross derivatives | $ | 283,603 | $ | 11,257 | $ | 46,218 | $ | 341,078 | ||||||
Amounts offset | ||||||||||||||
Counterparty netting | (212,181) | (10,000) | (41,074) | (263,255) | ||||||||||
Cash collateral netting | (38,774) | (958) | 0 | (39,732) | ||||||||||
Total in Trading liabilities | $ | 32,648 | $ | 299 | $ | 5,144 | $ | 38,091 | ||||||
Amounts not offset1 | ||||||||||||||
Financial instruments collateral | (6,634) | 0 | (1,103) | (7,737) | ||||||||||
Net amounts | $ | 26,014 | $ | 299 | $ | 4,041 | $ | 30,354 | ||||||
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable | 7,394 | |||||||||||||
49 |
|
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 |
|
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|
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 |
Notes to Consolidated Financial Statements
|
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
Assets at December 31, 2020 | ||||||||||||||
$ in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||
Designated as accounting hedges | ||||||||||||||
Interest rate | $ | 946 | $ | 2 | $ | 0 | $ | 948 | ||||||
Foreign exchange | 5 | 2 | 0 | 7 | ||||||||||
Total | 951 | 4 | 0 | 955 | ||||||||||
Not designated as accounting hedges | ||||||||||||||
Economic loan hedges | ||||||||||||||
Credit1 | 2 | 51 | 0 | 53 | ||||||||||
Other derivatives | ||||||||||||||
Interest rate | 221,895 | 10,343 | 300 | 232,538 | ||||||||||
Credit1 | 5,341 | 2,147 | 0 | 7,488 | ||||||||||
Foreign exchange | 92,334 | 1,639 | 79 | 94,052 | ||||||||||
Equity | 34,278 | 0 | 34,166 | 68,444 | ||||||||||
Commodity and other | 11,095 | 0 | 3,554 | 14,649 | ||||||||||
Total | 364,945 | 14,180 | 38,099 | 417,224 | ||||||||||
Total gross derivatives | $ | 365,896 | $ | 14,184 | $ | 38,099 | $ | 418,179 | ||||||
Amounts offset | ||||||||||||||
Counterparty netting | (276,682) | (11,601) | (35,260) | (323,543) | ||||||||||
Cash collateral netting | (54,921) | (1,865) | 0 | (56,786) | ||||||||||
Total in Trading assets | $ | 34,293 | $ | 718 | $ | 2,839 | $ | 37,850 | ||||||
Amounts not offset2 | ||||||||||||||
Financial instruments collateral | (13,319) | 0 | 0 | (13,319) | ||||||||||
Other cash collateral | (391) | 0 | 0 | (391) | ||||||||||
Net amounts | $ | 20,583 | $ | 718 | $ | 2,839 | $ | 24,140 | ||||||
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable | $ | 3,743 | ||||||||||||
Liabilities at December 31, 2020 | ||||||||||||||
$ in millions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||
Designated as accounting hedges | ||||||||||||||
Interest rate | $ | 0 | $ | 19 | $ | 0 | $ | 19 | ||||||
Foreign exchange | 291 | 99 | 0 | 390 | ||||||||||
Total | 291 | 118 | 0 | 409 | ||||||||||
Not designated as accounting hedges | ||||||||||||||
Economic loan hedges | ||||||||||||||
Credit1 | 18 | 177 | 0 | 195 | ||||||||||
Other derivatives | ||||||||||||||
Interest rate | 210,015 | 7,965 | 639 | 218,619 | ||||||||||
Credit1 | 5,275 | 2,682 | 0 | 7,957 | ||||||||||
Foreign exchange | 92,975 | 1,500 | 43 | 94,518 | ||||||||||
Equity | 49,943 | 0 | 36,585 | 86,528 | ||||||||||
Commodity and other | 8,831 | 0 | 3,359 | 12,190 | ||||||||||
Total | 367,057 | 12,324 | 40,626 | 420,007 | ||||||||||
Total gross derivatives | $ | 367,348 | $ | 12,442 | $ | 40,626 | $ | 420,416 | ||||||
Amounts offset | ||||||||||||||
Counterparty netting | (276,682) | (11,601) | (35,260) | (323,543) | ||||||||||
Cash collateral netting | (51,112) | (823) | 0 | (51,935) | ||||||||||
Total in Trading liabilities | $ | 39,554 | $ | 18 | $ | 5,366 | $ | 44,938 | ||||||
Amounts not offset2 | ||||||||||||||
Financial instruments collateral | (10,598) | 0 | (1,520) | (12,118) | ||||||||||
Other cash collateral | (62) | (3) | 0 | (65) | ||||||||||
Net amounts | $ | 28,894 | $ | 15 | $ | 3,846 | $ | 32,755 | ||||||
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable | $ | 6,746 | ||||||||||||
|
4. Derivative Instruments and Hedging Activities
Derivative Fair Values
At September 30, 2017
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 |
At December 31, 2016
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 |
|
OTC—Over-the-counter
|
|
|
See Note 35 for information related to the unsettled fair value of futures contracts not designated as accounting hedges, which are excluded from the table above.
previous tables.
At September 30, 2017
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 |
At December 31, 2016
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 related Assets at June 30, 2021 $ in billions Total Designated as accounting hedges Interest rate $ 4 $ 109 $ 0 $ 113 Foreign exchange 13 2 0 15 Total 17 111 0 128 Not designated as accounting hedges Economic loan hedges Credit 0 0 0 0 Other derivatives Interest rate 4,095 7,338 576 12,009 Credit 188 107 0 295 Foreign exchange 3,494 97 12 3,603 Equity 483 0 410 893 Commodity and other 128 0 77 205 Total 8,388 7,542 1,075 17,005 Total gross derivatives $ 8,405 $ 7,653 $ 1,075 $ 17,133
Liabilities at June 30, 2021 | ||||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||
Designated as accounting hedges | ||||||||||||||
Interest rate | $ | 0 | $ | 90 | $ | 0 | $ | 90 | ||||||
Foreign exchange | 1 | 1 | 0 | 2 | ||||||||||
Total | 1 | 91 | 0 | 92 | ||||||||||
Not designated as accounting hedges | ||||||||||||||
Economic loan hedges | ||||||||||||||
Credit | 0 | 7 | 0 | 7 | ||||||||||
Other derivatives | ||||||||||||||
Interest rate | 4,084 | 7,156 | 523 | 11,763 | ||||||||||
Credit | 197 | 113 | 0 | 310 | ||||||||||
Foreign exchange | 3,425 | 90 | 23 | 3,538 | ||||||||||
Equity | 535 | 0 | 766 | 1,301 | ||||||||||
Commodity and other | 118 | 0 | 76 | 194 | ||||||||||
Total | 8,359 | 7,366 | 1,388 | 17,113 | ||||||||||
Total gross derivatives | $ | 8,360 | $ | 7,457 | $ | 1,388 | $ | 17,205 | ||||||
Assets at December 31, 2020 | ||||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||
Designated as accounting hedges | ||||||||||||||
Interest rate | $ | 6 | $ | 123 | $ | 0 | $ | 129 | ||||||
Foreign exchange | 2 | 0 | 0 | 2 | ||||||||||
Total | 8 | 123 | 0 | 131 | ||||||||||
Not designated as accounting hedges | ||||||||||||||
Economic loan hedges | ||||||||||||||
Credit1 | 0 | 1 | 0 | 1 | ||||||||||
Other derivatives | ||||||||||||||
Interest rate | 3,847 | 6,946 | 409 | 11,202 | ||||||||||
Credit1 | 140 | 87 | 0 | 227 | ||||||||||
Foreign exchange | 3,046 | 103 | 10 | 3,159 | ||||||||||
Equity | 444 | 0 | 367 | 811 | ||||||||||
Commodity and other | 107 | 0 | 68 | 175 | ||||||||||
Total | 7,584 | 7,137 | 854 | 15,575 | ||||||||||
Total gross derivatives | $ | 7,592 | $ | 7,260 | $ | 854 | $ | 15,706 | ||||||
June 2021 Form 10-Q | 50 |
Notes to Consolidated Financial Statements (Unaudited) |
Liabilities at December 31, 2020 | ||||||||||||||
$ in billions | Bilateral OTC | Cleared OTC | Exchange- Traded | Total | ||||||||||
Designated as accounting hedges | ||||||||||||||
Interest rate | $ | 0 | $ | 80 | $ | 0 | $ | 80 | ||||||
Foreign exchange | 11 | 3 | 0 | 14 | ||||||||||
Total | 11 | 83 | 0 | 94 | ||||||||||
Not designated as accounting hedges | ||||||||||||||
Economic loan hedges | ||||||||||||||
Credit1 | 1 | 5 | 0 | 6 | ||||||||||
Other derivatives | ||||||||||||||
Interest rate | 4,000 | 6,915 | 511 | 11,426 | ||||||||||
Credit1 | 142 | 93 | 0 | 235 | ||||||||||
Foreign exchange | 3,180 | 102 | 11 | 3,293 | ||||||||||
Equity | 474 | 0 | 591 | 1,065 | ||||||||||
Commodity and other | 93 | 0 | 68 | 161 | ||||||||||
Total | 7,890 | 7,115 | 1,181 | 16,186 | ||||||||||
Total gross derivatives | $ | 7,901 | $ | 7,198 | $ | 1,181 | $ | 16,280 | ||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Fair value hedges—Recognized in Interest income | ||||||||||||||
Interest rate contracts | $ | (331) | $ | (16) | $ | 500 | $ | (80) | ||||||
Investment Securities—AFS | 345 | 23 | (427) | 89 | ||||||||||
Fair value hedges—Recognized in Interest expense | ||||||||||||||
Interest rate contracts | $ | 1,238 | $ | 245 | $ | (2,870) | $ | 6,912 | ||||||
Deposits | 22 | 46 | 58 | (215) | ||||||||||
Borrowings | (1,270) | (327) | 2,751 | (6,759) | ||||||||||
Net investment hedges—Foreign exchange contracts | ||||||||||||||
Recognized in OCI | $ | (106) | $ | (96) | $ | 299 | $ | 314 | ||||||
Forward points excluded from hedge effectiveness testing—Recognized in Interest income | (14) | (8) | (13) | 25 |
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) |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Investment Securities—AFS | ||||||||
Amortized cost basis currently or previously hedged | $ | 18,009 | $ | 16,288 | ||||
Basis adjustments included in amortized cost1 | $ | (371) | $ | (39) | ||||
Deposits | ||||||||
Carrying amount currently or previously hedged | $ | 6,316 | $ | 15,059 | ||||
Basis adjustments included in carrying amount1 | $ | 35 | $ | 93 | ||||
Borrowings | ||||||||
Carrying amount currently or previously hedged | $ | 114,420 | $ | 114,349 | ||||
Basis adjustments included in carrying amount—Outstanding hedges | $ | 3,799 | $ | 6,575 | ||||
Basis adjustments included in carrying amount—Terminated hedges | $ | (757) | $ | (756) |
|
Gains (Losses) on Net InvestmentEconomic Loan Hedges
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 |
|
The previous table summarizes gains and losses included in Trading revenues in the income statements. These activities include revenues
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Recognized in Other revenues | ||||||||||||||
Credit contracts1 | $ | (44) | $ | (120) | $ | (149) | $ | 135 |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Net derivative liabilities with credit risk-related contingent features | $ | 20,227 | $ | 30,421 | ||||
Collateral posted | 14,954 | 23,842 |
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 June 30, 2021 | ||||
One-notch downgrade | $ | 227 | |||
Two-notch downgrade | 328 | ||||
Bilateral downgrade agreements included in the amounts above1 | $ | 489 |
51 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Incremental Collateral or Termination Payments upon
$ in millions | At September 30, 20171 | |||
One-notch downgrade | $ | 592 | ||
Two-notch downgrade | 512 |
|
Credit DerivativesProtection Sold
Years to Maturity at June 30, 2021 | |||||||||||||||||
$ in billions | < 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||||
Single-name CDS | |||||||||||||||||
Investment grade | $ | 9 | $ | 23 | $ | 30 | $ | 9 | $ | 71 | |||||||
Non-investment grade | 6 | 12 | 16 | 2 | 36 | ||||||||||||
Total | $ | 15 | $ | 35 | $ | 46 | $ | 11 | $ | 107 | |||||||
Index and basket CDS | |||||||||||||||||
Investment grade | $ | 2 | $ | 7 | $ | 89 | $ | 16 | $ | 114 | |||||||
Non-investment grade | 6 | 15 | 37 | 15 | 73 | ||||||||||||
Total | $ | 8 | $ | 22 | $ | 126 | $ | 31 | $ | 187 | |||||||
Total CDS sold | $ | 23 | $ | 57 | $ | 172 | $ | 42 | $ | 294 | |||||||
Other credit contracts | 1 | 0 | 0 | 0 | 1 | ||||||||||||
Total credit protection sold | $ | 24 | $ | 57 | $ | 172 | $ | 42 | $ | 295 | |||||||
CDS protection sold with identical protection purchased | $ | 248 |
Years to Maturity at December 31, 2020 | |||||||||||||||||
$ in billions | < 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||||
Single-name CDS | |||||||||||||||||
Investment grade | $ | 9 | $ | 19 | $ | 32 | $ | 9 | $ | 69 | |||||||
Non-investment grade | 7 | 10 | 17 | 2 | 36 | ||||||||||||
Total | $ | 16 | $ | 29 | $ | 49 | $ | 11 | $ | 105 | |||||||
Index and basket CDS | |||||||||||||||||
Investment grade | $ | 2 | $ | 5 | $ | 39 | $ | 14 | $ | 60 | |||||||
Non-investment grade | 6 | 9 | 29 | 14 | 58 | ||||||||||||
Total | $ | 8 | $ | 14 | $ | 68 | $ | 28 | $ | 118 | |||||||
Total CDS sold | $ | 24 | $ | 43 | $ | 117 | $ | 39 | $ | 223 | |||||||
Other credit contracts | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Total credit protection sold | $ | 24 | $ | 43 | $ | 117 | $ | 39 | $ | 223 | |||||||
CDS protection sold with identical protection purchased | $ | 196 |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Single-name CDS | ||||||||
Investment grade | $ | 1,495 | $ | 1,230 | ||||
Non-investment grade | 147 | (22) | ||||||
Total | $ | 1,642 | $ | 1,208 | ||||
Index and basket CDS | ||||||||
Investment grade | $ | 1,331 | $ | 843 | ||||
Non-investment grade | (617) | (824) | ||||||
Total | $ | 714 | $ | 19 | ||||
Total CDS sold | $ | 2,356 | $ | 1,227 | ||||
Other credit contracts | (3) | (4) | ||||||
Total credit protection sold | $ | 2,353 | $ | 1,223 |
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.
Notional | ||||||||
$ in billions | At June 30, 2021 | At December 31, 2020 | ||||||
Single name | $ | 118 | $ | 116 | ||||
Index and basket | 185 | 116 | ||||||
Tranched index and basket | 15 | 14 | ||||||
Total | $ | 318 | $ | 246 |
Fair Value Asset (Liability) | ||||||||
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Single name | $ | (1,906) | $ | (1,452) | ||||
Index and basket | (999) | (57) | ||||||
Tranched index and basket | (335) | (329) | ||||||
Total | $ | (3,240) | $ | (1,838) |
Protection Sold
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 June 30, 2021 | ||||||||||||||
$ in millions | Amortized Cost1 | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||
AFS securities | ||||||||||||||
U.S. Treasury securities | $ | 45,594 | $ | 654 | $ | 38 | $ | 46,210 | ||||||
U.S. agency securities2 | 28,855 | 422 | 136 | 29,141 | ||||||||||
Agency CMBS | 15,467 | 424 | 47 | 15,844 | ||||||||||
State and municipal securities | 230 | 31 | 5 | 256 | ||||||||||
FFELP student loan ABS3 | 1,769 | 13 | 11 | 1,771 | ||||||||||
Total AFS securities | 91,915 | 1,544 | 237 | 93,222 | ||||||||||
HTM securities | ||||||||||||||
U.S. Treasury securities | 29,429 | 1,235 | 40 | 30,624 | ||||||||||
U.S. agency securities2 | 49,247 | 306 | 760 | 48,793 | ||||||||||
Agency CMBS | 2,513 | 0 | 25 | 2,488 | ||||||||||
Non-agency CMBS | 931 | 42 | 1 | 972 | ||||||||||
Total HTM securities | 82,120 | 1,583 | 826 | 82,877 | ||||||||||
Total investment securities | $ | 174,035 | $ | 3,127 | $ | 1,063 | $ | 176,099 |
52 |
|
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) |
Notes to Consolidated Financial Statements
|
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, 2020 | ||||||||||||||
$ in millions | Amortized Cost1 | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||
AFS securities | ||||||||||||||
U.S. Treasury securities | $ | 45,345 | $ | 1,010 | $ | 0 | $ | 46,355 | ||||||
U.S. agency securities2 | 37,389 | 762 | 25 | 38,126 | ||||||||||
Agency CMBS | 19,982 | 465 | 9 | 20,438 | ||||||||||
Corporate bonds | 1,694 | 42 | 0 | 1,736 | ||||||||||
State and municipal securities | 1,461 | 103 | 1 | 1,563 | ||||||||||
FFELP student loan ABS3 | 1,735 | 7 | 26 | 1,716 | ||||||||||
Other ABS | 449 | 0 | 0 | 449 | ||||||||||
Total AFS securities | 108,055 | 2,389 | 61 | 110,383 | ||||||||||
HTM securities | ||||||||||||||
U.S. Treasury securities | 29,346 | 1,893 | 0 | 31,239 | ||||||||||
U.S. agency securities2 | 38,951 | 704 | 8 | 39,647 | ||||||||||
Agency CMBS | 2,632 | 4 | 2 | 2,634 | ||||||||||
Non-agency CMBS | 842 | 58 | 0 | 900 | ||||||||||
Total HTM securities | 71,771 | 2,659 | 10 | 74,420 | ||||||||||
Total investment securities | $ | 179,826 | $ | 5,048 | $ | 71 | $ | 184,803 |
|
2.U.S. agency securities consist mainly of agency mortgage pass-through pool securities, CMOs and agency-issued debt.
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 |
At June 30, 2021 | At December 31, 2020 | |||||||||||||
$ in millions | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||
U.S. Treasury securities | ||||||||||||||
Less than 12 months | $ | 13,017 | $ | 38 | $ | 151 | $ | 0 | ||||||
Total | 13,017 | 38 | 151 | 0 | ||||||||||
U.S. agency securities | ||||||||||||||
Less than 12 months | 9,081 | 135 | 5,808 | 22 | ||||||||||
12 months or longer | 793 | 1 | 1,168 | 3 | ||||||||||
Total | 9,874 | 136 | 6,976 | 25 | ||||||||||
Agency CMBS | ||||||||||||||
Less than 12 months | 2,983 | 47 | 2,779 | 9 | ||||||||||
12 months or longer | 28 | 0 | 46 | 0 | ||||||||||
Total | 3,011 | 47 | 2,825 | 9 | ||||||||||
Corporate bonds | ||||||||||||||
12 months or longer | 0 | 0 | 31 | 0 | ||||||||||
Total | 0 | 0 | 31 | 0 | ||||||||||
State and municipal securities | ||||||||||||||
Less than 12 months | 34 | 5 | 86 | 0 | ||||||||||
12 months or longer | 0 | 0 | 36 | 1 | ||||||||||
Total | 34 | 5 | 122 | 1 | ||||||||||
FFELP student loan ABS | ||||||||||||||
Less than 12 months | 87 | 0 | 0 | 0 | ||||||||||
12 months or longer | 802 | 11 | 1,077 | 26 | ||||||||||
Total | 889 | 11 | 1,077 | 26 | ||||||||||
Total AFS securities in an unrealized loss position | ||||||||||||||
Less than 12 months | 25,202 | 225 | 8,824 | 31 | ||||||||||
12 months or longer | 1,623 | 12 | 2,358 | 30 | ||||||||||
Total | $ | 26,825 | $ | 237 | $ | 11,182 | $ | 61 |
As discussed in Note 2 to the consolidated financial statements in the 2016 Form10-K,For AFS and HTM securities, with a current fair value less than their amortized cost are analyzed as part of the Firm’s ongoing assessment of temporarily versus other-than-temporarily impaired at the individual security level.
The Firm believes there are no securities in an unrealized loss position that are other-than-temporarily-impaired at September 30, 2017have credit losses after
For AFS debt securities,Firm expects to recover the amortized cost basis of these securities. Additionally, the Firm does not intend to sell thethese securities and is not likely to be required to sell thethese securities prior to recovery of the amortized cost basis. For AFSAs of June 30, 2021 and HTM debt securities,December 31, 2020, the securities have not experienced credit losses as the net unrealized losses reported in the previous table 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 considered and the Firm does not expect to experience a credit loss (as discussed in Note 2 to the consolidated financial statements in the 2016 Form 10-K). The risk of credit loss on securities in an unrealized loss position is considered minimal becauseare predominantly investment grade.
For AFS equity securities, the Firm has the intent and ability to hold these securities2020 Form 10-K for a perioddescription of time sufficient to allowthe ACL methodology used for any anticipated recovery in market value.
HTM Securities. As of June 30, 2021, and December 31, 2020, Non-Agency CMBS HTM securities were predominantly on accrual status and investment grade.
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 June 30, 2021 | |||||||||||
$ in millions | Amortized Cost1 | Fair Value | Annualized Average Yield | ||||||||
AFS securities | |||||||||||
U.S. Treasury securities: | |||||||||||
Due within 1 year | $ | 10,079 | $ | 10,161 | 1.4 | % | |||||
After 1 year through 5 years | 26,632 | 27,138 | 1.3 | % | |||||||
After 5 years through 10 years | 8,883 | 8,911 | 1.2 | % | |||||||
Total | 45,594 | 46,210 | |||||||||
U.S. agency securities: | |||||||||||
Due within 1 year | 1 | 1 | 1.5 | % | |||||||
After 1 year through 5 years | 147 | 149 | 1.3 | % | |||||||
After 5 years through 10 years | 1,466 | 1,504 | 1.8 | % | |||||||
After 10 years | 27,241 | 27,487 | 1.6 | % | |||||||
Total | 28,855 | 29,141 | |||||||||
Agency CMBS: | |||||||||||
Due within 1 year | 240 | 242 | 1.8 | % | |||||||
After 1 year through 5 years | 1,503 | 1,534 | 1.6 | % | |||||||
After 5 years through 10 years | 10,665 | 11,030 | 1.6 | % | |||||||
After 10 years | 3,059 | 3,038 | 1.5 | % | |||||||
Total | 15,467 | 15,844 | |||||||||
State and municipal securities: | |||||||||||
Due within 1 year | 4 | 4 | 1.9 | % | |||||||
After 1 year through 5 years | 22 | 22 | 1.8 | % | |||||||
After 5 years through 10 years | 30 | 39 | 2.3 | % | |||||||
After 10 Years | 174 | 191 | 3.9 | % | |||||||
Total | 230 | 256 | |||||||||
FFELP student loan ABS: | |||||||||||
Due within 1 year | 32 | 31 | 0.8 | % | |||||||
After 1 year through 5 years | 188 | 184 | 0.9 | % | |||||||
After 5 years through 10 years | 152 | 148 | 0.7 | % | |||||||
After 10 years | 1,397 | 1,408 | 1.1 | % | |||||||
Total | 1,769 | 1,771 | |||||||||
Total AFS securities | 91,915 | 93,222 | 1.4 | % | |||||||
53 |
Notes to Consolidated Financial Statements
|
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 | % |
At June 30, 2021 | |||||||||||
$ in millions | Amortized Cost1 | Fair Value | Annualized Average Yield | ||||||||
HTM securities | |||||||||||
U.S. Treasury securities: | |||||||||||
Due within 1 year | 3,673 | 3,711 | 1.9 | % | |||||||
After 1 year through 5 years | 19,256 | 19,880 | 1.7 | % | |||||||
After 5 years through 10 years | 5,418 | 5,855 | 2.4 | % | |||||||
After 10 years | 1,082 | 1,178 | 2.5 | % | |||||||
Total | 29,429 | 30,624 | |||||||||
U.S. agency securities: | |||||||||||
After 5 years through 10 years | 546 | 562 | 2.0 | % | |||||||
After 10 years | 48,701 | 48,231 | 1.6 | % | |||||||
Total | 49,247 | 48,793 | |||||||||
Agency CMBS: | |||||||||||
Due within 1 year | 21 | 21 | 2.4 | % | |||||||
After 1 year through 5 years | 1,358 | 1,349 | 1.3 | % | |||||||
After 5 years through 10 years | 971 | 958 | 1.4 | % | |||||||
After 10 years | 163 | 160 | 1.5 | % | |||||||
Total | 2,513 | 2,488 | |||||||||
Non-agency CMBS: | |||||||||||
Due within 1 year | 151 | 151 | 4.5 | % | |||||||
After 1 year through 5 years | 65 | 67 | 2.7 | % | |||||||
After 5 years through 10 years | 662 | 698 | 3.7 | % | |||||||
After 10 years | 53 | 56 | 3.8 | % | |||||||
Total | 931 | 972 | |||||||||
Total HTM securities | 82,120 | 82,877 | 1.7 | % | |||||||
Total investment securities | $ | 174,035 | $ | 176,099 | 1.6 | % |
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
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Gross realized gains | $ | 74 | $ | 16 | $ | 219 | $ | 65 | ||||||
Gross realized (losses) | (16) | (6) | (27) | (14) | ||||||||||
Total1 | $ | 58 | $ | 10 | $ | 192 | $ | 51 |
The
At June 30, 2021 | |||||||||||||||||
$ in millions | Gross Amounts | Amounts Offset | Balance Sheet Net Amounts | Amounts Not Offset1 | Net Amounts | ||||||||||||
Assets | |||||||||||||||||
Securities purchased under agreements to resell | $ | 198,942 | $ | (103,012) | $ | 95,930 | $ | (93,720) | $ | 2,210 | |||||||
Securities borrowed | 137,720 | (11,017) | 126,703 | (121,432) | 5,271 | ||||||||||||
Liabilities | |||||||||||||||||
Securities sold under agreements to repurchase | $ | 160,657 | $ | (103,012) | $ | 57,645 | $ | (48,791) | $ | 8,854 | |||||||
Securities loaned | 20,591 | (11,017) | 9,574 | (9,275) | 299 | ||||||||||||
Net amounts for which master netting agreements are not in place or may not be legally enforceable | |||||||||||||||||
Securities purchased under agreements to resell | $ | 1,824 | |||||||||||||||
Securities borrowed | 1,120 | ||||||||||||||||
Securities sold under agreements to repurchase | 8,099 | ||||||||||||||||
Securities loaned | 164 |
At December 31, 2020 | |||||||||||||||||
$ in millions | Gross Amounts | Amounts Offset | Balance Sheet Net Amounts | Amounts Not Offset1 | Net Amounts | ||||||||||||
Assets | |||||||||||||||||
Securities purchased under agreements to resell | $ | 264,140 | $ | (147,906) | $ | 116,234 | $ | (114,108) | $ | 2,126 | |||||||
Securities borrowed | 124,921 | (12,530) | 112,391 | (107,434) | 4,957 | ||||||||||||
Liabilities | |||||||||||||||||
Securities sold under agreements to repurchase | $ | 198,493 | $ | (147,906) | $ | 50,587 | $ | (43,960) | $ | 6,627 | |||||||
Securities loaned | 20,261 | (12,530) | 7,731 | (7,430) | 301 | ||||||||||||
Net amounts for which master netting agreements are not in place or may not be legally enforceable | |||||||||||||||||
Securities purchased under agreements to resell | $ | 1,870 | |||||||||||||||
Securities borrowed | 596 | ||||||||||||||||
Securities sold under agreements to repurchase | 6,282 | ||||||||||||||||
Securities loaned | 128 |
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 |
|
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 |
|
|
For information related to offsetting of derivatives, see Note 4.
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 | At June 30, 2021 | ||||||||||||||||||||||||||||||||||||
$ in millions | Overnight and Open | Less than 30 Days | 30-90 Days | Over 90 Days | Total | $ 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 sold under agreements to repurchase | $ | 53,852 | $ | 52,208 | $ | 14,459 | $ | 40,138 | $ | 160,657 | ||||||||||||||||
Securities loaned | 9,487 | 851 | 2,863 | 7,341 | 20,542 | Securities loaned | 13,432 | 250 | 150 | 6,759 | 20,591 | ||||||||||||||||||||||||||
Total included in the | $ | 51,036 | $ | 37,554 | $ | 27,511 | $ | 40,002 | $ | 156,103 | Total included in the offsetting disclosure | $ | 67,284 | $ | 52,458 | $ | 14,609 | $ | 46,897 | $ | 181,248 | ||||||||||||||||
Trading liabilities— | 20,262 | — | — | — | 20,262 | Trading liabilities— Obligation to return securities received as collateral | 22,331 | 0 | 0 | — | 22,331 | ||||||||||||||||||||||||||
Total | $ | 71,298 | $ | 37,554 | $ | 27,511 | $ | 40,002 | $ | 176,365 | Total | $ | 89,615 | $ | 52,458 | $ | 14,609 | $ | 46,897 | $ | 203,579 |
June 2021 Form 10-Q | 54 |
Notes to Consolidated Financial Statements (Unaudited) |
At December 31, 2020 | |||||||||||||||||
$ in millions | Overnight and Open | Less than 30 Days | 30-90 Days | Over 90 Days | Total | ||||||||||||
Securities sold under agreements to repurchase | $ | 84,349 | $ | 60,853 | $ | 26,221 | $ | 27,070 | $ | 198,493 | |||||||
Securities loaned | 15,267 | 247 | 0 | 4,747 | 20,261 | ||||||||||||
Total included in the offsetting disclosure | $ | 99,616 | $ | 61,100 | $ | 26,221 | $ | 31,817 | $ | 218,754 | |||||||
Trading liabilities— Obligation to return securities received as collateral | 16,389 | 0 | 0 | 0 | 16,389 | ||||||||||||
Total | $ | 116,005 | $ | 61,100 | $ | 26,221 | $ | 31,817 | $ | 235,143 |
$ 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 June 30, 2021 | At December 31, 2020 | ||||||
Securities sold under agreements to repurchase | ||||||||
U.S. Treasury and agency securities | $ | 39,247 | $ | 94,662 | ||||
Other sovereign government obligations | 85,282 | 71,140 | ||||||
Corporate equities | 26,775 | 24,692 | ||||||
Other | 9,353 | 7,999 | ||||||
Total | $ | 160,657 | $ | 198,493 | ||||
Securities loaned | ||||||||
Other sovereign government obligations | $ | 1,414 | $ | 3,430 | ||||
Corporate equities | 19,079 | 16,536 | ||||||
Other | 98 | 295 | ||||||
Total | $ | 20,591 | $ | 20,261 | ||||
Total included in the offsetting disclosure | $ | 181,248 | $ | 218,754 | ||||
Trading liabilities—Obligation to return securities received as collateral | ||||||||
Corporate equities | $ | 22,312 | $ | 16,365 | ||||
Other | 19 | 24 | ||||||
Total | $ | 22,331 | $ | 16,389 | ||||
Total | $ | 203,579 | $ | 235,143 |
without Counterparty Right to Sell or Repledge
$ in millions | At June 30, 2021 | At December 31, 2020 | |||||||||
Trading assets | $ | 35,894 | $ | 30,954 | |||||||
|
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 June 30, 2021 | At December 31, 2020 | ||||||
Collateral received with right to sell or repledge | $ | 708,327 | $ | 724,818 | ||||
Collateral that was sold or repledged1 | 540,654 | 523,648 |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Segregated securities1 | $ | 23,912 | $ | 34,106 |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Margin and other lending | $ | 72,942 | $ | 74,714 |
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 |
Customer Margin Lending and Other
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Net customer receivables representing margin loans | $ | 28,609 | $ | 24,359 |
The Firm engages inprovides margin lending to clientsarrangements that allows the clientallow customers to borrow against the value of qualifying securities. Margin loansReceivables from these arrangements are included within Customer and other receivables in the balance sheets. Under these agreements and transactions,arrangements, the Firm receives collateral, includingwhich includes U.S. government and agency securities, other sovereign government obligations, corporate and other debt, and corporate equities. Customer receivables generated from margin lending activitiesMargin loans are collateralized by customer-owned securities held by the Firm. The Firm monitors required margin levels and established credit terms daily and, pursuant to such guidelines,
requires customers to deposit additional collateral, or reduce positions, when necessary.
55 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
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 |
|
The by Type
At June 30, 2021 | |||||||||||
$ in millions | Loans Held for Investment | Loans Held for Sale | Total Loans | ||||||||
Corporate | $ | 4,724 | $ | 7,098 | $ | 11,822 | |||||
Secured lending facilities | 28,217 | 3,951 | 32,168 | ||||||||
Commercial real estate | 6,707 | 583 | 7,290 | ||||||||
Residential real estate | 38,917 | 47 | 38,964 | ||||||||
Securities-based lending and Other loans | 76,468 | 34 | 76,502 | ||||||||
Total loans | 155,033 | 11,713 | 166,746 | ||||||||
ACL | (687) | (687) | |||||||||
Total loans, net | $ | 154,346 | $ | 11,713 | $ | 166,059 | |||||
Fixed rate loans, net | $ | 38,968 | |||||||||
Floating or adjustable rate loans, net | 127,091 | ||||||||||
Loans to non-U.S. borrowers, net | 21,567 |
At December 31, 2020 | |||||||||||
$ in millions | Loans Held for Investment | Loans Held for Sale | Total Loans | ||||||||
Corporate | $ | 6,046 | $ | 8,580 | $ | 14,626 | |||||
Secured lending facilities | 25,727 | 3,296 | 29,023 | ||||||||
Commercial real estate | 7,346 | 822 | 8,168 | ||||||||
Residential real estate | 35,268 | 48 | 35,316 | ||||||||
Securities-based lending and Other loans | 64,232 | 67 | 64,299 | ||||||||
Total loans | 138,619 | 12,813 | 151,432 | ||||||||
ACL | (835) | (835) | |||||||||
Total loans, net | $ | 137,784 | $ | 12,813 | $ | 150,597 | |||||
Fixed rate loans, net | $ | 32,796 | |||||||||
Floating or adjustable rate loans, net | 117,801 | ||||||||||
Loans to non-U.S. borrowers, net | 21,081 |
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 |
|
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 |
Loans by Interest Rate Type
$ 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 See Note 14 for details of current commitments 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 lend in the 2016Form 10-K.
future.
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 |
At June 30, 2021 | At December 31, 2020 | |||||||||||||||||||
Corporate | ||||||||||||||||||||
$ in millions | IG | NIG | Total | IG | NIG | Total | ||||||||||||||
Revolving | $ | 1,404 | $ | 2,353 | $ | 3,757 | $ | 1,138 | $ | 3,231 | $ | 4,369 | ||||||||
2021 | 0 | 71 | 71 | |||||||||||||||||
2020 | 183 | 25 | 208 | 585 | 80 | 665 | ||||||||||||||
2019 | 11 | 187 | 198 | 204 | 202 | 406 | ||||||||||||||
2018 | 195 | 0 | 195 | 195 | 0 | 195 | ||||||||||||||
2017 | 0 | 62 | 62 | 0 | 64 | 64 | ||||||||||||||
Prior | 233 | 0 | 233 | 247 | 100 | 347 | ||||||||||||||
Total | $ | 2,026 | $ | 2,698 | $ | 4,724 | $ | 2,369 | $ | 3,677 | $ | 6,046 |
At June 30, 2021 | At December 31, 2020 | |||||||||||||||||||
Secured lending facilities | ||||||||||||||||||||
$ in millions | IG | NIG | Total | IG | NIG | Total | ||||||||||||||
Revolving | $ | 6,932 | $ | 15,899 | $ | 22,831 | $ | 4,711 | $ | 14,510 | $ | 19,221 | ||||||||
2021 | 460 | 308 | 768 | |||||||||||||||||
2020 | 84 | 214 | 298 | 162 | 253 | 415 | ||||||||||||||
2019 | 179 | 1,644 | 1,823 | 260 | 1,904 | 2,164 | ||||||||||||||
2018 | 328 | 824 | 1,152 | 614 | 1,432 | 2,046 | ||||||||||||||
2017 | 144 | 359 | 503 | 245 | 581 | 826 | ||||||||||||||
Prior | 0 | 842 | 842 | 0 | 1,055 | 1,055 | ||||||||||||||
Total | $ | 8,127 | $ | 20,090 | $ | 28,217 | $ | 5,992 | $ | 19,735 | $ | 25,727 |
At June 30, 2021 | At December 31, 2020 | |||||||||||||||||||
Commercial real estate | ||||||||||||||||||||
$ in millions | IG | NIG | Total | IG | NIG | Total | ||||||||||||||
2021 | $ | 82 | $ | 363 | $ | 445 | ||||||||||||||
2020 | 165 | 820 | 985 | $ | 95 | $ | 943 | $ | 1,038 | |||||||||||
2019 | 1,031 | 1,585 | 2,616 | 1,074 | 1,848 | 2,922 | ||||||||||||||
2018 | 433 | 537 | 970 | 746 | 774 | 1,520 | ||||||||||||||
2017 | 367 | 341 | 708 | 412 | 387 | 799 | ||||||||||||||
Prior | 100 | 883 | 983 | 100 | 967 | 1,067 | ||||||||||||||
Total | $ | 2,178 | $ | 4,529 | $ | 6,707 | $ | 2,427 | $ | 4,919 | $ | 7,346 |
At June 30, 2021 | ||||||||||||||||||||||||||
Residential real estate | ||||||||||||||||||||||||||
by FICO Scores | by LTV Ratio | Total | ||||||||||||||||||||||||
$ in millions | ≥ 740 | 680-739 | ≤ 679 | ≤ 80% | > 80% | |||||||||||||||||||||
Revolving | $ | 69 | $ | 30 | $ | 5 | $ | 104 | $ | 0 | $ | 104 | ||||||||||||||
2021 | 5,506 | 1,131 | 101 | 6,312 | 426 | 6,738 | ||||||||||||||||||||
2020 | 8,530 | 1,761 | 136 | 9,874 | 553 | 10,427 | ||||||||||||||||||||
2019 | 5,176 | 1,168 | 155 | 6,096 | 403 | 6,499 | ||||||||||||||||||||
2018 | 2,108 | 547 | 70 | 2,505 | 220 | 2,725 | ||||||||||||||||||||
2017 | 2,422 | 621 | 78 | 2,900 | 221 | 3,121 | ||||||||||||||||||||
Prior | 6,745 | 2,201 | 357 | 8,461 | 842 | 9,303 | ||||||||||||||||||||
Total | $ | 30,556 | $ | 7,459 | $ | 902 | $ | 36,252 | $ | 2,665 | $ | 38,917 |
At December 31, 2020 | ||||||||||||||||||||||||||
Residential real estate | ||||||||||||||||||||||||||
by FICO Scores | by LTV Ratio | Total | ||||||||||||||||||||||||
$ in millions | ≥ 740 | 680-739 | ≤ 679 | ≤ 80% | > 80% | |||||||||||||||||||||
Revolving | $ | 85 | $ | 32 | $ | 5 | $ | 122 | $ | 0 | $ | 122 | ||||||||||||||
2020 | 8,948 | 1,824 | 149 | 10,338 | 583 | 10,921 | ||||||||||||||||||||
2019 | 5,592 | 1,265 | 168 | 6,584 | 441 | 7,025 | ||||||||||||||||||||
2018 | 2,320 | 604 | 75 | 2,756 | 243 | 2,999 | ||||||||||||||||||||
2017 | 2,721 | 690 | 89 | 3,251 | 249 | 3,500 | ||||||||||||||||||||
2016 | 3,324 | 884 | 118 | 4,035 | 291 | 4,326 | ||||||||||||||||||||
Prior | 4,465 | 1,626 | 284 | 5,684 | 691 | 6,375 | ||||||||||||||||||||
Total | $ | 27,455 | $ | 6,925 | $ | 888 | $ | 32,770 | $ | 2,498 | $ | 35,268 |
At June 30, 2021 | ||||||||||||||
Securities-based lending1 | Other2 | |||||||||||||
$ in millions | Investment Grade | Non-Investment Grade | Total | |||||||||||
Revolving | $ | 63,243 | $ | 5,383 | $ | 715 | $ | 69,341 | ||||||
2021 | 31 | 232 | 49 | 312 | ||||||||||
2020 | 0 | 817 | 586 | 1,403 | ||||||||||
2019 | 18 | 1,121 | 637 | 1,776 | ||||||||||
2018 | 232 | 378 | 421 | 1,031 | ||||||||||
2017 | 0 | 645 | 147 | 792 | ||||||||||
Prior | 16 | 1,496 | 301 | 1,813 | ||||||||||
Total | $ | 63,540 | $ | 10,072 | $ | 2,856 | $ | 76,468 |
| ||||||||
June 2021 Form 10-Q | 56 |
| |||||
Notes to (Unaudited) |
Impaired
December 31, 2020 | ||||||||||||||
Securities-based lending1 | Other2 | |||||||||||||
$ in millions | Investment Grade | Non-Investment Grade | Total | |||||||||||
Revolving | $ | 51,667 | $ | 4,816 | $ | 555 | $ | 57,038 | ||||||
2020 | 0 | 1,073 | 590 | 1,663 | ||||||||||
2019 | 18 | 1,156 | 623 | 1,797 | ||||||||||
2018 | 232 | 407 | 403 | 1,042 | ||||||||||
2017 | 0 | 654 | 122 | 776 | ||||||||||
2016 | 0 | 566 | 111 | 677 | ||||||||||
Prior | 16 | 1,066 | 157 | 1,239 | ||||||||||
Total | $ | 51,933 | $ | 9,738 | $ | 2,561 | $ | 64,232 |
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
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Residential real estate | 194 | 332 | ||||||
Securities-based lending and Other loans | 0 | 31 | ||||||
Total | $ | 194 | $ | 363 |
| |||||||||||
1.The majority of the amounts are past due for a period of less than 90 days as of June 30, 2021 and December 31, 2020.
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Corporate | $ | 98 | $ | 164 | ||||
Secured lending facilities | 298 | 0 | ||||||
Commercial real estate | 71 | 152 | ||||||
Residential real estate | 123 | 97 | ||||||
Securities-based lending and Other loans | 163 | 178 | ||||||
Total1 | $ | 753 | $ | 591 | ||||
Nonaccrual loans without an ACL | $ | 124 | $ | 90 |
$ 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 June 30, 2021 | At December 31, 2020 | ||||||
Loans, before ACL | $ | 62 | $ | 167 | ||||
Lending commitments | 0 | 27 | ||||||
ACL on Loans and Lending commitments | 10 | 36 |
See Note 2 to the financial statements in the 2020 Form 10-K for further information on TDR guidance issued by Congress in the CARES Act as well as by the U.S. banking agencies.
$ 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, 2020 | $ | 309 | $ | 198 | $ | 211 | $ | 59 | $ | 58 | $ | 835 | ||||||||
Gross charge-offs | (14) | (67) | (21) | 0 | 0 | (102) | ||||||||||||||
Provision for credit losses1 | (95) | 48 | 5 | (2) | 2 | (42) | ||||||||||||||
Other | (1) | (2) | (1) | 0 | 0 | (4) | ||||||||||||||
June 30, 2021 | $ | 199 | $ | 177 | $ | 194 | $ | 57 | $ | 60 | $ | 687 |
$ 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 | 0 | 0 | 0 | (33) | ||||||||||||||
Recoveries | 0 | 0 | 0 | 0 | 2 | 2 | ||||||||||||||
Net recoveries (charge-offs) | (33) | 0 | 0 | 0 | 2 | (31) | ||||||||||||||
Provision for credit losses1 | 298 | 63 | 155 | 13 | 9 | 538 | ||||||||||||||
Other | 1 | 0 | (38) | 0 | 38 | 1 | ||||||||||||||
June 30, 2020 | $ | 379 | $ | 122 | $ | 226 | $ | 59 | $ | 80 | $ | 866 |
$ in millions | Corporate | Secured lending facilities | CRE | Residential real estate | SBL and Other | Total | ||||||||||||||
December 31, 2020 | $ | 323 | $ | 38 | $ | 11 | $ | 1 | $ | 23 | $ | 396 | ||||||||
Provision for credit losses1 | 18 | 1 | 0 | 0 | (2) | 17 | ||||||||||||||
Other | (1) | 1 | (1) | 0 | 0 | (1) | ||||||||||||||
June 30, 2021 | $ | 340 | $ | 40 | $ | 10 | $ | 1 | $ | 21 | $ | 412 |
$ 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 for credit losses1 | 73 | 26 | 7 | (1) | 3 | 108 | ||||||||||||||
Other | (2) | 0 | (4) | 0 | 4 | (2) | ||||||||||||||
June 30, 2020 | $ | 231 | $ | 42 | $ | 11 | $ | 1 | $ | 12 | $ | 297 |
Three Months Ended June 30, | ||||||||
$ in millions | 2021 | 2020 | ||||||
Loans | $ | 16 | $ | 246 | ||||
Lending commitments | 57 | (7) |
| ||||||||
57 | June 2021 Form 10-Q |
| |||||
Notes to (Unaudited) |
Allowance
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Currently employed by the Firm1 | $ | 3,329 | $ | 3,100 | ||||
No longer employed by the Firm2 | 133 | $ | 140 | |||||
Employee loans | $ | 3,462 | $ | 3,240 | ||||
ACL | (163) | (165) | ||||||
Employee loans, net of ACL | $ | 3,299 | $ | 3,075 | ||||
Remaining repayment term, weighted average in years | 5.6 | 5.3 |
$ 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 |
|
Employee Loans
$ 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 |
a period of 90 days or more as of June 30, 2021 and December 31, 2020.
|
Overview
The Firm’s investments accounted for underexpense in the equity method of accounting (seeincome statements. See Note 12 to the consolidated financial statements in the 20162020 Form10-K) 10-K for a description of the CECL allowance methodology, including credit quality indicators, for employee loans.
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Investments | $ | 2,266 | $ | 2,410 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Income (loss) | $ | 51 | $ | (63) | $ | 27 | $ | (34) |
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
Included in the equity method investments is the Firm’s 40% voting interest (“40% interest”) in
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Income (loss) from investment in MUMSS | $ | 52 | $ | (1) | $ | 84 | $ | 31 |
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.
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 June 30, 2021 | At December 31, 2020 | ||||||
Savings and demand deposits | $ | 299,681 | $ | 279,221 | ||||
Time deposits | 20,677 | 31,561 | ||||||
Total | $ | 320,358 | $ | 310,782 | ||||
Deposits subject to FDIC insurance | $ | 237,803 | $ | 234,211 | ||||
Time deposits that equal or exceed the FDIC insurance limit | $ | 6 | $ | 16 |
$ 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 June 30, 2021 | ||||
2021 | $ | 6,804 | |||
2022 | 5,523 | ||||
2023 | 4,117 | ||||
2024 | 2,821 | ||||
2025 | 776 | ||||
Thereafter | 636 | ||||
Total | $ | 20,677 |
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 June 30, 2021 | At December 31, 2020 | ||||||
Original maturities of one year or less | $ | 5,538 | $ | 3,691 | ||||
Original maturities greater than one year | ||||||||
Senior | $ | 207,781 | $ | 202,305 | ||||
Subordinated | 10,823 | 11,083 | ||||||
Total | $ | 218,604 | $ | 213,388 | ||||
Total borrowings | $ | 224,142 | $ | 217,079 | ||||
Weighted average stated maturity, in years1 | 7.6 | 7.3 |
June 2021 Form 10-Q | 58 |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Original maturities: | ||||||||
One year or less | $ | 6,767 | $ | 10,453 | ||||
Greater than one year | 4,465 | 5,410 | ||||||
Total | $ | 11,232 | $ | 15,863 | ||||
Transfers of assets accounted for as secured financings | $ | 1,253 | $ | 1,529 |
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 |
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The Firm’s commitments are summarized in the following table by years to maturity.
Years to Maturity at June 30, 2021 | |||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | ||||||||||||
Lending: | |||||||||||||||||
Corporate | $ | 16,396 | $ | 38,716 | $ | 44,932 | $ | 7,479 | $ | 107,523 | |||||||
Secured lending facilities | 6,007 | 6,669 | 2,086 | 643 | 15,405 | ||||||||||||
Commercial and Residential real estate | 428 | 233 | 19 | 248 | 928 | ||||||||||||
Securities-based lending and Other | 11,103 | 3,724 | 308 | 266 | 15,401 | ||||||||||||
Forward-starting secured financing receivables | 69,886 | 0 | 0 | 0 | 69,886 | ||||||||||||
Central counterparty | 300 | 0 | 0 | 6,237 | 6,537 | ||||||||||||
Underwriting | 0 | 60 | 0 | 0 | 60 | ||||||||||||
Investment activities | 1,019 | 253 | 56 | 356 | 1,684 | ||||||||||||
Letters of credit and other financial guarantees | 26 | 0 | 0 | 3 | 29 | ||||||||||||
Total | $ | 105,165 | $ | 49,655 | $ | 47,401 | $ | 15,232 | $ | 217,453 | |||||||
Lending commitments participated to third parties | $ | 9,223 | |||||||||||||||
Forward-starting secured financing receivables settled within three business days | $ | 64,159 |
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 |
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Guarantees
Obligations under Guarantee Arrangements at September 30, 2017
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 | — |
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| |||||
At June 30, 2021 | |||||||||||||||||||||||
Maximum Potential Payout/Notional of Obligations by Years to Maturity | Carrying Amount Asset (Liability) | ||||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | |||||||||||||||||||
Non-credit derivatives1 | $ | 1,352,865 | $ | 1,029,619 | $ | 445,441 | $ | 955,300 | $ | (46,932) | |||||||||||||
Standby letters of credit and other financial guarantees issued2 | 1,537 | 1,250 | 517 | 3,735 | 89 | ||||||||||||||||||
Market value guarantees | 79 | 22 | 0 | 0 | 0 | ||||||||||||||||||
Liquidity facilities | 4,073 | 0 | 0 | 0 | 5 | ||||||||||||||||||
Whole loan sales guarantees | 0 | 0 | 58 | 23,123 | 0 | ||||||||||||||||||
Securitization representations and warranties3 | 0 | 0 | 0 | 69,210 | (42) | ||||||||||||||||||
General partner guarantees | 315 | 12 | 20 | 125 | (68) | ||||||||||||||||||
Client clearing guarantees | 52 | 0 | 0 | 0 | 0 |
In certain situations, collateral may be held by the Firm for those contracts that meet the definition of a guarantee. Generally, the Firm sets collateral requirements by counterparty so that the collateral covers various transactions and products and is not allocated specifically to individual contracts. Also, the Firm may recover amounts related to the underlying asset delivered to the Firm under the derivative contract.
59 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Contingencies
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
estimable.
For certain legal proceedings and investigations, the Firm cannot reasonably estimate such losses,loss, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or governmentalgovernment entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the
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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.
investigation, including through potentially lengthy discovery and
On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Firm, styledChina Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New York, New York County (“Supreme Court of NY”). The complaint relates to a $275 million credit default swap referencing the super senior portion of the STACK2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Firm misrepresented the risks of the STACK2006-1 CDO to CDIB, and that the Firm knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB’s obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied the Firm’s motion to dismiss the complaint. Based on currently available information, the Firm believes it could incur a loss in this action of up to approximately $240 million pluspre- and post-judgment interest, fees and costs.
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,the State of New York County (“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.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
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and material omissions to induce FGIC to issue a financial guaranty policy on certain classes of certificates that had an original balance of approximately $876 million. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential and punitive damages, attorneys’ fees, interest and interest.costs. On January 23, 2017, the court denied the Firm’s motion to dismiss the complaint. On February 24, 2017,September 13, 2018, the Firm filed a noticeAppellate Division, First Department (“First Department”) affirmed in part and reversed in part the lower court’s order denying the Firm’s motion to dismiss the complaint. On December 20, 2018, the First Department denied plaintiff’s motion for leave to appeal to the New York Court of appealAppeals (“Court of Appeals”) 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 made and will make in the future. In addition, plaintiff is seeking to expand the number of loans at issue and the possible range of loss could increase.
June 2021 Form 10-Q | 60 |
Notes to Consolidated Financial Statements (Unaudited) |
Tax
12.the civil claims asserted by the Dutch Tax Authority in matters re-styled
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 |
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At June 30, 2021 | At December 31, 2020 | |||||||||||||
$ in millions | VIE Assets | VIE Liabilities | VIE Assets | VIE Liabilities | ||||||||||
CLO | $ | 800 | $ | 705 | $ | 418 | $ | 350 | ||||||
MABS2 | 388 | 47 | 590 | 17 | ||||||||||
Other3 | 1,497 | 378 | 1,110 | 47 | ||||||||||
Total | $ | 2,685 | $ | 1,130 | $ | 2,118 | $ | 414 |
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3.Other primarily includes operating entities and investment funds.
$ 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 June 30, 2021 | At December 31, 2020 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 318 | $ | 269 | ||||
Trading assets at fair value | 1,781 | 1,445 | ||||||
Securities purchased under agreements to resell | 200 | 0 | ||||||
Customer and other receivables | 25 | 23 | ||||||
Intangible assets | 92 | 98 | ||||||
Other assets | 269 | 283 | ||||||
Total | $ | 2,685 | $ | 2,118 | ||||
Liabilities | ||||||||
Other secured financings | $ | 949 | $ | 366 | ||||
Other liabilities and accrued expenses | 181 | 48 | ||||||
Total | $ | 1,130 | $ | 414 | ||||
Noncontrolling interests | $ | 143 | $ | 196 |
61 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Select Information Related to Consolidated
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Noncontrolling interests | $ | 197 | $ | 228 | ||||
Maximum exposure to losses1 | — | 78 |
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Non-consolidated VIEs
The following tables include all VIEs in which the Firm has determined that its maximum exposure to loss is greater than specific thresholds or meets certain other criteria and exclude exposure to loss from liabilities due to immateriality. Most of the VIEs included in the following tables are sponsored by unrelated parties; the Firm’s involvement generally is the result of its secondary market-making activities, securities held in its Investment securities portfolio (see Note 5) and certain investments in funds.
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 | At June 30, 2021 | ||||||||||||||||||||||||||||||||||||
$ in millions | MABS | CDO | MTOB | OSF | Other | $ in millions | MABS1 | CDO | MTOB | OSF | Other2 | ||||||||||||||||||||||||||
VIE assets (unpaid principal balance) | $ | 101,916 | $ | 11,341 | $ | 4,857 | $ | 4,293 | $ | 39,077 | |||||||||||||||||||||||||||
Maximum exposure to loss |
| ||||||||||||||||||||||||||||||||||||
VIE assets (UPB) | VIE assets (UPB) | $ | 155,510 | $ | 1,918 | $ | 6,424 | $ | 2,001 | $ | 50,129 | ||||||||||||||||||||||||||
Maximum exposure to loss3 | Maximum exposure to loss3 | ||||||||||||||||||||||||||||||||||||
Debt and equity interests | $ | 11,243 | $ | 1,245 | $ | 50 | $ | 1,570 | $ | 4,877 | Debt and equity interests | $ | 20,473 | $ | 166 | $ | 4 | $ | 1,245 | $ | 10,741 | ||||||||||||||||
Derivative and other contracts | — | — | 2,812 | — | 45 | Derivative and other contracts | 0 | 0 | 4,073 | 0 | 5,997 | ||||||||||||||||||||||||||
Commitments, guarantees and other | 684 | 99 | — | 187 | 228 | Commitments, guarantees and other | 1,390 | 0 | 0 | 0 | 1,443 | ||||||||||||||||||||||||||
Total | $ | 11,927 | $ | 1,344 | $ | 2,862 | $ | 1,757 | $ | 5,150 | Total | $ | 21,863 | $ | 166 | $ | 4,077 | $ | 1,245 | $ | 18,181 | ||||||||||||||||
Carrying value of exposure to loss—Assets |
| ||||||||||||||||||||||||||||||||||||
Carrying value of variable interests—Assets | Carrying value of variable interests—Assets | ||||||||||||||||||||||||||||||||||||
Debt and equity interests | $ | 11,243 | $ | 1,245 | $ | 49 | $ | 1,183 | $ | 4,877 | Debt and equity interests | $ | 20,473 | $ | 166 | $ | 4 | $ | 1,245 | $ | 10,741 | ||||||||||||||||
Derivative and other contracts | — | — | 5 | — | 18 | Derivative and other contracts | 0 | 0 | 5 | 0 | 2,208 | ||||||||||||||||||||||||||
Total | $ | 11,243 | $ | 1,245 | $ | 54 | $ | 1,183 | $ | 4,895 | Total | $ | 20,473 | $ | 166 | $ | 9 | $ | 1,245 | $ | 12,949 | ||||||||||||||||
Additional VIE assets owned4 | Additional VIE assets owned4 | $ | 17,235 | ||||||||||||||||||||||||||||||||||
Carrying value of variable interests—Liabilities | Carrying value of variable interests—Liabilities | ||||||||||||||||||||||||||||||||||||
Derivative and other contracts | Derivative and other contracts | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 217 |
At December 31, 2020 | |||||||||||||||||
$ in millions | MABS1 | CDO | MTOB | OSF | Other2 | ||||||||||||
VIE assets (UPB) | $ | 184,153 | $ | 3,527 | $ | 6,524 | $ | 2,161 | $ | 48,241 | |||||||
Maximum exposure to loss3 | |||||||||||||||||
Debt and equity interests | $ | 26,247 | $ | 257 | $ | 0 | $ | 1,187 | $ | 11,008 | |||||||
Derivative and other contracts | 0 | 0 | 4,425 | 0 | 5,639 | ||||||||||||
Commitments, guarantees and other | 929 | 0 | 0 | 0 | 749 | ||||||||||||
Total | $ | 27,176 | $ | 257 | $ | 4,425 | $ | 1,187 | $ | 17,396 | |||||||
Carrying value of variable interests–Assets | |||||||||||||||||
Debt and equity interests | $ | 26,247 | $ | 257 | $ | 0 | $ | 1,187 | $ | 11,008 | |||||||
Derivative and other contracts | 0 | 0 | 5 | 0 | 851 | ||||||||||||
Total | $ | 26,247 | $ | 257 | $ | 5 | $ | 1,187 | $ | 11,859 | |||||||
Additional VIE assets owned4 | $ | 20,019 | |||||||||||||||
Carrying value of variable interests—Liabilities | |||||||||||||||||
Derivative and other contracts | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 222 |
OSF—
Non-consolidated VIE Mortgage-primarily includes exposures to commercial real estate property 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 VIEs and is limited to the notional amounts of certain liquidity facilities, other credit support, total return swaps,
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written put options, and 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. 3.Where notional amounts are utilized in quantifying the maximum exposure related to derivatives, such amounts do not reflect changes in fair value write-downs already recorded by the Firm.
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 issuedFirm.
At June 30, 2021 | At December 31, 2020 | |||||||||||||
$ in millions | UPB | Debt and Equity Interests | UPB | Debt and Equity Interests | ||||||||||
Residential mortgages | $ | 17,146 | $ | 2,637 | $ | 17,775 | $ | 3,175 | ||||||
Commercial mortgages | 62,404 | 3,705 | 62,093 | 4,131 | ||||||||||
U.S. agency collateralized mortgage obligations | 70,091 | 11,989 | 99,182 | 17,224 | ||||||||||
Other consumer or commercial loans | 5,869 | 2,142 | 5,103 | 1,717 | ||||||||||
Total | $ | 155,510 | $ | 20,473 | $ | 184,153 | $ | 26,247 |
At June 30, 2021 | ||||||||||||||
$ in millions | RML | CML | U.S. Agency CMO | CLN and Other1 | ||||||||||
SPE assets (UPB)2 | $ | 7,217 | $ | 90,355 | $ | 31,722 | $ | 15,181 | ||||||
Retained interests | ||||||||||||||
Investment grade | $ | 98 | $ | 936 | $ | 605 | $ | 0 | ||||||
Non-investment grade | 21 | 214 | 0 | 80 | ||||||||||
Total | $ | 119 | $ | 1,150 | $ | 605 | $ | 80 | ||||||
Interests purchased in the secondary market | ||||||||||||||
Investment grade | $ | 0 | $ | 78 | $ | 20 | $ | 0 | ||||||
Non-investment grade | 46 | 68 | 0 | 1 | ||||||||||
Total | $ | 46 | $ | 146 | $ | 20 | $ | 1 | ||||||
Derivative assets | $ | 0 | $ | 0 | $ | 0 | $ | 608 | ||||||
Derivative liabilities | 0 | 0 | 0 | 197 |
At December 31, 2020 | ||||||||||||||
$ in millions | RML | CML | U.S. Agency CMO | CLN and Other1 | ||||||||||
SPE assets (UPB)2 | $ | 7,515 | $ | 84,674 | $ | 21,061 | $ | 12,978 | ||||||
Retained interests | ||||||||||||||
Investment grade | $ | 49 | $ | 822 | $ | 615 | $ | 0 | ||||||
Non-investment grade | 16 | 195 | 0 | 114 | ||||||||||
Total | $ | 65 | $ | 1,017 | $ | 615 | $ | 114 | ||||||
Interests purchased in the secondary market | ||||||||||||||
Investment grade | $ | 0 | $ | 96 | $ | 116 | $ | 0 | ||||||
Non-investment grade | 43 | 80 | 0 | 21 | ||||||||||
Total | $ | 43 | $ | 176 | $ | 116 | $ | 21 | ||||||
Derivative assets | $ | 0 | $ | 0 | $ | 0 | $ | 400 | ||||||
Derivative liabilities | 0 | 0 | 0 | 436 |
June 2021 Form 10-Q | 62 |
Notes to Consolidated Financial Statements (Unaudited) |
Fair Value At June 30, 2021 | |||||||||||
$ in millions | Level 2 | Level 3 | Total | ||||||||
Retained interests | |||||||||||
Investment grade | $ | 702 | $ | 0 | $ | 702 | |||||
Non-investment grade | 12 | 50 | 62 | ||||||||
Total | $ | 714 | $ | 50 | $ | 764 | |||||
Interests purchased in the secondary market | |||||||||||
Investment grade | $ | 97 | $ | 1 | $ | 98 | |||||
Non-investment grade | 76 | 39 | 115 | ||||||||
Total | $ | 173 | $ | 40 | $ | 213 | |||||
Derivative assets | $ | 607 | $ | 1 | $ | 608 | |||||
Derivative liabilities | 163 | 34 | 197 |
Fair Value at December 31, 2020 | |||||||||||
$ in millions | Level 2 | Level 3 | Total | ||||||||
Retained interests | |||||||||||
Investment grade | $ | 663 | $ | 0 | $ | 663 | |||||
Non-investment grade | 6 | 63 | 69 | ||||||||
Total | $ | 669 | $ | 63 | $ | 732 | |||||
Interests purchased in the secondary market | |||||||||||
Investment grade | $ | 196 | $ | 16 | $ | 212 | |||||
Non-investment grade | 62 | 82 | 144 | ||||||||
Total | $ | 258 | $ | 98 | $ | 356 | |||||
Derivative assets | $ | 388 | $ | 12 | $ | 400 | |||||
Derivative liabilities | 435 | 1 | 436 |
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 with the valuation techniques applied to the Firm’s major categories of assets and liabilities as described in Note 2 in the 2020 Form 10-K and Note 5 herein. Further, as permitted by applicable guidance, certain transfers of assets where the Firm’s only continuing involvement is a derivative are only reported in the following Assets Sold with Retained Exposure table.
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 June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
New transactions1 | $ | 16,410 | $ | 9,189 | $ | 31,200 | $ | 17,660 | ||||||
Retained interests | 2,985 | 1,136 | 5,564 | 5,224 | ||||||||||
Sales of corporate loans to CLO SPEs1, 2 | 73 | 73 | 73 | 139 |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Gross cash proceeds from sale of assets1 | $ | 61,885 | $ | 45,051 | ||||
Fair value | ||||||||
Assets sold | $ | 63,544 | $ | 46,609 | ||||
Derivative assets recognized in the balance sheets | 1,972 | 1,592 | ||||||
Derivative liabilities recognized in the balance sheets | 314 | 64 |
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”).
|
Minimum risk-based capital ratio requirements apply to Common Equity Tier 1 capital, Tier 1 capital and Total capital. Certaincapital (which includes Tier 2 capital). Capital standards require certain adjustments to, and deductions from, capital are required for purposes of determining these ratios. At June 30, 2021 and December 31, 2020, the differences between the actual and required ratios suchwere lower under the Standardized Approach.
63 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
At June 30, 2021 and December 31, 2020 | |||||||||||||||||
Standardized | Advanced | ||||||||||||||||
Capital buffers | |||||||||||||||||
Capital conservation buffer | — | 2.5% | |||||||||||||||
SCB | 5.7% | N/A | |||||||||||||||
G-SIB capital surcharge | 3.0% | 3.0% | |||||||||||||||
CCyB1 | 0% | 0% | |||||||||||||||
Capital buffer requirement2 | 8.7% | 5.5% | |||||||||||||||
At June 30, 2021 and December 31, 2020 | |||||||||||||||||
Regulatory Minimum | Standardized | Advanced | |||||||||||||||
Required ratios3 | |||||||||||||||||
Common Equity Tier 1 capital ratio | 4.5 | % | 13.2% | 10.0% | |||||||||||||
Tier 1 capital ratio | 6.0 | % | 14.7% | 11.5% | |||||||||||||
Total capital ratio | 8.0 | % | 16.7% | 13.5% |
In addition to the minimum risk-based capital ratio requirements, on a fullyphased-in basis by 2019, the Firm will be subject to:
A greater than 2.5% Common Equity Tier 1 capital conservation buffer;
the Firm must maintain above the minimum risk-based capital requirements in order to avoid 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 Common Equity Tier 1 global systemically important bankFirm's Standardized Approach capital buffer requirement is equal to the sum of the SCB, G-SIB capital surcharge currently at 3%; and
Up to a 2.5% Common Equity Tier 1 countercyclical CCyB, and the Advanced Approach capital buffer currently set by U.S. banking regulators at zero (collectively,requirement is equal to the “buffers”).
In 2017,
$ in millions | Required Ratio1 | At June 30, 2021 | At December 31, 2020 | ||||||||||||||||||||
Risk-based capital | |||||||||||||||||||||||
Common Equity Tier 1 capital | $ | 76,815 | $ | 78,650 | |||||||||||||||||||
Tier 1 capital | 84,612 | 88,079 | |||||||||||||||||||||
Total capital | 92,782 | 97,213 | |||||||||||||||||||||
Total RWA | 462,808 | 453,106 | |||||||||||||||||||||
Common Equity Tier 1 capital ratio | 13.2 | % | 16.6 | % | 17.4 | % | |||||||||||||||||
Tier 1 capital ratio | 14.7 | % | 18.3 | % | 19.4 | % | |||||||||||||||||
Total capital ratio | 16.7 | % | 20.0 | % | 21.5 | % | |||||||||||||||||
$ in millions | Required Ratio1 | At June 30, 2021 | At December 31, 2020 | ||||||||||||||||||||
Leverage-based capital | |||||||||||||||||||||||
Adjusted average assets2 | $ | 1,135,262 | $ | 1,053,510 | |||||||||||||||||||
Tier 1 leverage ratio | 4.0 | % | 7.5 | % | 8.4 | % | |||||||||||||||||
Supplementary leverage exposure3,4 | $ | 1,439,971 | $ | 1,192,506 | |||||||||||||||||||
SLR4 | 5.0 | % | 5.9 | % | 7.4 | % |
The methods for calculating each
For a further discussion of the Firm’s calculation of risk-based capital ratios, see Note 14 to the consolidated financial statementsAdjusted average assets used in the 2016 Form10-K.
Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures.
At September 30, 2017,Supplementary leverage exposure as of December 31, 2020 reflect the Firm’s ratios areexclusion of U.S. Treasury securities and deposits at Federal Reserve Banks based on the Standardized Approach transitional rules. At Decembera Federal Reserve interim final rule that was in effect until March 31, 2016, the Firm’s ratios were based on the Advanced Approach transitional rules.
Regulatory Capital
At September 30, 2017 | ||||||||||||
$ in millions | Amount | Ratio | Minimum Capital Ratio1 | |||||||||
Common Equity Tier 1 capital | $ | 62,214 | 16.9% | 7.3% | ||||||||
Tier 1 capital | 71,006 | 19.3% | 8.8% | |||||||||
Total capital | 81,861 | 22.2% | 10.8% | |||||||||
Tier 1 leverage | — | 8.4% | 4.0% | |||||||||
Total RWAs | $ | 368,629 | N/A | N/A | ||||||||
Adjusted average assets2 | 841,360 | N/A | N/A | |||||||||
At December 31, 2016 | ||||||||||||
$ in millions | Amount | Ratio | Minimum Capital Ratio1 | |||||||||
Common Equity Tier 1 capital | $ | 60,398 | 16.9% | 5.9% | ||||||||
Tier 1 capital | 68,097 | 19.0% | 7.4% | |||||||||
Total capital | 78,642 | 22.0% | 9.4% | |||||||||
Tier 1 leverage | — | 8.4% | 4.0% | |||||||||
Total RWAs | $ | 358,141 | N/A | N/A | ||||||||
Adjusted average assets2 | 811,402 | N/A | N/A |
N/A—Not Applicable
|
|
Certain U.S. Bank Subsidiaries’ Regulatory Capital and Capital Ratios
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-
64 |
Notes to Consolidated Financial Statements
|
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 June 30, 2021 and December 31, 2020, the risk-based and leverage-based capital amounts and ratios are calculated excluding the effect of the adoption of CECL based on MSBNA’s and MSPBNA’s election to defer this effect over a five-year transition period, which began on January 1, 2020.
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 June 30, 2021 | At December 31, 2020 | |||||||||||||||||||
$ in millions | Well-Capitalized Requirement | Required Ratio1 | Amount | Ratio | Amount | Ratio | ||||||||||||||
Risk-based capital | ||||||||||||||||||||
Common Equity Tier 1 capital | 6.5 | % | 7.0 | % | $ | 18,069 | 19.8 | % | $ | 17,238 | 18.7 | % | ||||||||
Tier 1 capital | 8.0 | % | 8.5 | % | 18,069 | 19.8 | % | 17,238 | 18.7 | % | ||||||||||
Total capital | 10.0 | % | 10.5 | % | 18,644 | 20.5 | % | 17,882 | 19.4 | % | ||||||||||
Leverage-based capital | ||||||||||||||||||||
Tier 1 leverage | 5.0 | % | 4.0 | % | $ | 18,069 | 10.4 | % | $ | 17,238 | 10.1 | % | ||||||||
SLR | 6.0 | % | 3.0 | % | 18,069 | 8.1 | % | 17,238 | 8.0 | % |
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% |
|
At June 30, 2021 At December 31, 2020 $ in millions Amount Ratio Amount Ratio Risk-based capital Common Equity Tier 1 capital 6.5 % 7.0 % $ 9,629 25.1 % $ 8,213 21.3 % Tier 1 capital 8.0 % 8.5 % 9,629 25.1 % 8,213 21.3 % Total capital 10.0 % 10.5 % 9,702 25.2 % 8,287 21.5 % Leverage-based capital Tier 1 leverage 5.0 % 4.0 % $ 9,629 7.4 % $ 8,213 7.2 % SLR 6.0 % 3.0 % 9,629 7.1 % 8,213 6.9 %
$ 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 June 30, 2021 | At December 31, 2020 | ||||||
Net capital | $ | 16,739 | $ | 12,869 | ||||
Excess net capital | 12,837 | 9,034 |
$ 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 (“MSSB LLC”) is a registered U.S. broker-dealer and introducing broker for the futures business, and, accordingly, is subject to the minimum net capital requirements of the SEC. MSSB LLC has consistently operated with capital in excess of its regulatory capital requirements.
Other Regulated Subsidiaries
Morgan Stanley & Co. International plc (“MSIP”),MSIP, a London-based broker-dealer subsidiary, is subject to the capital requirements of the Prudential Regulation Authority,PRA, and the Morgan Stanley MUFG Securities Co., Ltd.Europe Holdings SE Group (“MSMS”MSEHSE Group”), a Tokyo-based broker-dealer subsidiary, is subject to the capital requirements of the Financial Services Agency.European Central Bank, BaFin and the German Central Bank. MSSB, MSIP and MSMSthe MSEHSE Group, including MSESE, a Germany-based broker-dealer, have consistently operated with capital in excess of their respective regulatory capital requirements.
Additionally, E*TRADE Bank and E*TRADE Savings Bank are subject to the capital requirements of the OCC, and E*TRADE Securities LLC is subject to the minimum net capital requirements of the SEC; each of these entities has consistently operated with capital in excess of their respective regulatory capital requirements.
|
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
Shares Outstanding | Carrying Value | |||||||||||||
$ in millions, except per share data | At June 30, 2021 | Liquidation Preference per Share | At June 30, 2021 | At December 31, 2020 | ||||||||||
Series | ||||||||||||||
A | 44,000 | $ | 25,000 | $ | 1,100 | $ | 1,100 | |||||||
C1 | 519,882 | 1,000 | 408 | 408 | ||||||||||
E | 34,500 | 25,000 | 862 | 862 | ||||||||||
F | 34,000 | 25,000 | 850 | 850 | ||||||||||
H | 52,000 | 25,000 | 1,300 | 1,300 | ||||||||||
I | 40,000 | 25,000 | 1,000 | 1,000 | ||||||||||
J | 0 | 0 | 0 | 1,500 | ||||||||||
K | 40,000 | 25,000 | 1,000 | 1,000 | ||||||||||
L | 20,000 | 25,000 | 500 | 500 | ||||||||||
M | 400,000 | 1,000 | 430 | 430 | ||||||||||
N | 3,000 | 100,000 | 300 | 300 | ||||||||||
Total | $ | 7,750 | $ | 9,250 | ||||||||||
Shares authorized | 30,000,000 |
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 |
held by MUFG.
Series K Preferred Stock.The Series K Preferred Stock offering (net of related issuance costs) in January 2017 resulted in proceeds of approximately $994 million.
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 |
|
Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss)1
$ in millions | Foreign Currency Translation Adjustments | AFS Securities | Pensions, Postretirement and Other | DVA | Total | |||||||||||||||
June 30, 2017 | $ | (856 | ) | $ | (396 | ) | $ | (470 | ) | $ | (766 | ) | $ | (2,488) | ||||||
OCI during the period | 61 | 26 | — | (143 | ) | (56) | ||||||||||||||
September 30, 2017 | $ | (795 | ) | $ | (370 | ) | $ | (470 | ) | $ | (909 | ) | $ | (2,544) | ||||||
June 30, 2016 | $ | (779 | ) | $ | 219 | $ | (378 | ) | $ | 33 | $ | (905) | ||||||||
OCI during the period | 25 | (99 | ) | (1 | ) | (90 | ) | (165) | ||||||||||||
September 30, 2016 | $ | (754 | ) | $ | 120 | $ | (379 | ) | $ | (57 | ) | $ | (1,070) | |||||||
December 31, 2016 | $ | (986 | ) | $ | (588 | ) | $ | (474 | ) | $ | (595 | ) | $ | (2,643) | ||||||
OCI during the period | 191 | 218 | 4 | (314 | ) | 99 | ||||||||||||||
September 30, 2017 | $ | (795 | ) | $ | (370 | ) | $ | (470 | ) | $ | (909 | ) | $ | (2,544) | ||||||
December 31, 2015 | $ | (963 | ) | $ | (319 | ) | $ | (374 | ) | $ | — | $ | (1,656) | |||||||
Cumulative adjustment for | — | — | — | (312 | ) | (312) | ||||||||||||||
OCI during the period | 209 | 439 | (5 | ) | 255 | 898 | ||||||||||||||
September 30, 2016 | $ | (754 | ) | $ | 120 | $ | (379 | ) | $ | (57 | ) | $ | (1,070) |
|
|
|
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 |
|
|
65 |
|
Noncontrolling Interests
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||||
Noncontrolling interests | $ | 1,136 | $ | 1,127 |
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. 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 |
|
|
|
|
|
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Repurchases of common stock under the Firm’s Share Repurchase Program | $ | 2,939 | $ | 0 | $ | 5,074 | $ | 1,347 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Weighted average common shares outstanding, basic | 1,814 | 1,541 | 1,804 | 1,548 | ||||||||||
Effect of dilutive Stock options, RSUs and PSUs | 27 | 16 | 25 | 17 | ||||||||||
Weighted average common shares outstanding and common stock equivalents, diluted | 1,841 | 1,557 | 1,829 | 1,565 | ||||||||||
Weighted average antidilutive common stock equivalents (excluded from the computation of diluted EPS) | 0 | 8 | 0 | 10 |
$ in millions, except per share data | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | ||||||||||||
Per Share1 | Total | Per Share1 | Total | |||||||||||
Preferred stock series | ||||||||||||||
A | $ | 253 | $ | 11 | $ | 253 | $ | 11 | ||||||
C | 25 | 13 | 25 | 13 | ||||||||||
E | 445 | 15 | 445 | 15 | ||||||||||
F | 430 | 15 | 430 | 15 | ||||||||||
H | 240 | 12 | 305 | 16 | ||||||||||
I | 398 | 16 | 398 | 16 | ||||||||||
J2 | 0 | 0 | 694 | 42 | ||||||||||
K | 366 | 15 | 366 | 15 | ||||||||||
L | 305 | 6 | 305 | 6 | ||||||||||
Total Preferred stock | $ | 103 | $ | 149 | ||||||||||
Common stock | 0.35 | $ | 651 | $ | 0.35 | $ | 550 |
$ in millions, except per share data | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | ||||||||||||
Per Share1 | Total | Per Share1 | Total | |||||||||||
Preferred stock series | ||||||||||||||
A | $ | 503 | $ | 22 | $ | 506 | $ | 22 | ||||||
C | 50 | 26 | 50 | 26 | ||||||||||
E | 891 | 30 | 891 | 30 | ||||||||||
F | 859 | 29 | 859 | 29 | ||||||||||
H | 480 | 25 | 649 | 34 | ||||||||||
I | 797 | 32 | 797 | 32 | ||||||||||
J2 | 253 | 15 | 694 | 42 | ||||||||||
K | 731 | 30 | 731 | 30 | ||||||||||
L | 609 | 12 | 609 | 12 | ||||||||||
M3 | 29 | 12 | 0 | 0 | ||||||||||
N4 | 2,650 | 8 | 0 | 0 | ||||||||||
Total Preferred stock | $ | 241 | $ | 257 | ||||||||||
Common stock | $ | 0.70 | $ | 1,286 | $ | 0.70 | $ | 1,111 |
$ in millions | CTA | AFS Securities | Pension and Other | DVA | Total | ||||||||||||
March 31, 2021 | $ | (936) | $ | 1,011 | $ | (493) | $ | (2,336) | $ | (2,754) | |||||||
OCI during the period | 41 | (7) | 12 | 185 | 231 | ||||||||||||
June 30, 2021 | $ | (895) | $ | 1,004 | $ | (481) | $ | (2,151) | $ | (2,523) | |||||||
March 31, 2020 | $ | (1,038) | $ | 1,532 | $ | (619) | $ | 2,220 | $ | 2,095 | |||||||
OCI during the period | 21 | 295 | (1) | (2,409) | (2,094) | ||||||||||||
June 30, 2020 | $ | (1,017) | $ | 1,827 | $ | (620) | $ | (189) | $ | 1 | |||||||
December 31, 2020 | $ | (795) | $ | 1,787 | $ | (498) | $ | (2,456) | $ | (1,962) | |||||||
OCI during the period | (100) | (783) | 17 | 305 | (561) | ||||||||||||
June 30, 2021 | $ | (895) | $ | 1,004 | $ | (481) | $ | (2,151) | $ | (2,523) | |||||||
December 31, 2019 | $ | (897) | $ | 207 | $ | (644) | $ | (1,454) | $ | (2,788) | |||||||
OCI during the period | (120) | 1,620 | 24 | 1,265 | 2,789 | ||||||||||||
June 30, 2020 | $ | (1,017) | $ | 1,827 | $ | (620) | $ | (189) | $ | 1 |
Three Months Ended June 30, 2021 | |||||||||||||||||
$ in millions | Pre-tax Gain (Loss) | Income Tax Benefit (Provision) | After-tax Gain (Loss) | Non- controlling Interests | Net | ||||||||||||
CTA | |||||||||||||||||
OCI activity | $ | 12 | $ | 29 | $ | 41 | $ | 0 | $ | 41 | |||||||
Reclassified to earnings | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Net OCI | $ | 12 | $ | 29 | $ | 41 | $ | 0 | $ | 41 | |||||||
Change in net unrealized gains (losses) on AFS securities | |||||||||||||||||
OCI activity | $ | 47 | $ | (10) | $ | 37 | $ | 0 | $ | 37 | |||||||
Reclassified to earnings | (58) | 14 | (44) | 0 | (44) | ||||||||||||
Net OCI | $ | (11) | $ | 4 | $ | (7) | $ | 0 | $ | (7) | |||||||
Pension and other | |||||||||||||||||
OCI activity | $ | 8 | $ | 0 | $ | 8 | $ | 0 | $ | 8 | |||||||
Reclassified to earnings | 7 | (3) | 4 | 0 | 4 | ||||||||||||
Net OCI | $ | 15 | $ | (3) | $ | 12 | $ | 0 | $ | 12 | |||||||
Change in net DVA | |||||||||||||||||
OCI activity | $ | 237 | $ | (59) | $ | 178 | $ | 1 | $ | 177 | |||||||
Reclassified to earnings | 10 | (2) | 8 | 0 | 8 | ||||||||||||
Net OCI | $ | 247 | $ | (61) | $ | 186 | $ | 1 | $ | 185 |
June 2021 Form 10-Q | 66 |
Notes to Consolidated Financial Statements
|
The Firm sponsors various retirement plans
Three Months Ended June 30, 2020 | |||||||||||||||||
$ in millions | Pre-tax Gain (Loss) | Income Tax Benefit (Provision) | After-tax Gain (Loss) | Non- controlling Interests | Net | ||||||||||||
CTA | |||||||||||||||||
OCI activity | $ | 5 | $ | 19 | $ | 24 | $ | 0 | $ | 24 | |||||||
Reclassified to earnings | (3) | 0 | (3) | 0 | (3) | ||||||||||||
Net OCI | $ | 2 | $ | 19 | $ | 21 | $ | 0 | $ | 21 | |||||||
Change in net unrealized gains (losses) on AFS securities | |||||||||||||||||
OCI activity | $ | 395 | $ | (93) | $ | 302 | $ | 0 | $ | 302 | |||||||
Reclassified to earnings | (10) | 3 | (7) | 0 | (7) | ||||||||||||
Net OCI | $ | 385 | $ | (90) | $ | 295 | $ | 0 | $ | 295 | |||||||
Pension and other | |||||||||||||||||
OCI activity | $ | (4) | $ | (1) | $ | (5) | $ | 0 | $ | (5) | |||||||
Reclassified to earnings | 5 | (1) | 4 | 0 | 4 | ||||||||||||
Net OCI | $ | 1 | $ | (2) | $ | (1) | $ | 0 | $ | (1) | |||||||
Change in net DVA | |||||||||||||||||
OCI activity | $ | (3,301) | $ | 805 | $ | (2,496) | $ | (87) | $ | (2,409) | |||||||
Reclassified to earnings | 1 | (1) | 0 | 0 | 0 | ||||||||||||
Net OCI | $ | (3,300) | $ | 804 | $ | (2,496) | $ | (87) | $ | (2,409) |
Six Months Ended June 30, 2021 | |||||||||||||||||
$ in millions | Pre-tax Gain (Loss) | Income Tax Benefit (Provision) | After-tax Gain (Loss) | Non- controlling Interests | Net | ||||||||||||
CTA | |||||||||||||||||
OCI activity | $ | (92) | $ | (86) | $ | (178) | $ | (78) | $ | (100) | |||||||
Reclassified to earnings | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Net OCI | $ | (92) | $ | (86) | $ | (178) | $ | (78) | $ | (100) | |||||||
Change in net unrealized gains (losses) on AFS securities | |||||||||||||||||
OCI activity | $ | (829) | $ | 193 | $ | (636) | $ | 0 | $ | (636) | |||||||
Reclassified to earnings | (192) | 45 | (147) | 0 | (147) | ||||||||||||
Net OCI | $ | (1,021) | $ | 238 | $ | (783) | $ | 0 | $ | (783) | |||||||
Pension and other | |||||||||||||||||
OCI activity | $ | 8 | $ | 0 | $ | 8 | $ | 0 | $ | 8 | |||||||
Reclassified to earnings | 14 | (5) | 9 | 0 | 9 | ||||||||||||
Net OCI | $ | 22 | $ | (5) | $ | 17 | $ | 0 | $ | 17 | |||||||
Change in net DVA | |||||||||||||||||
OCI activity | $ | 404 | $ | (102) | $ | 302 | $ | 18 | $ | 284 | |||||||
Reclassified to earnings | 27 | (6) | 21 | 0 | 21 | ||||||||||||
Net OCI | $ | 431 | $ | (108) | $ | 323 | $ | 18 | $ | 305 |
Six Months Ended June 30, 2020 | |||||||||||||||||
$ in millions | Pre-tax Gain (Loss) | Income Tax Benefit (Provision) | After-tax Gain (Loss) | Non- controlling Interests | Net | ||||||||||||
CTA | |||||||||||||||||
OCI activity | $ | (15) | $ | (93) | $ | (108) | $ | 9 | $ | (117) | |||||||
Reclassified to earnings | (3) | 0 | (3) | 0 | (3) | ||||||||||||
Net OCI | $ | (18) | $ | (93) | $ | (111) | $ | 9 | $ | (120) | |||||||
Change in net unrealized gains (losses) on AFS securities | |||||||||||||||||
OCI activity | $ | 2,168 | $ | (509) | $ | 1,659 | $ | 0 | $ | 1,659 | |||||||
Reclassified to earnings | (51) | 12 | (39) | 0 | (39) | ||||||||||||
Net OCI | $ | 2,117 | $ | (497) | $ | 1,620 | $ | 0 | $ | 1,620 | |||||||
Pension and other | |||||||||||||||||
OCI activity | $ | 21 | $ | (5) | $ | 16 | $ | 0 | $ | 16 | |||||||
Reclassified to earnings | 10 | (2) | 8 | 0 | 8 | ||||||||||||
Net OCI | $ | 31 | $ | (7) | $ | 24 | $ | 0 | $ | 24 | |||||||
Change in net DVA | |||||||||||||||||
OCI activity | $ | 1,714 | $ | (411) | $ | 1,303 | $ | 42 | $ | 1,261 | |||||||
Reclassified to earnings | 6 | (2) | 4 | 0 | 4 | ||||||||||||
Net OCI | $ | 1,720 | $ | (413) | $ | 1,307 | $ | 42 | $ | 1,265 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Interest income | ||||||||||||||
Investment securities | $ | 608 | $ | 629 | $ | 1,457 | $ | 1,074 | ||||||
Loans | 1,040 | 1,050 | 2,028 | 2,204 | ||||||||||
Securities purchased under agreements to resell and Securities borrowed1 | (321) | (141) | (617) | 257 | ||||||||||
Trading assets, net of Trading liabilities | 486 | 616 | 996 | 1,365 | ||||||||||
Customer receivables and Other2 | 399 | 204 | 785 | 961 | ||||||||||
Total interest income | $ | 2,212 | $ | 2,358 | $ | 4,649 | $ | 5,861 | ||||||
Interest expense | ||||||||||||||
Deposits | $ | 108 | $ | 220 | $ | 228 | $ | 626 | ||||||
Borrowings | 719 | 823 | 1,433 | 1,820 | ||||||||||
Securities sold under agreements to repurchase and Securities loaned3 | 116 | 209 | 230 | 718 | ||||||||||
Customer payables and Other4 | (596) | (494) | (1,135) | (259) | ||||||||||
Total interest expense | $ | 347 | $ | 758 | $ | 756 | $ | 2,905 | ||||||
Net interest | $ | 1,865 | $ | 1,600 | $ | 3,893 | $ | 2,956 |
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 |
18.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.
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Customer and other receivables | $ | 2,160 | $ | 1,652 | ||||
Customer and other payables | 2,517 | 2,119 |
The Firm is currently at various levels of field examination with respect to audits by the IRS, as well as New York State and New York City, for tax years 2009-2012 and 2007-2014, respectively. In April 2016, the Firm received a notification from the IRS that the Congressional Joint Committee on Taxation approved the final report of an Appeals Office review of matters from tax years 1999-2005. In June 2016, the Firm received an amended Revenue Agent’s Report for tax years 2006-2008. Over the next 12 months the Firm expects to receive new information related to multi-year IRS field audit examinations that may prompt an overall net decrease in the Firm’s recorded tax liabilities.
The Firm believes that the resolution of the abovethese tax mattersexaminations will not have a material effect on the annual financial statements, although a resolution could have a material impact onin the income statementsstatement and on the 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 whichresolutions occur.
See Note 11 regarding the Dutch Tax Authority’s challenge,reasonably possible that significant changes 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.
19.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.
67 | June 2021 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Three Months Ended June 30, 2021 | |||||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||||
Investment banking | $ | 2,376 | $ | 203 | $ | 0 | $ | (19) | $ | 2,560 | |||||||
Trading | 3,078 | 255 | (22) | 19 | 3,330 | ||||||||||||
Investments | 61 | 14 | 306 | 0 | 381 | ||||||||||||
Commissions and fees1 | 682 | 714 | 1 | (89) | 1,308 | ||||||||||||
Asset management1,2 | 148 | 3,447 | 1,418 | (40) | 4,973 | ||||||||||||
Other | 137 | 207 | 1 | (3) | 342 | ||||||||||||
Total non-interest revenues | 6,482 | 4,840 | 1,704 | (132) | 12,894 | ||||||||||||
Interest income | 873 | 1,366 | 10 | (37) | 2,212 | ||||||||||||
Interest expense | 263 | 111 | 12 | (39) | 347 | ||||||||||||
Net interest | 610 | 1,255 | (2) | 2 | 1,865 | ||||||||||||
Net revenues | $ | 7,092 | $ | 6,095 | $ | 1,702 | $ | (130) | $ | 14,759 | |||||||
Provision for credit losses | $ | 70 | $ | 3 | $ | 0 | $ | 0 | $ | 73 | |||||||
Compensation and benefits | 2,433 | 3,275 | 715 | 0 | 6,423 | ||||||||||||
Non-compensation expenses | 2,091 | 1,181 | 557 | (132) | 3,697 | ||||||||||||
Total non-interest expenses | $ | 4,524 | $ | 4,456 | $ | 1,272 | $ | (132) | $ | 10,120 | |||||||
Income before provision for income taxes | $ | 2,498 | $ | 1,636 | $ | 430 | $ | 2 | $ | 4,566 | |||||||
Provision for income taxes | 574 | 372 | 108 | 0 | 1,054 | ||||||||||||
Net income | 1,924 | 1,264 | 322 | 2 | 3,512 | ||||||||||||
Net income applicable to noncontrolling interests | 20 | 0 | (19) | 0 | 1 | ||||||||||||
Net income applicable to Morgan Stanley | $ | 1,904 | $ | 1,264 | $ | 341 | $ | 2 | $ | 3,511 |
Three Months Ended June 30, 2020 | |||||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||||
Investment banking | $ | 2,051 | $ | 110 | $ | 0 | $ | (19) | $ | 2,142 | |||||||
Trading3 | 4,272 | 492 | 22 | 17 | 4,803 | ||||||||||||
Investments | 36 | 8 | 231 | 0 | 275 | ||||||||||||
Commissions and fees1 | 717 | 473 | 0 | (88) | 1,102 | ||||||||||||
Asset management1,2 | 115 | 2,507 | 684 | (41) | 3,265 | ||||||||||||
Other3 | 439 | 84 | (47) | (3) | 473 | ||||||||||||
Total non-interest revenues | 7,630 | 3,674 | 890 | (134) | 12,060 | ||||||||||||
Interest income | 1,300 | 1,210 | 7 | (159) | 2,358 | ||||||||||||
Interest expense | 731 | 180 | 11 | (164) | 758 | ||||||||||||
Net interest | 569 | 1,030 | (4) | 5 | 1,600 | ||||||||||||
Net revenues3 | $ | 8,199 | $ | 4,704 | $ | 886 | $ | (129) | $ | 13,660 | |||||||
Provision for credit losses3 | $ | 217 | $ | 22 | $ | 0 | $ | 0 | $ | 239 | |||||||
Compensation and benefits | 2,952 | 2,729 | 354 | 0 | 6,035 | ||||||||||||
Non-compensation expenses3 | 2,037 | 811 | 316 | (133) | 3,031 | ||||||||||||
Total non-interest expenses3 | $ | 4,989 | $ | 3,540 | $ | 670 | $ | (133) | $ | 9,066 | |||||||
Income before provision for income taxes | $ | 2,993 | $ | 1,142 | $ | 216 | $ | 4 | $ | 4,355 | |||||||
Provision for income taxes | 790 | 289 | 39 | 1 | 1,119 | ||||||||||||
Net income | 2,203 | 853 | 177 | 3 | 3,236 | ||||||||||||
Net income applicable to noncontrolling interests | 17 | 0 | 23 | 0 | 40 | ||||||||||||
Net income applicable to Morgan Stanley | $ | 2,186 | $ | 853 | $ | 154 | $ | 3 | $ | 3,196 |
Six Months Ended June 30, 2021 | |||||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||||
Investment banking | $ | 4,989 | $ | 454 | $ | 0 | $ | (43) | $ | 5,400 | |||||||
Trading | 7,151 | 381 | (19) | 42 | 7,555 | ||||||||||||
Investments | 147 | 16 | 536 | 0 | 699 | ||||||||||||
Commissions and fees1 | 1,552 | 1,565 | 1 | (184) | 2,934 | ||||||||||||
Asset management1,2 | 287 | 6,638 | 2,521 | (75) | 9,371 | ||||||||||||
Other | 295 | 360 | (23) | (6) | 626 | ||||||||||||
Total non-interest revenues | 14,421 | 9,414 | 3,016 | (266) | 26,585 | ||||||||||||
Interest income | 1,843 | 2,852 | 18 | (64) | 4,649 | ||||||||||||
Interest expense | 595 | 212 | 18 | (69) | 756 | ||||||||||||
Net interest | 1,248 | 2,640 | 0 | 5 | 3,893 | ||||||||||||
Net revenues | $ | 15,669 | $ | 12,054 | $ | 3,016 | $ | (261) | $ | 30,478 | |||||||
Provision for credit losses | $ | (23) | $ | (2) | $ | 0 | $ | 0 | $ | (25) | |||||||
Compensation and benefits | 5,547 | 6,445 | 1,229 | 0 | 13,221 | ||||||||||||
Non-compensation expenses | 4,276 | 2,375 | 987 | (266) | 7,372 | ||||||||||||
Total non-interest expenses | $ | 9,823 | $ | 8,820 | $ | 2,216 | $ | (266) | $ | 20,593 | |||||||
Income before provision for income taxes | $ | 5,869 | $ | 3,236 | $ | 800 | $ | 5 | $ | 9,910 | |||||||
Provision for income taxes | 1,310 | 730 | 189 | 1 | 2,230 | ||||||||||||
Net income | 4,559 | 2,506 | 611 | 4 | 7,680 | ||||||||||||
Net income applicable to noncontrolling interests | 54 | 0 | (5) | 0 | 49 | ||||||||||||
Net income applicable to Morgan Stanley | $ | 4,505 | $ | 2,506 | $ | 616 | $ | 4 | $ | 7,631 |
Six Months Ended June 30, 2020 | |||||||||||||||||
$ in millions | IS | WM | IM | I/E | Total | ||||||||||||
Investment banking | $ | 3,195 | $ | 268 | $ | 0 | $ | (50) | $ | 3,413 | |||||||
Trading3 | 7,433 | 145 | (15) | 41 | 7,604 | ||||||||||||
Investments | 11 | 8 | 294 | 0 | 313 | ||||||||||||
Commissions and fees1 | 1,591 | 1,061 | 0 | (190) | 2,462 | ||||||||||||
Asset management1,2 | 228 | 5,187 | 1,349 | (82) | 6,682 | ||||||||||||
Other3 | (112) | 165 | (40) | (4) | 9 | ||||||||||||
Total non-interest revenues | 12,346 | 6,834 | 1,588 | (285) | 20,483 | ||||||||||||
Interest income | 3,723 | 2,403 | 15 | (280) | 5,861 | ||||||||||||
Interest expense | 2,692 | 477 | 25 | (289) | 2,905 | ||||||||||||
Net interest | 1,031 | 1,926 | (10) | 9 | 2,956 | ||||||||||||
Net revenues3 | $ | 13,377 | $ | 8,760 | $ | 1,578 | $ | (276) | $ | 23,439 | |||||||
Provision for credit losses3 | $ | 605 | $ | 41 | $ | 0 | $ | 0 | $ | 646 | |||||||
Compensation and benefits | 4,766 | 4,941 | 611 | 0 | 10,318 | ||||||||||||
Non-compensation expenses3 | 4,063 | 1,581 | 608 | (278) | 5,974 | ||||||||||||
Total non-interest expenses3 | $ | 8,829 | $ | 6,522 | $ | 1,219 | $ | (278) | $ | 16,292 | |||||||
Income before provision for income taxes | $ | 3,943 | $ | 2,197 | $ | 359 | $ | 2 | $ | 6,501 | |||||||
Provision for income taxes | 941 | 480 | 64 | 0 | 1,485 | ||||||||||||
Net income | 3,002 | 1,717 | 295 | 2 | 5,016 | ||||||||||||
Net income applicable to noncontrolling interests | 59 | 0 | 63 | 0 | 122 | ||||||||||||
Net income applicable to Morgan Stanley | $ | 2,943 | $ | 1,717 | $ | 232 | $ | 2 | $ | 4,894 |
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 |
68 |
Notes to Consolidated Financial Statements
|
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—
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Institutional Securities Advisory | $ | 664 | $ | 462 | $ | 1,144 | $ | 824 | ||||||
Institutional Securities Underwriting | 1,712 | 1,589 | 3,845 | 2,371 | ||||||||||
Firm Investment banking revenues from contracts with customers | 90 | % | 92 | % | 91 | % | 91 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Interest rate | $ | 17 | $ | 1,008 | $ | 876 | $ | 2,082 | ||||||
Foreign exchange | 314 | 127 | 588 | 465 | ||||||||||
Equity security and index2 | 2,033 | 1,943 | 3,728 | 3,016 | ||||||||||
Commodity and other | 680 | 723 | 1,541 | 733 | ||||||||||
Credit | 286 | 1,002 | 822 | 1,308 | ||||||||||
Total | $ | 3,330 | $ | 4,803 | $ | 7,555 | $ | 7,604 |
I/E—Intersegment eliminations
|
|
|
|
Investments Revenues—Net Cumulative Unrealized Carried Interest
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Net cumulative unrealized performance-based income at risk of reversing | $ | 778 | $ | 735 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Fee waivers | $ | 131 | $ | 22 | $ | 225 | $ | 33 |
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
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Transaction taxes | $ | 217 | $ | 146 | $ | 455 | $ | 330 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Americas | $ | 10,885 | $ | 9,950 | $ | 22,076 | $ | 16,838 | ||||||
EMEA | 2,093 | 2,109 | 4,252 | 3,306 | ||||||||||
Asia | 1,781 | 1,601 | 4,150 | 3,295 | ||||||||||
Total | $ | 14,759 | $ | 13,660 | $ | 30,478 | $ | 23,439 |
|
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.current presentation. See Note 111 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 Assets 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
additional information.
Net
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 |
Recognized from Prior Services
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
$ in millions | 2021 | 2020 | 2021 | 2020 | ||||||||||
Non-interest revenues | $ | 677 | $ | 680 | $ | 1,066 | $ | 1,242 |
69 |
|
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 % |
Notes to Consolidated Financial Statements (Unaudited) |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Customer and other receivables | $ | 3,425 | $ | 3,200 |
$ in millions | At June 30, 2021 | At December 31, 2020 | ||||||
Institutional Securities | $ | 782,257 | $ | 753,322 | ||||
Wealth Management | 361,136 | 355,595 | ||||||
Investment Management | 18,412 | 6,945 | ||||||
Total1 | $ | 1,161,805 | $ | 1,115,862 |
June 2021 Form 10-Q | 70 |
Financial Data Supplement (Unaudited)
|
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 % |
Three Months Ended June 30, | ||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||
$ in millions | Average Daily Balance | Interest | Annualized Average Rate | Average Daily Balance | Interest | Annualized Average Rate | ||||||||||||||
Interest earning assets | ||||||||||||||||||||
Investment securities1 | $ | 181,482 | $ | 608 | 1.3 | % | $ | 123,713 | $ | 629 | 2.0 | % | ||||||||
Loans1 | 161,767 | 1,040 | 2.6 | % | 147,326 | 1,050 | 2.9 | % | ||||||||||||
Securities purchased under agreements to resell and Securities borrowed2: | ||||||||||||||||||||
U.S. | 152,770 | (200) | (0.5) | % | 141,722 | (85) | (0.2) | % | ||||||||||||
Non-U.S. | 73,218 | (121) | (0.7) | % | 61,283 | (56) | (0.4) | % | ||||||||||||
Trading assets, net of Trading liabilities3: | ||||||||||||||||||||
U.S. | 77,814 | 409 | 2.1 | % | 70,641 | 489 | 2.8 | % | ||||||||||||
Non-U.S. | 17,897 | 77 | 1.7 | % | 24,757 | 127 | 2.1 | % | ||||||||||||
Customer receivables and Other4: | ||||||||||||||||||||
U.S. | 130,618 | 340 | 1.0 | % | 87,620 | 166 | 0.8 | % | ||||||||||||
Non-U.S. | 76,329 | 59 | 0.3 | % | 62,126 | 38 | 0.2 | % | ||||||||||||
Total | $ | 871,895 | $ | 2,212 | 1.0 | % | $ | 719,188 | $ | 2,358 | 1.3 | % | ||||||||
Interest bearing liabilities | ||||||||||||||||||||
Deposits1 | $ | 321,138 | $ | 108 | 0.1 | % | $ | 235,370 | $ | 220 | 0.4 | % | ||||||||
Borrowings1, 5 | 221,911 | 719 | 1.3 | % | 202,280 | 823 | 1.6 | % | ||||||||||||
Securities sold under agreements to repurchase and Securities loaned6: | ||||||||||||||||||||
U.S. | 37,849 | 33 | 0.3 | % | 28,840 | 92 | 1.3 | % | ||||||||||||
Non-U.S. | 29,719 | 83 | 1.1 | % | 30,446 | 117 | 1.5 | % | ||||||||||||
Customer payables and Other7: | ||||||||||||||||||||
U.S. | 129,695 | (481) | (1.5) | % | 121,977 | (403) | (1.3) | % | ||||||||||||
Non-U.S. | 75,829 | (115) | (0.6) | % | 63,778 | (91) | (0.6) | % | ||||||||||||
Total | $ | 816,141 | $ | 347 | 0.2 | % | $ | 682,691 | $ | 758 | 0.4 | % | ||||||||
Net interest income and net interest rate spread | $ | 1,865 | 0.8 | % | $ | 1,600 | 0.9 | % |
Six Months Ended June 30, | ||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||
$ in millions | Average Daily Balance | Interest | Annualized Average Rate | Average Daily Balance | Interest | Annualized Average Rate | ||||||||||||||
Interest earning assets | ||||||||||||||||||||
Investment securities1 | $ | 184,377 | $ | 1,457 | 1.6 | % | $ | 116,995 | $ | 1,074 | 1.8 | % | ||||||||
Loans1 | 156,729 | 2,028 | 2.6 | % | 140,884 | 2,204 | 3.1 | % | ||||||||||||
Securities purchased under agreements to resell and Securities borrowed2: | ||||||||||||||||||||
U.S. | 149,440 | (369) | (0.5) | % | 131,357 | 293 | 0.4 | % | ||||||||||||
Non-U.S. | 70,897 | (248) | (0.7) | % | 59,131 | (36) | (0.1) | % | ||||||||||||
Trading assets, net of Trading liabilities3: | ||||||||||||||||||||
U.S. | 75,563 | 819 | 2.2 | % | 74,663 | 1,115 | 3.0 | % | ||||||||||||
Non-U.S. | 17,518 | 177 | 2.0 | % | 23,905 | 250 | 2.1 | % | ||||||||||||
Customer receivables and Other4: | ||||||||||||||||||||
U.S. | 134,298 | 677 | 1.0 | % | 77,694 | 721 | 1.9 | % | ||||||||||||
Non-U.S. | 75,249 | 108 | 0.3 | % | 61,078 | 240 | 0.8 | % | ||||||||||||
Total | $ | 864,071 | $ | 4,649 | 1.1 | % | $ | 685,707 | $ | 5,861 | 1.7 | % | ||||||||
Interest bearing liabilities | ||||||||||||||||||||
Deposits1 | $ | 320,688 | $ | 228 | 0.1 | % | $ | 217,472 | $ | 626 | 0.6 | % | ||||||||
Borrowings1, 5 | 218,816 | 1,433 | 1.3 | % | 197,171 | 1,820 | 1.9 | % | ||||||||||||
Securities sold under agreements to repurchase and Securities loaned6: | ||||||||||||||||||||
U.S. | 35,891 | 77 | 0.4 | % | 29,954 | 420 | 2.8 | % | ||||||||||||
Non-U.S. | 28,486 | 153 | 1.1 | % | 30,261 | 298 | 2.0 | % | ||||||||||||
Customer payables and Other7: | ||||||||||||||||||||
U.S. | 130,065 | (918) | (1.4) | % | 125,797 | (294) | (0.5) | % | ||||||||||||
Non-U.S. | 71,608 | (217) | (0.6) | % | 63,375 | 35 | 0.1 | % | ||||||||||||
Total | $ | 805,554 | $ | 756 | 0.2 | % | $ | 664,030 | $ | 2,905 | 0.9 | % | ||||||||
Net interest income and net interest rate spread | $ | 3,893 | 0.9 | % | $ | 2,956 | 0.8 | % |
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71 |
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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) |
Glossary of Common Terms and Acronyms |
2020 Form 10-K | Annual report on Form 10-K for year ended December 31, 2020 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 | ||||
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) | ||||
CRM | Credit Risk Management Department | ||||
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 | ||||
FDIC | |||||
FFELP | Federal Family Education Loan Program | ||||
FHC | Financial Holding Company | ||||
FICO | Fair Isaac Corporation | ||||
Financial statements | Consolidated financial statements | ||||
G-SIB | Global systemically important banks | ||||
HQLA | High-quality liquid assets | ||||
HTM | Held-to-maturity | ||||
I/E | Intersegment eliminations | ||||
IHC | Intermediate holding company | ||||
IM | Investment Management | ||||
Income statements | Consolidated income statements |
IRS | Internal Revenue Service | ||||
IS | Institutional Securities | ||||
LCR | Liquidity coverage ratio, as adopted by the U.S. banking agencies | ||||
LIBOR | London Interbank Offered Rate | ||||
LTV | Loan-to-value | ||||
MSBNA | Morgan Stanley Bank, N.A. | ||||
MS&Co. | Morgan Stanley & Co. LLC | ||||
MSIP | Morgan Stanley & Co. International plc | ||||
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 adopted by the U.S. banking agencies | ||||
OCC | Office of the Comptroller of the Currency | ||||
OCI | Other comprehensive income (loss) | ||||
OTC | Over-the-counter | ||||
PRA | Prudential Regulation Authority | ||||
PSU | Performance-based stock unit | ||||
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 | ||||
SCB | Stress capital buffer | ||||
SEC | U.S. Securities and Exchange Commission | ||||
SLR | Supplementary leverage ratio | ||||
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 |
June 2021 Form 10-Q | 72 |
The following new matters and developments have occurred since previously reporting certain matters in the Firm’s Annual Report on2020 Form10-K for the year ended December 31, 2016 (the “Form10-K”), and the Firm’s Quarterly Report on Form10-Q for the quarterly period ended March 31, 20172021 (the “First Quarter Form10-Q”) and the Firm’s Quarterly Report on Form10-Q for the period ending June 30, 2017 (the “Second Quarter Form10-Q”). See also the disclosures set forth under “Legal Proceedings” in the 2020 Form 10-K.
Residential Mortgage and Credit Crisis Related Matters
On August 10, 2017, the plaintiff inWilmington Trust Company v. Morgan Stanley Mortgage Capital Holdings LLC et al.filed a motion for leave to appeal the Appellate Division, First Department’s July 11, 2017 decision and order granting in part and denying in part the Firm’s motion to dismiss. On September 26, 2017, the Appellate Division, First Department denied plaintiff’s motion for leave to appeal.
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 denied the Firm’s motion for leave to appeal inDeutscheZentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al.
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 the Firm and another bank in a matter styledCase number BS99-6998/2017,filed in the City Court of Copenhagen, Denmark concerning their roles as underwriters of the initial public offering (“IPO”) in March 2014 of the Danish company OW Bunker A/S. The claim is based on alleged prospectus liability and seeks damages of DKK 534,270,456 (approximately US$85 million) plus interest in respect of alleged losses arising from investing in shares in OW Bunker, which entered into bankruptcy in November 2014. Separately, on September 12, 2017, representatives of another group of institutional investors gave formal notice of their intention to commence legal proceedings against the Firm and the other bank. The investors are expected to join the Firm and the other bank to pending proceedings in Copenhagen, Denmark against various other parties involved in the IPO in a matter styledCase numberB-2073-16. The investors are expected to claim damages of DKK 766,066,012 (approximately US$121 million) plus interest, also on the basis of alleged prospectus liability.
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 November 3, 2017, the Firm intends to file its opposition to plaintiffs’ motion for class certification inAlaska Electrical Pension Fund et al. v. Bank of America et al. (formerly styledGenesee County Employees’ Retirement System v. Bank of America Corporation et al.).
Unregistered Sales of Equity Securities and Use of Proceeds
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 | Average Price Paid Per Share | 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 | ||||||||||||
Month #1 (July 1, 2017—July 31, 2017) | ||||||||||||||||
Share Repurchase Program2 | 2,729,000 | $ | 47.07 | 2,729,000 | $ | 4,872 | ||||||||||
Employee transactions3 | 769,637 | $ | 46.21 | — | — | |||||||||||
Month #2 (August 1, 2017—August 31, 2017) | ||||||||||||||||
Share Repurchase Program2 | 13,740,000 | $ | 46.56 | 13,740,000 | $ | 4,232 | ||||||||||
Employee transactions3 | 96,764 | $ | 46.66 | — | — | |||||||||||
Month #3 (September 1, 2017—September 30, 2017) | ||||||||||||||||
Share Repurchase Program2 | 10,448,247 | $ | 46.12 | 10,448,247 | $ | 3,750 | ||||||||||
Employee transactions3 | 192,674 | $ | 46.11 | — | — | |||||||||||
Quarter ended at September 30, 2017 | ||||||||||||||||
Share Repurchase Program2 | 26,917,247 | $ | 46.44 | 26,917,247 | $ | 3,750 | ||||||||||
Employee transactions3 | 1,059,075 | $ | 46.23 | — | — |
$ in millions, except per share data | Total Number of Shares Purchased1 | Average Price Paid per Share | Total Shares Purchased as Part of Share Repurchase Program2,3 | Dollar Value of Remaining Authorized Repurchase | ||||||||||
April | 9,005,938 | $ | 79.84 | 8,095,000 | $ | 7,219 | ||||||||
May | 14,426,207 | $ | 85.91 | 14,386,200 | $ | 5,983 | ||||||||
June | 11,627,627 | $ | 91.07 | 11,606,923 | $ | 4,926 | ||||||||
Total | 35,059,772 | $ | 86.06 | 34,088,123 |
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An exhibit index has been filed as part of this Report on pageE-1.
Morgan Stanley
Quarter Ended September 30, 2017
Exhibit No. | Description | |||||
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15 | ||||||
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31.1 | ||||||
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31.2 | ||||||
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32.1 | ||||||
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32.2 | ||||||
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101 | ||||||
| Interactive | |||||
104 | Cover Page Interactive Data File (formatted in Inline XBRL and |
73 |
MORGAN STANLEY (Registrant) | |||||||||
By: | /s/ SHARON YESHAYA | ||||||||
| |||||||||
Sharon Yeshaya
| |||||||||
By: | /s/ RAJA J. AKRAM | ||||||||
| |||||||||
Raja J. Akram Deputy Chief Financial Officer, Chief Accounting Officer and Controller |
74 |