UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-11758

(Exact Name of Registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) | 1585 Broadway New York, NY 10036 (Address of principal executive offices, including zip code) | 36-3145972 (I.R.S. Employer Identification No.) | (212) 761-4000 (Registrant's telephone number, including area code) |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer x | Accelerated Filer ¨ | |
Non-Accelerated Filer ¨ | Smaller reporting company ¨ | |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of October 30, 2015, there were 1,936,223,959 shares of the Registrant's Common Stock, par value $0.01 per share, outstanding.

QUARTERLY REPORT ON FORM 10-Q
For the quarter ended September 30, 2015
Table of Contents | Page | |||||||
Part I-Financial Information | ||||||||
Item 1. | Financial Statements (unaudited) | 1 | ||||||
Condensed Consolidated Statements of Income-Three and Nine Months Ended September 30, 2015 and 2014 | 1 | |||||||
Condensed Consolidated Statements of Comprehensive Income-Three and Nine Months Ended September 30, 2015 and 2014 | 2 | |||||||
Condensed Consolidated Statements of Financial Condition-September 30, 2015 and December 31, 2014 | 3 | |||||||
Condensed Consolidated Statements of Changes in Total Equity-Nine Months Ended September 30, 2015 and 2014 | 4 | |||||||
Condensed Consolidated Statements of Cash Flows-Nine Months Ended September 30, 2015 and 2014 | 5 | |||||||
Notes to Condensed Consolidated Financial Statements (unaudited) | 6 | |||||||
1. Introduction and Basis of Presentation | 6 | |||||||
2. Significant Accounting Policies | 7 | |||||||
3. Fair Values | 8 | |||||||
4. Derivative Instruments and Hedging Activities | 30 | |||||||
5. Investment Securities | 43 | |||||||
6. Collateralized Transactions | 49 | |||||||
7. Loans and Allowance for Credit Losses | 52 | |||||||
8. Equity Method Investments | 57 | |||||||
9. Deposits | 57 | |||||||
10. Long-Term Borrowings and Other Secured Financings | 58 | |||||||
11. Commitments, Guarantees and Contingencies | 59 | |||||||
12. Variable Interest Entities and Securitization Activities | 65 | |||||||
13. Regulatory Requirements | 72 | |||||||
14. Total Equity | 75 | |||||||
15. Earnings per Common Share | 79 | |||||||
16. Interest Income and Interest Expense | 80 | |||||||
17. Employee Benefit Plans | 81 | |||||||
18. Income Taxes | 81 | |||||||
19. Segment and Geographic Information | 82 | |||||||
20. Subsequent Events | 85 | |||||||
Report of Independent Registered Public Accounting Firm | 86 | |||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 87 | ||||||
Introduction | 87 | |||||||
Business Segments | 97 | |||||||
Supplemental Financial Information and Disclosures | 116 | |||||||
Accounting Development Updates | 118 | |||||||
Critical Accounting Policies | 119 | |||||||
Liquidity and Capital Resources | 120 | |||||||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 141 | ||||||
Item 4. | Controls and Procedures | 157 | ||||||
Financial Data Supplement (unaudited) | 158 | |||||||
Part II-Other Information | ||||||||
Item 1. | Legal Proceedings | 164 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 166 | ||||||
Item 5. | Other Information | 167 | ||||||
Item 6. | Exhibits | 167 |
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AVAILABLE INFORMATION
Morgan Stanley files annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (the "SEC"). You may read and copy any document we file with the SEC at the SEC's public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for information on the public reference room. The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including Morgan Stanley) file electronically with the SEC. Morgan Stanley's electronic SEC filings are available to the public at the SEC's internet site, www.sec.gov .
Morgan Stanley's internet site is www.morganstanley.com . You can access Morgan Stanley's Investor Relations webpage at www.morganstanley.com/about-us-ir . Morgan Stanley makes available free of charge, on or through its Investor Relations webpage, its proxy statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Morgan Stanley also makes available, through its Investor Relations webpage, via a link to the SEC's internet site, statements of beneficial ownership of Morgan Stanley's equity securities filed by its directors, officers, 10% or greater shareholders and others under Section 16 of the Exchange Act.
Morgan Stanley has a Corporate Governance webpage. You can access information about Morgan Stanley's corporate governance at www.morganstanley.com/about-us-governance . Morgan Stanley posts the following on its Corporate Governance webpage:
• | Amended and Restated Certificate of Incorporation; |
• | Amended and Restated Bylaws; |
• | Charters for its Audit Committee; Operations and Technology Committee; Compensation, Management Development and Succession Committee; Nominating and Governance Committee; and Risk Committee; |
• | Corporate Governance Policies; |
• | Policy Regarding Communication with the Board of Directors; |
• | Policy Regarding Director Candidates Recommended by Shareholders; |
• | Policy Regarding Corporate Political Activities; |
• | Policy Regarding Shareholder Rights Plan; |
• | Code of Ethics and Business Conduct; |
• | Code of Conduct; and |
• | Integrity Hotline information. |
Morgan Stanley's Code of Ethics and Business Conduct applies to all directors, officers and employees, including its Chief Executive Officer, Chief Financial Officer and Deputy Chief Financial Officer. Morgan Stanley will post any amendments to the Code of Ethics and Business Conduct and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange LLC ("NYSE") on its internet site. You can request a copy of these documents, excluding exhibits, at no cost, by contacting Investor Relations, 1585 Broadway, New York, NY 10036 (212-761-4000). The information on Morgan Stanley's internet site is not incorporated by reference into this report.
![]() | ii |
Part I-Financial Information.
Item 1. | Financial Statements. |
MORGAN STANLEY
Condensed Consolidated Statements of Income
(dollars in millions, except share and per share data)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenues: | ||||||||||||||||
Investment banking | $ | 1,313 | $ | 1,551 | $ | 4,284 | $ | 4,492 | ||||||||
Trading | 2,026 | 2,448 | 8,649 | 7,926 | ||||||||||||
Investments | (119 | ) | 138 | 408 | 724 | |||||||||||
Commissions and fees | 1,115 | 1,124 | 3,459 | 3,478 | ||||||||||||
Asset management, distribution and administration fees | 2,732 | 2,716 | 8,155 | 7,886 | ||||||||||||
Other | (62 | ) | 373 | 406 | 873 | |||||||||||
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Total non-interest revenues | 7,005 | 8,350 | 25,361 | 25,379 | ||||||||||||
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Interest income | 1,451 | 1,384 | 4,321 | 3,977 | ||||||||||||
Interest expense | 689 | 827 | 2,265 | 2,845 | ||||||||||||
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Net interest | 762 | 557 | 2,056 | 1,132 | ||||||||||||
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Net revenues | 7,767 | 8,907 | 27,417 | 26,511 | ||||||||||||
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Non-interest expenses: | ||||||||||||||||
Compensation and benefits | 3,437 | 4,214 | 12,366 | 12,720 | ||||||||||||
Occupancy and equipment | 341 | 350 | 1,034 | 1,069 | ||||||||||||
Brokerage, clearing and exchange fees | 485 | 437 | 1,435 | 1,338 | ||||||||||||
Information processing and communications | 447 | 396 | 1,300 | 1,231 | ||||||||||||
Marketing and business development | 158 | 160 | 487 | 472 | ||||||||||||
Professional services | 576 | 522 | 1,660 | 1,506 | ||||||||||||
Other | 849 | 608 | 2,079 | 1,653 | ||||||||||||
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Total non-interest expenses | 6,293 | 6,687 | 20,361 | 19,989 | ||||||||||||
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Income from continuing operations before income taxes | 1,474 | 2,220 | 7,056 | 6,522 | ||||||||||||
Provision for income taxes | 423 | 463 | 1,704 | 1,263 | ||||||||||||
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Income from continuing operations | 1,051 | 1,757 | 5,352 | 5,259 | ||||||||||||
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Discontinued operations: | ||||||||||||||||
Income (loss) from discontinued operations before income taxes | (4 | ) | (8 | ) | (13 | ) | (11 | ) | ||||||||
Provision for (benefit from) income taxes | (2 | ) | (3 | ) | (4 | ) | (5 | ) | ||||||||
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Income (loss) from discontinued operations | (2 | ) | (5 | ) | (9 | ) | (6 | ) | ||||||||
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Net income | $ | 1,049 | $ | 1,752 | $ | 5,343 | $ | 5,253 | ||||||||
Net income applicable to nonredeemable noncontrolling interests | 31 | 59 | 124 | 156 | ||||||||||||
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Net income applicable to Morgan Stanley | $ | 1,018 | $ | 1,693 | $ | 5,219 | $ | 5,097 | ||||||||
Preferred stock dividends and other | 79 | 64 | 301 | 199 | ||||||||||||
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Earnings applicable to Morgan Stanley common shareholders | $ | 939 | $ | 1,629 | $ | 4,918 | $ | 4,898 | ||||||||
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Earnings per basic common share: | ||||||||||||||||
Income from continuing operations | $ | 0.49 | $ | 0.85 | $ | 2.57 | $ | 2.55 | ||||||||
Income (loss) from discontinued operations | - | - | - | (0.01 | ) | |||||||||||
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Earnings per basic common share | $ | 0.49 | $ | 0.85 | $ | 2.57 | $ | 2.54 | ||||||||
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Earnings per diluted common share: | ||||||||||||||||
Income from continuing operations | $ | 0.48 | $ | 0.83 | $ | 2.52 | $ | 2.49 | ||||||||
Income (loss) from discontinued operations | - | - | (0.01 | ) | - | |||||||||||
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Earnings per diluted common share | $ | 0.48 | $ | 0.83 | $ | 2.51 | $ | 2.49 | ||||||||
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Dividends declared per common share | $ | 0.15 | $ | 0.10 | $ | 0.40 | $ | 0.25 | ||||||||
Average common shares outstanding: | ||||||||||||||||
Basic | 1,904,213,493 | 1,922,995,835 | 1,915,807,606 | 1,925,172,108 | ||||||||||||
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Diluted | 1,949,281,601 | 1,970,922,473 | 1,957,544,581 | 1,970,091,170 | ||||||||||||
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See Notes to Condensed Consolidated Financial Statements.
1 | ![]() |
MORGAN STANLEY
Condensed Consolidated Statements of Comprehensive Income
(dollars in millions)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net income | $ | 1,049 | $ | 1,752 | $ | 5,343 | $ | 5,253 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments(1) | $ | (61 | ) | $ | (327 | ) | $ | (249 | ) | $ | (175 | ) | ||||
Change in net unrealized gains (losses) on available for sale securities(2) | 100 | (102 | ) | 72 | 134 | |||||||||||
Pension, postretirement and other(3) | 4 | (15 | ) | 3 | (7 | ) | ||||||||||
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Total other comprehensive income (loss) | $ | 43 | $ | (444 | ) | $ | (174 | ) | $ | (48 | ) | |||||
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Comprehensive income | $ | 1,092 | $ | 1,308 | $ | 5,169 | $ | 5,205 | ||||||||
Net income applicable to nonredeemable noncontrolling interests | 31 | 59 | 124 | 156 | ||||||||||||
Other comprehensive income (loss) applicable to nonredeemable noncontrolling interests | 15 | (62 | ) | (3 | ) | (26 | ) | |||||||||
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Comprehensive income applicable to Morgan Stanley | $ | 1,046 | $ | 1,311 | $ | 5,048 | $ | 5,075 | ||||||||
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(1) | Amounts include provision for (benefit from) income taxes of $30 million and $249 million for the quarters ended September 30, 2015 and 2014, respectively, and $150 million and $137 million for the nine months ended September 30, 2015 and 2014, respectively. |
(2) | Amounts include provision for (benefit from) income taxes of $57 million and $(70) million for the quarters ended September 30, 2015 and 2014, respectively, and $41 million and $92 million for the nine months ended September 30, 2015 and 2014, respectively. |
(3) | Amounts include provision for (benefit from) income taxes of $(2) million and $(7) million for the quarters ended September 30, 2015 and 2014, respectively, and $(2) million and $(4) million for the nine months ended September 30, 2015 and 2014, respectively. |
See Notes to Condensed Consolidated Financial Statements.
![]() | 2 |
MORGAN STANLEY
Condensed Consolidated Statements of Financial Condition
(dollars in millions, except share data)
(unaudited)
September 30, 2015 | December 31, 2014 | |||||||
Assets | ||||||||
Cash and due from banks ($13 and $45 at September 30, 2015 and December 31, 2014, respectively, related to consolidated variable interest entities, generally not available to the Company) | $ | 19,244 | $ | 21,381 | ||||
Interest bearing deposits with banks | 34,274 | 25,603 | ||||||
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements ($165 and $149 at September 30, 2015 and December 31, 2014, respectively, related to consolidated variable interest entities, generally not available to the Company) | 35,552 | 40,607 | ||||||
Trading assets, at fair value ($129,632 and $127,342 were pledged to various parties at September 30, 2015 and December 31, 2014, respectively) ($834 and $966 at September 30, 2015 and December 31, 2014, respectively, related to consolidated variable interest entities, generally not available to the Company) | 237,811 | 256,801 | ||||||
Investment securities (includes $61,159 and $69,216 at fair value at September 30, 2015 and December 31, 2014, respectively) | 64,689 | 69,316 | ||||||
Securities received as collateral, at fair value | 9,456 | 21,316 | ||||||
Securities purchased under agreements to resell (includes $809 and $1,113 at fair value at September 30, 2015 and December 31, 2014, respectively) | 127,206 | 83,288 | ||||||
Securities borrowed | 148,245 | 136,708 | ||||||
Customer and other receivables | 50,070 | 48,961 | ||||||
Loans: | ||||||||
Held for investment (net of allowances of $173 and $149 at September 30, 2015 and December 31, 2014, respectively) | 69,010 | 57,119 | ||||||
Held for sale | 9,199 | 9,458 | ||||||
Other investments ($364 and $467 at September 30, 2015 and December 31, 2014, respectively, related to consolidated variable interest entities, generally not available to the Company) | 4,282 | 4,355 | ||||||
Premises, equipment and software costs (net of accumulated depreciation of $6,906 and $6,219 at September 30, 2015 and December 31, 2014, respectively) ($187 and $191 at September 30, 2015 and December 31, 2014, respectively, related to consolidated variable interest entities, generally not available to the Company) | 6,259 | 6,108 | ||||||
Goodwill | 6,587 | 6,588 | ||||||
Intangible assets (net of accumulated amortization of $2,050 and $1,824 at September 30, 2015 and December 31, 2014, respectively) (includes $5 and $6 at fair value at September 30, 2015 and December 31, 2014, respectively) | 3,069 | 3,159 | ||||||
Other assets ($57 and $59 at September 30, 2015 and December 31, 2014, respectively, related to consolidated variable interest entities, generally not available to the Company) | 9,160 | 10,742 | ||||||
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Total assets | $ | 834,113 | $ | 801,510 | ||||
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Liabilities | ||||||||
Deposits | $ | 147,226 | $ | 133,544 | ||||
Short-term borrowings (includes $1,768 and $1,765 at fair value at September 30, 2015 and December 31, 2014, respectively) | 1,982 | 2,261 | ||||||
Trading liabilities, at fair value | 125,525 | 107,381 | ||||||
Obligation to return securities received as collateral, at fair value | 20,328 | 25,685 | ||||||
Securities sold under agreements to repurchase (includes $597 and $612 at fair value at September 30, 2015 and December 31, 2014, respectively) | 58,570 | 69,949 | ||||||
Securities loaned | 20,644 | 25,219 | ||||||
Other secured financings (includes $3,450 and $4,504 at fair value at September 30, 2015 and December 31, 2014, respectively) ($456 and $348 at September 30, 2015 and December 31, 2014, respectively, related to consolidated variable interest entities, generally non-recourse to the Company) | 10,171 | 12,085 | ||||||
Customer and other payables | 193,775 | 181,069 | ||||||
Other liabilities and accrued expenses ($3 and $72 at September 30, 2015 and December 31, 2014, respectively, related to consolidated variable interest entities, generally non-recourse to the Company) | 19,129 | 19,441 | ||||||
Long-term borrowings (includes $31,387 and $31,774 at fair value at September 30, 2015 and December 31, 2014, respectively) | 160,343 | 152,772 | ||||||
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Total liabilities | 757,693 | 729,406 | ||||||
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Commitments and contingent liabilities (see Note 11) | ||||||||
Equity | ||||||||
Morgan Stanley shareholders' equity: | ||||||||
Preferred stock (see Note 14) | 7,520 | 6,020 | ||||||
Common stock, $0.01 par value: | ||||||||
Shares authorized: 3,500,000,000 at September 30, 2015 and December 31, 2014; | ||||||||
Shares issued: 2,038,893,979 at September 30, 2015 and December 31, 2014; | ||||||||
Shares outstanding: 1,938,069,312 and 1,950,980,142 at September 30, 2015 and December 31, 2014, respectively | 20 | 20 | ||||||
Additional paid-in capital | 23,876 | 24,249 | ||||||
Retained earnings | 48,746 | 44,625 | ||||||
Employee stock trusts | 2,399 | 2,127 | ||||||
Accumulated other comprehensive loss | (1,419 | ) | (1,248 | ) | ||||
Common stock held in treasury, at cost, $0.01 par value: | ||||||||
Shares outstanding: 100,824,667 and 87,913,837 at September 30, 2015 and December 31, 2014, respectively | (3,456 | ) | (2,766 | ) | ||||
Common stock issued to employee stock trusts | (2,399 | ) | (2,127 | ) | ||||
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Total Morgan Stanley shareholders' equity | 75,287 | 70,900 | ||||||
Nonredeemable noncontrolling interests | 1,133 | 1,204 | ||||||
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Total equity | 76,420 | 72,104 | ||||||
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Total liabilities and equity | $ | 834,113 | $ | 801,510 | ||||
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See Notes to Condensed Consolidated Financial Statements.
3 | ![]() |
MORGAN STANLEY
Condensed Consolidated Statements of Changes in Total Equity
Nine Months Ended September 30, 2015 and 2014
(dollars in millions)
(unaudited)
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- redeemable Non- controlling Interests | Total Equity | |||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2014 | $ | 6,020 | $ | 20 | $ | 24,249 | $ | 44,625 | $ | 2,127 | $ | (1,248 | ) | $ | (2,766 | ) | $ | (2,127 | ) | $ | 1,204 | $ | 72,104 | |||||||||||||||||
Net income applicable to Morgan Stanley | - | - | - | 5,219 | - | - | - | - | - | 5,219 | ||||||||||||||||||||||||||||||
Net income applicable to nonredeemable noncontrolling interests | - | - | - | - | - | - | - | - | 124 | 124 | ||||||||||||||||||||||||||||||
Dividends | - | - | - | (1,098 | ) | - | - | - | - | - | (1,098 | ) | ||||||||||||||||||||||||||||
Shares issued under employee plans and related tax effects | - | - | (356 | ) | - | 272 | - | 1,445 | (272 | ) | - | 1,089 | ||||||||||||||||||||||||||||
Repurchases of common stock and employee tax withholdings | - | - | - | - | - | - | (2,135 | ) | - | - | (2,135 | ) | ||||||||||||||||||||||||||||
Net change in Accumulated other comprehensive income | - | - | - | - | - | (171 | ) | - | - | (3 | ) | (174 | ) | |||||||||||||||||||||||||||
Issuance of preferred stock | 1,500 | - | (7 | ) | - | - | - | - | - | - | 1,493 | |||||||||||||||||||||||||||||
Deconsolidation of certain legal entities associated with a real estate fund | - | - | - | - | - | - | - | - | (191 | ) | (191 | ) | ||||||||||||||||||||||||||||
Other net decreases | - | - | (10 | ) | - | - | - | - | - | (1 | ) | (11 | ) | |||||||||||||||||||||||||||
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BALANCE AT SEPTEMBER 30, 2015 | $ | 7,520 | $ | 20 | $ | 23,876 | $ | 48,746 | $ | 2,399 | $ | (1,419 | ) | $ | (3,456 | ) | $ | (2,399 | ) | $ | 1,133 | $ | 76,420 | |||||||||||||||||
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BALANCE AT DECEMBER 31, 2013 | $ | 3,220 | $ | 20 | $ | 24,570 | $ | 42,172 | $ | 1,718 | $ | (1,093 | ) | $ | (2,968 | ) | $ | (1,718 | ) | $ | 3,109 | $ | 69,030 | |||||||||||||||||
Net income applicable to Morgan Stanley | - | - | - | 5,097 | - | - | - | - | - | 5,097 | ||||||||||||||||||||||||||||||
Net income applicable to nonredeemable noncontrolling interests | - | - | - | - | - | - | - | - | 156 | 156 | ||||||||||||||||||||||||||||||
Dividends | - | - | - | (696 | ) | - | - | - | - | - | (696 | ) | ||||||||||||||||||||||||||||
Shares issued under employee plans and related tax effects | - | - | (627 | ) | - | 409 | - | 1,638 | (409 | ) | - | 1,011 | ||||||||||||||||||||||||||||
Repurchases of common stock and employee tax withholdings | - | - | - | - | - | - | (1,172 | ) | - | - | (1,172 | ) | ||||||||||||||||||||||||||||
Net change in Accumulated other comprehensive income | - | - | - | - | - | (22 | ) | - | - | (26 | ) | (48 | ) | |||||||||||||||||||||||||||
Issuance of preferred stock | 2,800 | - | (18 | ) | - | - | - | - | - | - | 2,782 | |||||||||||||||||||||||||||||
Deconsolidation of certain legal entities associated with a real estate fund | - | - | - | - | - | - | - | - | (1,606 | ) | (1,606 | ) | ||||||||||||||||||||||||||||
Other net decreases | - | - | (3 | ) | - | - | - | - | - | (540 | ) | (543 | ) | |||||||||||||||||||||||||||
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BALANCE AT SEPTEMBER 30, 2014 | $ | 6,020 | $ | 20 | $ | 23,922 | $ | 46,573 | $ | 2,127 | $ | (1,115 | ) | $ | (2,502 | ) | $ | (2,127 | ) | $ | 1,093 | $ | 74,011 | |||||||||||||||||
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See Notes to Condensed Consolidated Financial Statements.
![]() | 4 |
MORGAN STANLEY
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
(unaudited)
Nine Months Ended September 30, | ||||||||
2015 | 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 5,343 | $ | 5,253 | ||||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||||||
Income from equity method investments | (118 | ) | (108 | ) | ||||
Compensation payable in common stock and options | 836 | 933 | ||||||
Depreciation and amortization | 1,023 | 748 | ||||||
Net gain on sale of available for sale securities | (74 | ) | (36 | ) | ||||
Impairment charges | 91 | 85 | ||||||
Provision for credit losses on lending activities | 47 | 1 | ||||||
Other operating activities | 264 | (167 | ) | |||||
Changes in assets and liabilities: | ||||||||
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements | 5,055 | (5,903 | ) | |||||
Trading assets, net of Trading liabilities | 39,775 | 39,156 | ||||||
Securities borrowed | (11,537 | ) | (10,596 | ) | ||||
Securities loaned | (4,575 | ) | (5,142 | ) | ||||
Customer and other receivables and other assets | 787 | 2,931 | ||||||
Customer and other payables and other liabilities | 10,351 | 23,335 | ||||||
Securities purchased under agreements to resell | (43,918 | ) | 19,136 | |||||
Securities sold under agreements to repurchase | (11,313 | ) | (61,935 | ) | ||||
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Net cash provided by (used for) operating activities | (7,963 | ) | 7,691 | |||||
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CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Proceeds from (payments for): | ||||||||
Premises, equipment and software, net | (964 | ) | (533 | ) | ||||
Business dispositions, net of cash disposed | - | 962 | ||||||
Loans: | ||||||||
Purchases, net of proceeds from sales | (1,053 | ) | (797 | ) | ||||
Originations, net of repayments | (10,260 | ) | (13,177 | ) | ||||
Investment securities: | ||||||||
Purchases | (32,133 | ) | (24,581 | ) | ||||
Proceeds from sales | 32,788 | 11,212 | ||||||
Proceeds from paydowns and maturities | 4,285 | 3,415 | ||||||
Other investing activities | (61 | ) | (264 | ) | ||||
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Net cash used for investing activities | (7,398 | ) | (23,763 | ) | ||||
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| |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net proceeds from (payments for): | ||||||||
Short-term borrowings | (279 | ) | (382 | ) | ||||
Nonredeemable noncontrolling interests | (70 | ) | (189 | ) | ||||
Other secured financings | (1,677 | ) | (1,725 | ) | ||||
Deposits | 13,682 | 12,003 | ||||||
Proceeds from: | ||||||||
Excess tax benefits associated with stock-based awards | 180 | 91 | ||||||
Derivatives financing activities | 392 | 784 | ||||||
Issuance of preferred stock, net of issuance costs | 1,493 | 2,782 | ||||||
Issuance of long-term borrowings | 30,159 | 26,529 | ||||||
Payments for: | ||||||||
Long-term borrowings | (17,615 | ) | (24,731 | ) | ||||
Derivatives financing activities | (372 | ) | (384 | ) | ||||
Repurchases of common stock and employee tax withholdings | (2,135 | ) | (1,172 | ) | ||||
Cash dividends | (1,096 | ) | (652 | ) | ||||
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Net cash provided by financing activities | 22,662 | 12,954 | ||||||
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Effect of exchange rate changes on cash and cash equivalents | (767 | ) | (939 | ) | ||||
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Net decrease in cash and cash equivalents | 6,534 | (4,057 | ) | |||||
Cash and cash equivalents, at beginning of period | 46,984 | 59,883 | ||||||
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Cash and cash equivalents, at end of period | $ | 53,518 | $ | 55,826 | ||||
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Cash and cash equivalents include: | ||||||||
Cash and due from banks | $ | 19,244 | $ | 20,242 | ||||
Interest bearing deposits with banks | 34,274 | 35,584 | ||||||
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Cash and cash equivalents, at end of period | $ | 53,518 | $ | 55,826 | ||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest were $1,456 million and $2,116 million for the nine months ended September 30, 2015 and 2014, respectively.
Cash payments for income taxes were $541 million and $620 million for the nine months ended September 30, 2015 and 2014, respectively.
See Notes to Condensed Consolidated Financial Statements.
5 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. | Introduction and Basis of Presentation. |
The Company.
Morgan Stanley, a financial holding company, is a global financial services firm that maintains significant market positions in each of its business segments-Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms "Morgan Stanley" or the "Company" mean Morgan Stanley (the "Parent") together with its consolidated subsidiaries.
For a summary of the activities of each of the Company's business segments, see Note 1 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 (the "2014 Form 10-K").
Basis of Financial Information.
The Company's condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), which require the Company to make estimates and assumptions regarding the valuations of certain financial instruments, the valuation of goodwill and intangible assets, compensation, deferred tax assets, the outcome of legal and tax matters, allowance for credit losses and other matters that affect its condensed consolidated financial statements and related disclosures. The Company believes that the estimates utilized in the preparation of its condensed consolidated financial statements are prudent and reasonable. Actual results could differ materially from these estimates. Intercompany balances and transactions have been eliminated.
The accompanying condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto included in the 2014 Form 10-K. Certain footnote disclosures included in the 2014 Form 10-K have been condensed or omitted from the condensed consolidated financial statements as they are not required for interim reporting under U.S. GAAP. The condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are, in the opinion of management, necessary for the fair presentation of the results for the interim period. The results of operations for interim periods are not necessarily indicative of results for the entire year.
Consolidation.
The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and other entities in which the Company has a controlling financial interest, including certain variable interest entities ("VIE") (see Note 12). For consolidated subsidiaries that are less than wholly owned, the third-party holdings of equity interests are referred to as noncontrolling interests. The net income attributable to noncontrolling interests for such subsidiaries is presented as Net income (loss) applicable to nonredeemable noncontrolling interests in the Company's condensed consolidated statements of income. The portion of shareholders' equity of such subsidiaries that is attributable to noncontrolling interests for such subsidiaries is presented as Nonredeemable noncontrolling interests, a component of total equity, in the Company's condensed consolidated statements of financial condition.
For a discussion of the Company's VIEs and its significant regulated U.S. and international subsidiaries, see Note 1 to the consolidated financial statements in the 2014 Form 10-K.
![]() | 6 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Income Statement Presentation.
The Company, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. In connection with the delivery of the various products and services to clients, the Company manages its revenues and related expenses in the aggregate. As such, when assessing the performance of its businesses, primarily in its Institutional Securities business segment, the Company considers its trading, investment banking, commissions and fees, and interest income, along with the associated interest expense, as one integrated activity.
Statements of Cash Flows Presentation.
During 2015, the Company deconsolidated approximately $191 million in net assets previously attributable to nonredeemable noncontrolling interests that were related to a real estate fund sponsored by the Company. The deconsolidation resulted in a non-cash reduction of assets of $169 million. During 2014, the Company deconsolidated approximately $1.6 billion in net assets previously attributable to nonredeemable noncontrolling interests related to certain legal entities associated with another real estate fund sponsored by the Company. The deconsolidation resulted in a non-cash reduction of assets of $1.3 billion.
Global Oil Merchanting Business.
As a result of entering into a definitive agreement to sell the global oil merchanting unit of the commodities division to Castleton Commodities International LLC, on May 11, 2015, the Company recognized an impairment charge of $10 million and $69 million in Other revenues in the Company's condensed consolidated statements of income in the quarter and nine months ended September 30, 2015, respectively, to reduce the carrying amount of the unit to its estimated fair value less costs to sell. The Company closed the transaction on November 1, 2015. The transaction does not meet the criteria for discontinued operations and is not expected to have a material impact on the Company's financial results (see Note 3).
TransMontaigne.
On July 1, 2014, the Company completed the sale of its ownership stake in TransMontaigne Inc. ("TransMontaigne"), a U.S.-based oil storage, marketing and transportation company, as well as related physical inventory and the assumption of the Company's obligations under certain terminal storage contracts, to NGL Energy Partners LP. The gain on sale, which was included in continuing operations, was approximately $101 million for the quarter and nine months ended September 30, 2014.
CanTerm.
On March 27, 2014, the Company completed the sale of Canterm Canadian Terminals Inc. ("CanTerm"), a public storage terminal operator for refined products with two distribution terminals in Canada. As a result of the Company's level of continuing involvement with CanTerm, the results of CanTerm are reported as a component of continuing operations within the Company's Institutional Securities business segment for the nine months ended September 30, 2014. The gain on sale was approximately $45 million and is included in the condensed consolidated statement of income for the nine months ended September 30, 2014.
2. | Significant Accounting Policies. |
For a detailed discussion about the Company's significant accounting policies, see Note 2 to the consolidated financial statements in the 2014 Form 10-K.
7 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
During the quarter and nine months ended September 30, 2015, other than the following, there were no significant updates made to the Company's significant accounting policies.
Accounting Standards Adopted.
Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.
In June 2014, the Financial Accounting Standards Board (the "FASB") issued an accounting update requiring repurchase-to-maturity transactions be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. This accounting update also requires separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty (a repurchase financing), which will result in secured borrowing accounting for the repurchase agreement. This guidance became effective for the Company beginning January 1, 2015. In addition, new disclosures are required for sales of financial assets where the Company retains substantially all the exposure throughout the term and for the collateral pledged and remaining maturity of repurchase and securities lending agreements, which were effective January 1, 2015, and April 1, 2015, respectively. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements. For further information on the adoption of this guidance, see Notes 6 and 12.
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).
In May 2015, the FASB issued an accounting update that removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured at net asset value ("NAV") per share, or its equivalent using the practical expedient. The Company adopted this guidance retrospectively during the second quarter of 2015, as early adoption is permitted. For further information on the adoption of this guidance, see Note 3.
Goodwill.
The Company completed its annual goodwill impairment testing at July 1, 2015. The Company's impairment testing did not indicate any goodwill impairment, as each of the Company's reporting units with goodwill had a fair value that was substantially in excess of its carrying value. However, adverse market or economic events could result in impairment charges in future periods.
3. | Fair Values. |
Fair Value Measurements.
For a description of the valuation techniques applied to the Company's major categories of assets and liabilities measured at fair value on a recurring basis, see Note 4 to the consolidated financial statements in the 2014 Form 10-K.
![]() | 8 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
The following fair value hierarchy tables present information about the Company's assets and liabilities measured at fair value on a recurring basis at September 30, 2015 and December 31, 2014.
Assets and Liabilities Measured at Fair Value on a Recurring Basis.
At September 30, 2015.
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Counterparty and Cash Collateral Netting | Balance at September 30, 2015 | ||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||
Trading assets: | ||||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||||
U.S. Treasury securities | $ | 18,359 | $ | - | $ | - | $ | - | $ | 18,359 | ||||||||||
U.S. agency securities | 1,328 | 18,690 | - | - | 20,018 | |||||||||||||||
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Total U.S. government and agency securities | 19,687 | 18,690 | - | - | 38,377 | |||||||||||||||
Other sovereign government obligations | 19,597 | 7,493 | 11 | - | 27,101 | |||||||||||||||
Corporate and other debt: | ||||||||||||||||||||
State and municipal securities | - | 1,954 | 33 | - | 1,987 | |||||||||||||||
Residential mortgage-backed securities | - | 1,746 | 404 | - | 2,150 | |||||||||||||||
Commercial mortgage-backed securities | - | 1,868 | 79 | - | 1,947 | |||||||||||||||
Asset-backed securities | - | 771 | 31 | - | 802 | |||||||||||||||
Corporate bonds | - | 13,207 | 226 | - | 13,433 | |||||||||||||||
Collateralized debt and loan obligations | - | 187 | 545 | - | 732 | |||||||||||||||
Loans and lending commitments | - | 6,170 | 5,164 | - | 11,334 | |||||||||||||||
Other debt | - | 1,714 | 530 | - | 2,244 | |||||||||||||||
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Total corporate and other debt | - | 27,617 | 7,012 | - | 34,629 | |||||||||||||||
Corporate equities(1) | 96,023 | 491 | 575 | - | 97,089 | |||||||||||||||
Derivative and other contracts: | ||||||||||||||||||||
Interest rate contracts | 860 | 368,503 | 2,160 | - | 371,523 | |||||||||||||||
Credit contracts | - | 23,844 | 937 | - | 24,781 | |||||||||||||||
Foreign exchange contracts | 102 | 70,801 | 347 | - | 71,250 | |||||||||||||||
Equity contracts | 876 | 49,833 | 951 | - | 51,660 | |||||||||||||||
Commodity contracts | 3,392 | 14,646 | 3,203 | - | 21,241 | |||||||||||||||
Other | - | 364 | - | - | 364 | |||||||||||||||
Netting(2) | (4,652 | ) | (437,820 | ) | (3,981 | ) | (61,072 | ) | (507,525 | ) | ||||||||||
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Total derivative and other contracts | 578 | 90,171 | 3,617 | (61,072 | ) | 33,294 | ||||||||||||||
Investments: | ||||||||||||||||||||
Investments measured at NAV(3) | 4,278 | |||||||||||||||||||
Principal investments | 23 | 97 | 541 | - | 661 | |||||||||||||||
Other | 149 | 204 | 312 | - | 665 | |||||||||||||||
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Total investments | 172 | 301 | 853 | - | 5,604 | |||||||||||||||
Physical commodities | - | 1,717 | - | - | 1,717 | |||||||||||||||
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Total trading assets | 136,057 | 146,480 | 12,068 | (61,072 | ) | 237,811 | ||||||||||||||
AFS securities | 27,765 | 33,394 | - | - | 61,159 | |||||||||||||||
Securities received as collateral | 9,455 | - | 1 | - | 9,456 | |||||||||||||||
Securities purchased under agreements to resell | - | 809 | - | - | 809 | |||||||||||||||
Intangible assets(4) | - | - | 5 | - | 5 | |||||||||||||||
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Total assets measured at fair value | $ | 173,277 | $ | 180,683 | $ | 12,074 | $ | (61,072 | ) | $ | 309,240 | |||||||||
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9 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Counterparty and Cash Collateral Netting | Balance at September 30, 2015 | ||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||
Short-term borrowings | $ | - | $ | 1,699 | $ | 69 | $ | - | $ | 1,768 | ||||||||||
Trading liabilities: | ||||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||||
U.S. Treasury securities | 14,524 | - | - | - | 14,524 | |||||||||||||||
U.S. agency securities | 1,026 | 135 | - | - | 1,161 | |||||||||||||||
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Total U.S. government and agency securities | 15,550 | 135 | - | - | 15,685 | |||||||||||||||
Other sovereign government obligations | 13,611 | 2,379 | - | - | 15,990 | |||||||||||||||
Corporate and other debt: | ||||||||||||||||||||
State and municipal securities | - | 3 | - | - | 3 | |||||||||||||||
Corporate bonds | - | 6,783 | 19 | - | 6,802 | |||||||||||||||
Lending commitments | - | 2 | - | - | 2 | |||||||||||||||
Other debt | - | 7 | 4 | - | 11 | |||||||||||||||
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| |||||||||||
Total corporate and other debt | - | 6,795 | 23 | - | 6,818 | |||||||||||||||
Corporate equities(1) | 50,017 | 1,145 | 97 | - | 51,259 | |||||||||||||||
Derivative and other contracts: | ||||||||||||||||||||
Interest rate contracts | 780 | 346,806 | 2,071 | - | 349,657 | |||||||||||||||
Credit contracts | - | 22,900 | 1,742 | - | 24,642 | |||||||||||||||
Foreign exchange contracts | 60 | 72,593 | 281 | - | 72,934 | |||||||||||||||
Equity contracts | 691 | 53,728 | 2,992 | - | 57,411 | |||||||||||||||
Commodity contracts | 3,845 | 13,551 | 1,771 | - | 19,167 | |||||||||||||||
Other | - | 51 | - | - | 51 | |||||||||||||||
Netting(2) | (4,652 | ) | (437,820 | ) | (3,981 | ) | (41,636 | ) | (488,089 | ) | ||||||||||
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Total derivative and other contracts | 724 | 71,809 | 4,876 | (41,636 | ) | 35,773 | ||||||||||||||
Total trading liabilities | 79,902 | 82,263 | 4,996 | (41,636 | ) | 125,525 | ||||||||||||||
Obligation to return securities received as collateral | 20,327 | - | 1 | - | 20,328 | |||||||||||||||
Securities sold under agreements to repurchase | - | 443 | 154 | - | 597 | |||||||||||||||
Other secured financings | - | 3,109 | 341 | - | 3,450 | |||||||||||||||
Long-term borrowings | - | 28,925 | 2,462 | - | 31,387 | |||||||||||||||
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Total liabilities measured at fair value | $ | 100,229 | $ | 116,439 | $ | 8,023 | $ | (41,636 | ) | $ | 183,055 | |||||||||
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AFS-available for sale
(1) | For trading purposes, the Company holds or sells short equity securities issued by entities in diverse industries and of varying size. |
(2) | For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled "Counterparty and Cash Collateral Netting." For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that shared level. For further information on derivative instruments and hedging activities, see Note 4. |
(3) | Certain investments that are measured at fair value using the NAV per share, or its equivalent, are not classified in the fair value hierarchy. For additional disclosure about such investments, see "Fair Value of Investments that are Measured at Net Asset Value" herein. |
(4) | Amount represents mortgage servicing rights ("MSRs") accounted for at fair value. |
![]() | 10 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
At December 31, 2014.
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Counterparty and Cash Collateral Netting | Balance at December 31, 2014 | ||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||
Trading assets: | ||||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||||
U.S. Treasury securities | $ | 16,961 | $ | - | $ | - | $ | - | $ | 16,961 | ||||||||||
U.S. agency securities | 850 | 18,193 | - | - | 19,043 | |||||||||||||||
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|
|
|
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|
|
| |||||||||||
Total U.S. government and agency securities | 17,811 | 18,193 | - | - | 36,004 | |||||||||||||||
Other sovereign government obligations | 15,149 | 7,888 | 41 | - | 23,078 | |||||||||||||||
Corporate and other debt: | ||||||||||||||||||||
State and municipal securities | - | 2,049 | - | - | 2,049 | |||||||||||||||
Residential mortgage-backed securities | - | 1,991 | 175 | - | 2,166 | |||||||||||||||
Commercial mortgage-backed securities | - | 1,484 | 96 | - | 1,580 | |||||||||||||||
Asset-backed securities | - | 583 | 76 | - | 659 | |||||||||||||||
Corporate bonds | - | 15,800 | 386 | - | 16,186 | |||||||||||||||
Collateralized debt and loan obligations | - | 741 | 1,152 | - | 1,893 | |||||||||||||||
Loans and lending commitments | - | 6,088 | 5,874 | - | 11,962 | |||||||||||||||
Other debt | - | 2,167 | 285 | - | 2,452 | |||||||||||||||
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|
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|
|
|
| |||||||||||
Total corporate and other debt | - | 30,903 | 8,044 | - | 38,947 | |||||||||||||||
Corporate equities(1) | 112,490 | 1,357 | 272 | - | 114,119 | |||||||||||||||
Derivative and other contracts: | ||||||||||||||||||||
Interest rate contracts | 663 | 495,026 | 2,484 | - | 498,173 | |||||||||||||||
Credit contracts | - | 30,813 | 1,369 | - | 32,182 | |||||||||||||||
Foreign exchange contracts | 83 | 72,769 | 249 | - | 73,101 | |||||||||||||||
Equity contracts(2) | 571 | 45,967 | 1,586 | - | 48,124 | |||||||||||||||
Commodity contracts | 4,105 | 18,042 | 2,268 | - | 24,415 | |||||||||||||||
Other | - | 376 | - | - | 376 | |||||||||||||||
Netting(3) | (4,910 | ) | (564,127 | ) | (4,220 | ) | (66,720 | ) | (639,977 | ) | ||||||||||
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| |||||||||||
Total derivative and other contracts | 512 | 98,866 | 3,736 | (66,720 | ) | 36,394 | ||||||||||||||
Investments: | ||||||||||||||||||||
Investments measured at NAV(4) | 5,009 | |||||||||||||||||||
Principal investments | 58 | 3 | 835 | - | 896 | |||||||||||||||
Other | 225 | 198 | 323 | - | 746 | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||
Total investments | 283 | 201 | 1,158 | - | 6,651 | |||||||||||||||
Physical commodities | - | 1,608 | - | - | 1,608 | |||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total trading assets | 146,245 | 159,016 | 13,251 | (66,720 | ) | 256,801 | ||||||||||||||
AFS securities | 37,200 | 32,016 | - | - | 69,216 | |||||||||||||||
Securities received as collateral | 21,265 | 51 | - | - | 21,316 | |||||||||||||||
Securities purchased under agreements to resell | - | 1,113 | - | - | 1,113 | |||||||||||||||
Intangible assets(5) | - | - | 6 | - | 6 | |||||||||||||||
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| |||||||||||
Total assets measured at fair value | $ | 204,710 | $ | 192,196 | $ | 13,257 | $ | (66,720 | ) | $ | 348,452 | |||||||||
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11 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Counterparty and Cash Collateral Netting | Balance at December 31, 2014 | ||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||
Short-term borrowings | $ | - | $ | 1,765 | $ | - | $ | - | $ | 1,765 | ||||||||||
Trading liabilities: | ||||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||||
U.S. Treasury securities | 14,199 | - | - | - | 14,199 | |||||||||||||||
U.S. agency securities | 1,274 | 85 | - | - | 1,359 | |||||||||||||||
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Total U.S. government and agency securities | 15,473 | 85 | - | - | 15,558 | |||||||||||||||
Other sovereign government obligations | 11,653 | 2,109 | - | - | 13,762 | |||||||||||||||
Corporate and other debt: | ||||||||||||||||||||
State and municipal securities | - | 1 | - | - | 1 | |||||||||||||||
Corporate bonds | - | 5,943 | 78 | - | 6,021 | |||||||||||||||
Lending commitments | - | 10 | 5 | - | 15 | |||||||||||||||
Other debt | - | 63 | 38 | - | 101 | |||||||||||||||
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| |||||||||||
Total corporate and other debt | - | 6,017 | 121 | - | 6,138 | |||||||||||||||
Corporate equities(1) | 31,340 | 326 | 45 | - | 31,711 | |||||||||||||||
Derivative and other contracts: | ||||||||||||||||||||
Interest rate contracts | 602 | 469,319 | 2,657 | - | 472,578 | |||||||||||||||
Credit contracts | - | 29,997 | 2,112 | - | 32,109 | |||||||||||||||
Foreign exchange contracts | 21 | 72,233 | 98 | - | 72,352 | |||||||||||||||
Equity contracts(2) | 416 | 51,405 | 3,751 | - | 55,572 | |||||||||||||||
Commodity contracts | 4,817 | 15,584 | 1,122 | - | 21,523 | |||||||||||||||
Other | - | 172 | - | - | 172 | |||||||||||||||
Netting(3) | (4,910 | ) | (564,127 | ) | (4,220 | ) | (40,837 | ) | (614,094 | ) | ||||||||||
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| |||||||||||
Total derivative and other contracts | 946 | 74,583 | 5,520 | (40,837 | ) | 40,212 | ||||||||||||||
Total trading liabilities | 59,412 | 83,120 | 5,686 | (40,837 | ) | 107,381 | ||||||||||||||
Obligation to return securities received as collateral | 25,629 | 56 | - | - | 25,685 | |||||||||||||||
Securities sold under agreements to repurchase | - | 459 | 153 | - | 612 | |||||||||||||||
Other secured financings | - | 4,355 | 149 | - | 4,504 | |||||||||||||||
Long-term borrowings | - | 29,840 | 1,934 | - | 31,774 | |||||||||||||||
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Total liabilities measured at fair value | $ | 85,041 | $ | 119,595 | $ | 7,922 | $ | (40,837 | ) | $ | 171,721 | |||||||||
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(1) | For trading purposes, the Company holds or sells short equity securities issued by entities in diverse industries and of varying size. |
(2) | The balance of Level 3 asset derivative equity contracts increased by $57 million with a corresponding decrease in the balance of Level 2 asset derivative equity contracts, and the balance of Level 3 liability derivative equity contracts increased by $842 million with a corresponding decrease in the balance of Level 2 liability derivative equity contracts to correct the fair value level assigned to these contracts at December 31, 2014. The total amount of asset and liability derivative equity contracts remained unchanged. |
(3) | For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled "Counterparty and Cash Collateral Netting." For contracts with the same counterparty, counterparty netting among positions classified within the same level is included within that shared level. For further information on derivative instruments and hedging activities, see Note 4. |
(4) | Certain investments that are measured at fair value using the NAV per share, or its equivalent, are not classified in the fair value hierarchy. For additional disclosure about such investments, see "Fair Value of Investments that are Measured at Net Asset Value" herein. |
(5) | Amount represents MSRs accounted for at fair value. |
![]() | 12 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis.
The following tables present additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters and nine months ended September 30, 2015 and 2014, respectively. Level 3 instruments may be hedged with instruments classified in Level 1 and Level 2. As a result, the realized and unrealized gains (losses) for assets and liabilities within the Level 3 category presented in the tables below do not reflect the related realized and unrealized gains (losses) on hedging instruments that have been classified by the Company within the Level 1 and/or Level 2 categories.
Additionally, both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains (losses) during the period for assets and liabilities within the Level 3 category presented in the tables below may include changes in fair value during the period that were attributable to both observable ( e.g. , changes in market interest rates) and unobservable ( e.g. , changes in unobservable long-dated volatilities) inputs.
For assets and liabilities that were transferred into Level 3 during the period, gains (losses) are presented as if the assets or liabilities had been transferred into Level 3 at the beginning of the period; similarly, for assets and liabilities that were transferred out of Level 3 during the period, gains (losses) are presented as if the assets or liabilities had been transferred out at the beginning of the period.
13 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Three Months Ended September 30, 2015.
Beginning Balance at June 30, 2015 | Total Realized and Unrealized Gains (Losses)(1) | Purchases(2) | Sales | Issuances | Settlements | Net Transfers | Ending Balance at September 30, 2015 | Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at September 30, 2015(3) | ||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||||||
U.S. agency securities | $ | 3 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | (3 | ) | $ | - | $ | - | |||||||||||||||||
Other sovereign government obligations | 12 | - | 5 | (4 | ) | - | - | (2 | ) | 11 | - | |||||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||||||
State and municipal securities | 7 | 5 | 12 | (5 | ) | - | - | 14 | 33 | 5 | ||||||||||||||||||||||||||
Residential mortgage-backed securities | 378 | 3 | 59 | (55 | ) | - | - | 19 | 404 | 4 | ||||||||||||||||||||||||||
Commercial mortgage-backed securities | 84 | (12 | ) | 17 | (6 | ) | - | - | (4 | ) | 79 | (12 | ) | |||||||||||||||||||||||
Asset-backed securities | 19 | - | 13 | (7 | ) | - | - | 6 | 31 | - | ||||||||||||||||||||||||||
Corporate bonds | 479 | (25 | ) | 78 | (228 | ) | - | (50 | ) | (28 | ) | 226 | (6 | ) | ||||||||||||||||||||||
Collateralized debt and loan obligations | 660 | (7 | ) | 80 | (188 | ) | - | - | - | 545 | (11 | ) | ||||||||||||||||||||||||
Loans and lending commitments | 5,512 | (78 | ) | 939 | (156 | ) | - | (1,229 | ) | 176 | 5,164 | (53 | ) | |||||||||||||||||||||||
Other debt | 564 | (22 | ) | 9 | (4 | ) | - | (1 | ) | (16 | ) | 530 | (23 | ) | ||||||||||||||||||||||
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Total corporate and other debt | 7,703 | (136 | ) | 1,207 | (649 | ) | - | (1,280 | ) | 167 | 7,012 | (96 | ) | |||||||||||||||||||||||
Corporate equities | 486 | 10 | 150 | (80 | ) | - | - | 9 | 575 | 4 | ||||||||||||||||||||||||||
Net derivative and other contracts(4): | ||||||||||||||||||||||||||||||||||||
Interest rate contracts | (236 | ) | (137 | ) | 12 | - | (7 | ) | 74 | 383 | 89 | (66 | ) | |||||||||||||||||||||||
Credit contracts | (989 | ) | 210 | - | - | (74 | ) | 86 | (38 | ) | (805 | ) | 219 | |||||||||||||||||||||||
Foreign exchange contracts | 446 | 42 | 3 | - | - | (327 | ) | (98 | ) | 66 | 45 | |||||||||||||||||||||||||
Equity contracts | (2,102 | ) | 309 | 16 | - | (50 | ) | (187 | ) | (27 | ) | (2,041 | ) | 296 | ||||||||||||||||||||||
Commodity contracts | 1,205 | 238 | - | - | - | (11 | ) | - | 1,432 | 179 | ||||||||||||||||||||||||||
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Total net derivative and other contracts | (1,676 | ) | 662 | 31 | - | (131 | ) | (365 | ) | 220 | (1,259 | ) | 673 | |||||||||||||||||||||||
Investments: | ||||||||||||||||||||||||||||||||||||
Principal investments | 581 | 26 | 8 | (50 | ) | - | - | (24 | ) | 541 | 26 | |||||||||||||||||||||||||
Other | 300 | 11 | 1 | - | - | - | - | 312 | 11 | |||||||||||||||||||||||||||
Securities received as collateral | 3 | - | - | (2 | ) | - | - | - | 1 | - | ||||||||||||||||||||||||||
Intangible assets | 6 | (1 | ) | - | - | - | - | - | 5 | (1 | ) | |||||||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||||||||||||||||||
Short-term borrowings | $ | - | $ | (2 | ) | $ | - | $ | - | $ | 4 | $ | - | $ | 63 | $ | 69 | $ | (2 | ) | ||||||||||||||||
Trading liabilities: | ||||||||||||||||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||||||
Corporate bonds | 15 | 9 | (10 | ) | 23 | - | - | - | 19 | 7 | ||||||||||||||||||||||||||
Other debt | 4 | - | - | - | - | - | - | 4 | - | |||||||||||||||||||||||||||
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Total corporate and other debt | 19 | 9 | (10 | ) | 23 | - | - | - | 23 | 7 | ||||||||||||||||||||||||||
Corporate equities | 112 | 72 | (50 | ) | 99 | - | - | 8 | 97 | 73 | ||||||||||||||||||||||||||
Obligation to return securities received as collateral | 3 | - | (2 | ) | - | - | - | - | 1 | - | ||||||||||||||||||||||||||
Securities sold under agreements to repurchase | 154 | - | - | - | - | - | - | 154 | - | |||||||||||||||||||||||||||
Other secured financings | 168 | 2 | - | - | 187 | (12 | ) | - | 341 | 2 | ||||||||||||||||||||||||||
Long-term borrowings | 2,221 | 61 | - | - | 237 | (81 | ) | 146 | 2,462 | 64 |
(1) | Total realized and unrealized gains (losses) are primarily included in Trading revenues in the condensed consolidated statements of income except for $37 million related to Trading assets-Investments, which is included in Investments revenues. |
(2) | Loan originations are included in purchases. |
(3) | Amounts represent unrealized gains (losses) for the quarter ended September 30, 2015 related to assets and liabilities still outstanding at September 30, 2015. |
(4) | Net derivative and other contracts represent Trading assets-Derivative and other contracts net of Trading liabilities-Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 4. |
![]() | 14 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Nine Months Ended September 30, 2015.
Beginning Balance at December 31, 2014 | Total Realized and Unrealized Gains (Losses)(1) | Purchases(2) | Sales | Issuances | Settlements | Net Transfers | Ending Balance at September 30, 2015 | Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at September 30, 2015(3) | ||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||||||
Other sovereign government obligations | $ | 41 | $ | (1 | ) | $ | 7 | $ | (31 | ) | $ | - | $ | - | $ | (5 | ) | $ | 11 | $ | - | |||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||||||
State and municipal securities | - | 5 | 14 | (1 | ) | - | - | 15 | 33 | 5 | ||||||||||||||||||||||||||
Residential mortgage-backed securities | 175 | 28 | 172 | (57 | ) | - | - | 86 | 404 | 19 | ||||||||||||||||||||||||||
Commercial mortgage-backed securities | 96 | (17 | ) | 23 | (23 | ) | - | - | - | 79 | (19 | ) | ||||||||||||||||||||||||
Asset-backed securities | 76 | (1 | ) | 22 | (31 | ) | - | - | (35 | ) | 31 | 4 | ||||||||||||||||||||||||
Corporate bonds | 386 | (19 | ) | 155 | (218 | ) | - | (53 | ) | (25 | ) | 226 | (16 | ) | ||||||||||||||||||||||
Collateralized debt and loan obligations | 1,152 | 141 | 320 | (709 | ) | - | (331 | ) | (28 | ) | 545 | (7 | ) | |||||||||||||||||||||||
Loans and lending commitments | 5,874 | (34 | ) | 1,860 | (95 | ) | - | (2,461 | ) | 20 | 5,164 | (62 | ) | |||||||||||||||||||||||
Other debt | 285 | (13 | ) | 30 | (14 | ) | - | (25 | ) | 267 | 530 | - | ||||||||||||||||||||||||
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Total corporate and other debt | 8,044 | 90 | 2,596 | (1,148 | ) | - | (2,870 | ) | 300 | 7,012 | (76 | ) | ||||||||||||||||||||||||
Corporate equities | 272 | 57 | 437 | (199 | ) | - | - | 8 | 575 | 67 | ||||||||||||||||||||||||||
Net derivative and other contracts(4): | ||||||||||||||||||||||||||||||||||||
Interest rate contracts | (173 | ) | (37 | ) | 16 | - | (22 | ) | 277 | 28 | 89 | 20 | ||||||||||||||||||||||||
Credit contracts | (743 | ) | (69 | ) | 6 | - | (94 | ) | 86 | 9 | (805 | ) | (89 | ) | ||||||||||||||||||||||
Foreign exchange contracts | 151 | 133 | 4 | - | (1 | ) | (197 | ) | (24 | ) | 66 | 133 | ||||||||||||||||||||||||
Equity contracts(5) | (2,165 | ) | (76 | ) | 115 | - | (279 | ) | 252 | 112 | (2,041 | ) | (237 | ) | ||||||||||||||||||||||
Commodity contracts | 1,146 | 345 | 2 | - | (112 | ) | 111 | (60 | ) | 1,432 | 420 | |||||||||||||||||||||||||
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Total net derivative and other contracts | (1,784 | ) | 296 | 143 | - | (508 | ) | 529 | 65 | (1,259 | ) | 247 | ||||||||||||||||||||||||
Investments: | ||||||||||||||||||||||||||||||||||||
Principal investments | 835 | 22 | 20 | (109 | ) | - | (187 | ) | (40 | ) | 541 | - | ||||||||||||||||||||||||
Other | 323 | (5 | ) | 2 | (6 | ) | - | - | (2 | ) | 312 | - | ||||||||||||||||||||||||
Securities received as collateral | - | - | 1 | - | - | - | - | 1 | - | |||||||||||||||||||||||||||
Intangible assets | 6 | - | - | - | - | (1 | ) | - | 5 | - | ||||||||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||||||||||||||||||
Short-term borrowings | $ | - | $ | (2 | ) | $ | - | $ | - | $ | 60 | $ | - | $ | 7 | $ | 69 | $ | (2 | ) | ||||||||||||||||
Trading liabilities: | ||||||||||||||||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||||||
Corporate bonds | 78 | 6 | (25 | ) | 37 | - | - | (65 | ) | 19 | 6 | |||||||||||||||||||||||||
Lending commitments | 5 | 5 | - | - | - | - | - | - | 5 | |||||||||||||||||||||||||||
Other debt | 38 | - | (1 | ) | 7 | - | (39 | ) | (1 | ) | 4 | - | ||||||||||||||||||||||||
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Total corporate and other debt | 121 | 11 | (26 | ) | 44 | - | (39 | ) | (66 | ) | 23 | 11 | ||||||||||||||||||||||||
Corporate equities | 45 | 90 | (88 | ) | 128 | - | - | 102 | 97 | 90 | ||||||||||||||||||||||||||
Obligation to return securities received as collateral | - | - | - | 1 | - | - | - | 1 | - | |||||||||||||||||||||||||||
Securities sold under agreements to repurchase | 153 | (1 | ) | - | - | - | - | - | 154 | - | ||||||||||||||||||||||||||
Other secured financings | 149 | (5 | ) | - | - | 223 | (36 | ) | - | 341 | 4 | |||||||||||||||||||||||||
Long-term borrowings | 1,934 | 159 | - | - | 853 | (213 | ) | 47 | 2,462 | 157 |
(1) | Total realized and unrealized gains (losses) are primarily included in Trading revenues in the Company's condensed consolidated statements of income except for $17 million related to Trading assets-Investments, which is included in Investments revenues. |
(2) | Loan originations are included in purchases. |
(3) | Amounts represent unrealized gains (losses) for the nine months ended September 30, 2015 related to assets and liabilities still outstanding at September 30, 2015. |
(4) | Net derivative and other contracts represent Trading assets-Derivative and other contracts net of Trading liabilities-Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 4. |
(5) | Net liability Level 3 derivative equity contracts increased by $785 million to correct the fair value level assigned to these contracts at December 31, 2014. The total amount of derivative equity contracts remained unchanged at December 31, 2014. |
15 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Three Months Ended September 30, 2014.
Beginning Balance at June 30, 2014 | Total Realized and Unrealized Gains (Losses)(1) | Purchases(2) | Sales | Issuances | Settlements | Net Transfers | Ending Balance at September 30, 2014 | Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at September 30, 2014(3) | ||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||||||
Other sovereign government obligations | $ | 14 | $ | (1 | ) | $ | - | $ | (1 | ) | $ | - | $ | - | $ | 1 | $ | 13 | $ | (1 | ) | |||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||||||
State and municipal securities | 4 | - | - | - | - | - | (4 | ) | - | - | ||||||||||||||||||||||||||
Residential mortgage-backed securities | 55 | 11 | 33 | (7 | ) | - | (11 | ) | - | 81 | 11 | |||||||||||||||||||||||||
Commercial mortgage-backed securities | 47 | (1 | ) | 1 | (3 | ) | - | - | 13 | 57 | (2 | ) | ||||||||||||||||||||||||
Asset-backed securities | 65 | 5 | 27 | (8 | ) | - | - | 22 | 111 | 5 | ||||||||||||||||||||||||||
Corporate bonds | 510 | 36 | 99 | (148 | ) | - | - | 9 | 506 | 38 | ||||||||||||||||||||||||||
Collateralized debt obligations | 1,332 | 8 | 299 | (362 | ) | - | (6 | ) | - | 1,271 | 6 | |||||||||||||||||||||||||
Loans and lending commitments | 5,829 | (20 | ) | 2,138 | (676 | ) | - | (721 | ) | 957 | 7,507 | (24 | ) | |||||||||||||||||||||||
Other debt | 22 | - | 135 | (3 | ) | - | - | 1 | 155 | - | ||||||||||||||||||||||||||
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Total corporate and other debt | 7,864 | 39 | 2,732 | (1,207 | ) | - | (738 | ) | 998 | 9,688 | 34 | |||||||||||||||||||||||||
Corporate equities | 243 | (2 | ) | 30 | (41 | ) | - | - | 11 | 241 | 7 | |||||||||||||||||||||||||
Net derivative and other contracts(4): | ||||||||||||||||||||||||||||||||||||
Interest rate contracts | (109 | ) | (15 | ) | 7 | - | (3 | ) | (17 | ) | 150 | 13 | (22 | ) | ||||||||||||||||||||||
Credit contracts | (710 | ) | 209 | 7 | - | (64 | ) | (108 | ) | (16 | ) | (682 | ) | 140 | ||||||||||||||||||||||
Foreign exchange contracts | 109 | (27 | ) | 6 | (3 | ) | - | 70 | (1 | ) | 154 | (25 | ) | |||||||||||||||||||||||
Equity contracts | (1,097 | ) | (6 | ) | 56 | - | (59 | ) | (105 | ) | 23 | (1,188 | ) | (9 | ) | |||||||||||||||||||||
Commodity contracts | 1,132 | 73 | 36 | - | - | (62 | ) | (12 | ) | 1,167 | 12 | |||||||||||||||||||||||||
Other | (3 | ) | (1 | ) | - | - | - | 4 | - | - | - | |||||||||||||||||||||||||
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Total net derivative and other contracts | (678 | ) | 233 | 112 | (3 | ) | (126 | ) | (218 | ) | 144 | (536 | ) | 96 | ||||||||||||||||||||||
Investments: | ||||||||||||||||||||||||||||||||||||
Principal investments | 883 | (1 | ) | 22 | (23 | ) | - | - | 32 | 913 | (1 | ) | ||||||||||||||||||||||||
Other | 380 | (3 | ) | 14 | - | - | - | 2 | 393 | (3 | ) | |||||||||||||||||||||||||
Intangible assets | 6 | - | - | - | - | - | - | 6 | - | |||||||||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||||||||||||||||||
Trading liabilities: | ||||||||||||||||||||||||||||||||||||
Other sovereign government obligations | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 2 | $ | 2 | $ | - | ||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||||||
Corporate bonds | 14 | 1 | (8 | ) | 46 | - | - | (3 | ) | 48 | 1 | |||||||||||||||||||||||||
Lending commitments | 12 | 12 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Other debt | 42 | 5 | - | - | - | (2 | ) | - | 35 | 5 | ||||||||||||||||||||||||||
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Total corporate and other debt | 68 | 18 | (8 | ) | 46 | - | (2 | ) | (3 | ) | 83 | 6 | ||||||||||||||||||||||||
Corporate equities | 6 | (5 | ) | (12 | ) | 2 | - | - | 2 | 3 | (4 | ) | ||||||||||||||||||||||||
Securities sold under agreements to repurchase | 155 | 2 | - | - | - | - | - | 153 | 2 | |||||||||||||||||||||||||||
Other secured financings | 135 | - | - | - | 4 | (3 | ) | 26 | 162 | - | ||||||||||||||||||||||||||
Long-term borrowings | 1,779 | 72 | - | - | 136 | (108 | ) | 186 | 1,921 | 72 |
(1) | Total realized and unrealized gains (losses) are primarily included in Trading revenues in the condensed consolidated statements of income except for $(4) million related to Trading assets-Investments, which is included in Investments revenues. |
(2) | Loan originations are included in purchases. |
(3) | Amounts represent unrealized gains (losses) for the quarter ended September 30, 2014 related to assets and liabilities still outstanding at September 30, 2014. |
(4) | Net derivative and other contracts represent Trading assets-Derivative and other contracts net of Trading liabilities-Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 4. |
![]() | 16 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Nine Months Ended September 30, 2014.
Beginning Balance at December 31, 2013 | Total Realized and Unrealized Gains (Losses)(1) | Purchases(2) | Sales | Issuances | Settlements | Net Transfers | Ending Balance at September 30, 2014 | Unrealized Gains (Losses) for Level 3 Assets/ Liabilities Outstanding at September 30, 2014(3) | ||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||||||
Assets at Fair Value | ||||||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||||||
Other sovereign government obligations | $ | 27 | $ | (1 | ) | $ | 7 | $ | (21 | ) | $ | - | $ | - | $ | 1 | $ | 13 | $ | (1 | ) | |||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | 47 | 34 | 30 | (9 | ) | - | (20 | ) | (1 | ) | 81 | 29 | ||||||||||||||||||||||||
Commercial mortgage-backed securities | 108 | 11 | 22 | (97 | ) | - | - | 13 | 57 | (3 | ) | |||||||||||||||||||||||||
Asset-backed securities | 103 | (3 | ) | 58 | (93 | ) | - | - | 46 | 111 | (3 | ) | ||||||||||||||||||||||||
Corporate bonds | 522 | 107 | 185 | (302 | ) | - | - | (6 | ) | 506 | 84 | |||||||||||||||||||||||||
Collateralized debt and loan obligations | 1,468 | 137 | 716 | (940 | ) | - | (109 | ) | (1 | ) | 1,271 | 45 | ||||||||||||||||||||||||
Loans and lending commitments | 5,129 | (202 | ) | 3,962 | (327 | ) | - | (1,299 | ) | 244 | 7,507 | (181 | ) | |||||||||||||||||||||||
Other debt | 27 | 4 | 128 | (6 | ) | - | (2 | ) | 4 | 155 | 3 | |||||||||||||||||||||||||
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Total corporate and other debt | 7,404 | 88 | 5,101 | (1,774 | ) | - | (1,430 | ) | 299 | 9,688 | (26 | ) | ||||||||||||||||||||||||
Corporate equities | 190 | 17 | 83 | (47 | ) | - | - | (2 | ) | 241 | 10 | |||||||||||||||||||||||||
Net derivative and other contracts(4): | ||||||||||||||||||||||||||||||||||||
Interest rate contracts | 113 | (4 | ) | 8 | - | (3 | ) | (61 | ) | (40 | ) | 13 | 4 | |||||||||||||||||||||||
Credit contracts | (147 | ) | (434 | ) | 52 | - | (118 | ) | 10 | (45 | ) | (682 | ) | (475 | ) | |||||||||||||||||||||
Foreign exchange contracts | 68 | (6 | ) | 6 | (1 | ) | - | 106 | (19 | ) | 154 | (2 | ) | |||||||||||||||||||||||
Equity contracts | (831 | ) | (19 | ) | 223 | (1 | ) | (273 | ) | (370 | ) | 83 | (1,188 | ) | (66 | ) | ||||||||||||||||||||
Commodity contracts | 880 | 177 | 200 | - | - | (90 | ) | - | 1,167 | 99 | ||||||||||||||||||||||||||
Other | (4 | ) | (1 | ) | - | - | - | 5 | - | - | - | |||||||||||||||||||||||||
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Total net derivative and other contracts | 79 | (287 | ) | 489 | (2 | ) | (394 | ) | (400 | ) | (21 | ) | (536 | ) | (440 | ) | ||||||||||||||||||||
Investments: | ||||||||||||||||||||||||||||||||||||
Principal investments | 2,160 | 49 | 36 | (124 | ) | - | (1,234 | ) | 26 | 913 | 129 | |||||||||||||||||||||||||
Other | 538 | (13 | ) | 17 | (11 | ) | - | - | (138 | ) | 393 | (6 | ) | |||||||||||||||||||||||
Intangible assets | 8 | - | - | - | - | (2 | ) | - | 6 | (1 | ) | |||||||||||||||||||||||||
Liabilities at Fair Value | ||||||||||||||||||||||||||||||||||||
Short-term borrowings | $ | 1 | $ | - | $ | - | $ | - | $ | - | $ | (1 | ) | $ | - | $ | - | $ | - | |||||||||||||||||
Trading liabilities: | ||||||||||||||||||||||||||||||||||||
Other sovereign government obligations | - | - | - | - | - | - | 2 | 2 | - | |||||||||||||||||||||||||||
Corporate and other debt: | ||||||||||||||||||||||||||||||||||||
Corporate bonds | 22 | 2 | (46 | ) | 85 | - | - | (11 | ) | 48 | 3 | |||||||||||||||||||||||||
Lending commitments | 2 | 2 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Other debt | 48 | 15 | - | - | - | 1 | 1 | 35 | 5 | |||||||||||||||||||||||||||
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Total corporate and other debt | 72 | 19 | (46 | ) | 85 | - | 1 | (10 | ) | 83 | 8 | |||||||||||||||||||||||||
Corporate equities | 8 | (6 | ) | (16 | ) | 2 | - | - | 3 | 3 | (6 | ) | ||||||||||||||||||||||||
Securities sold under agreements to repurchase | 154 | 1 | - | - | - | - | - | 153 | 1 | |||||||||||||||||||||||||||
Other secured financings | 278 | (9 | ) | - | - | 21 | (188 | ) | 42 | 162 | (6 | ) | ||||||||||||||||||||||||
Long-term borrowings | 1,887 | 17 | - | - | 372 | (289 | ) | (32 | ) | 1,921 | 15 |
(1) | Total realized and unrealized gains (losses) are primarily included in Trading revenues in the Company's condensed consolidated statements of income except for $36 million related to Trading assets-Investments, which is included in Investments revenues. |
(2) | Loan originations are included in purchases. |
(3) | Amounts represent unrealized gains (losses) for the nine months ended September 30, 2014 related to assets and liabilities still outstanding at September 30, 2014. |
(4) | Net derivative and other contracts represent Trading assets-Derivative and other contracts, net of Trading liabilities-Derivative and other contracts. For further information on derivative instruments and hedging activities, see Note 4. |
17 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Quantitative Information about and Sensitivity of Significant Unobservable Inputs Used in Recurring Level 3 Fair Value Measurements.
The disclosures below provide information on the valuation techniques, significant unobservable inputs, and their ranges and averages for each major category of assets and liabilities measured at fair value on a recurring basis with a significant Level 3 balance. The level of aggregation and breadth of products cause the range of inputs to be wide and not evenly distributed across the inventory. Further, the range of unobservable inputs may differ across firms in the financial services industry because of diversity in the types of products included in each firm's inventory. The following disclosures also include qualitative information on the sensitivity of the fair value measurements to changes in the significant unobservable inputs.
At September 30, 2015
Balance at September 30, 2015 | Valuations Technique(s) / Significant Unobservable Input(s) / Sensitivity of the Fair Value to | Range(1) | Averages(2) | |||||||||||
(dollars in millions) | ||||||||||||||
Assets at Fair Value | ||||||||||||||
Trading assets: | ||||||||||||||
Corporate and other debt: | ||||||||||||||
Residential mortgage-backed securities | $ | 404 | Comparable pricing: | |||||||||||
Comparable bond price / (A) | 0 to 80 points | 36 points | ||||||||||||
Commercial mortgage-backed securities | 79 | Comparable pricing: | ||||||||||||
Comparable bond price / (A) | 0 to 9 points | 2 points | ||||||||||||
Corporate bonds | 226 | Comparable pricing: | ||||||||||||
Comparable bond price / (A) | 4 to 119 points | 83 points | ||||||||||||
Collateralized debt and loan obligations | 545 | Comparable pricing(3): | ||||||||||||
Comparable bond price / (A) | 45 to 103 points | 77 points | ||||||||||||
Correlation model: | ||||||||||||||
Credit correlation / (B) | 35% to 60% | 49% | ||||||||||||
Loans and lending commitments | 5,164 | Corporate loan model: | ||||||||||||
Credit spread / (C) | 72 to 831 basis points | 544 basis points | ||||||||||||
Margin loan model: | ||||||||||||||
Credit spread / (C)(D) | 80 to 548 basis points | 165 basis points | ||||||||||||
Volatility skew / (C)(D) | 14% to 70% | 36% | ||||||||||||
Discount rate / (C)(D) | 2% to 6% | 4% | ||||||||||||
Option model: | ||||||||||||||
Volatility skew / (C) | -1% | -1% | ||||||||||||
Comparable pricing(3): | ||||||||||||||
Comparable loan price / (A) | 40 to 103 points | 89 points | ||||||||||||
Discounted cash flow: | ||||||||||||||
Implied weighted average cost of capital / (C)(D) | 6% to 8% | 7% | ||||||||||||
Capitalization rate / (C)(D) | 4% to 10% | 4% | ||||||||||||
Other debt | 530 | Comparable pricing: | ||||||||||||
Comparable loan price / (A) | 3 to 84 points | 65 points | ||||||||||||
Comparable pricing: | ||||||||||||||
Comparable bond price / (A) | 11 points | 11 points | ||||||||||||
Option model: | ||||||||||||||
At the money volatility / (A) | 16% to 53% | 16% | ||||||||||||
Margin loan model(3): | ||||||||||||||
Discount rate / (C) | 1% to 2% | 1% | ||||||||||||
Corporate equities | 575 | Comparable pricing: | ||||||||||||
Comparable price / (A) | 59% to 91% | 78% | ||||||||||||
Comparable pricing(3): | ||||||||||||||
Comparable equity price / (A) | 100% | 100% |
![]() | 18 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Balance at September 30, 2015 | Valuations Technique(s) / Significant Unobservable Input(s) / Sensitivity of the Fair Value to | Range(1) | Averages(2) | |||||||||||
(dollars in millions) | ||||||||||||||
Market approach: | ||||||||||||||
EBITDA multiple / (A)(D) | 9 times | 9 times | ||||||||||||
Price / Book ratio / (A)(D) | 0 times | 0 times | ||||||||||||
Net derivative and other | ||||||||||||||
Interest rate contracts | 89 | Option model: | ||||||||||||
Interest rate volatility concentration liquidity multiple / (C)(D) | 0 to 3 times | 2 times | ||||||||||||
Interest rate - Foreign exchange correlation / (C)(D) | 26% to 62% | 44% / 43%(5) | ||||||||||||
Interest rate volatility skew / (A)(D) | 32% to 91% | 44% / 43%(5) | ||||||||||||
Interest rate quanto correlation / (A)(D) | -8% to 37% | 2% / -8%(5) | ||||||||||||
Interest rate curve correlation / (C)(D) | 24% to 93% | 69% / 75%(5) | ||||||||||||
Inflation volatility / (A)(D) | 60% | 60% / 60%(5) | ||||||||||||
Interest rate - Inflation | -43% to -41% | -43% /-43%(5) | ||||||||||||
Credit contracts | (805 | ) | Comparable pricing: | |||||||||||
Cash synthetic basis / (C)(D) | 5 to 12 points | 9 points | ||||||||||||
Comparable bond price / (C)(D) | 0 to 75 points | 25 points | ||||||||||||
Correlation model(3): | ||||||||||||||
Credit correlation / (B) | 34% to 99% | 58% | ||||||||||||
Foreign exchange contracts(6) | 66 | Option model: | ||||||||||||
Interest rate - Foreign exchange correlation / (C)(D) | 26% to 62% | 44% / 43%(5) | ||||||||||||
Interest rate volatility skew / (A)(D) | 32% to 91% | 44% / 43%(5) | ||||||||||||
Interest rate curve / (A)(D) | 0% to 1% | 0% / 0%(5) | ||||||||||||
Interest rate quanto correlation / (A)(D) | -8% to 37% | 2% / -8%(5) | ||||||||||||
Equity contracts(6) | (2,041 | ) | Option model: | |||||||||||
At the money volatility / (A)(D) | 16% to 62% | 31% | ||||||||||||
Volatility skew / (A)(D) | -3% to 0% | -1% | ||||||||||||
Equity - Equity correlation / (C)(D) | 40% to 99% | 72% | ||||||||||||
Equity - Foreign exchange correlation / (A)(D) | -50% to 10% | -16% | ||||||||||||
Equity - Interest rate correlation / (C)(D) | -31% to 50% | 14% / 7%(5) | ||||||||||||
Commodity contracts | 1,432 | Option model: | ||||||||||||
Forward power price / (C)(D) | $4 to $91 per | $33 per | ||||||||||||
Megawatt hour | Megawatt hour | |||||||||||||
Commodity volatility / (A)(D) | 10% to 59% | 18% | ||||||||||||
Cross commodity correlation / (C)(D) | 43% to 100% | 93% | ||||||||||||
Investments: | ||||||||||||||
Principal investments | 541 | Discounted cash flow: | ||||||||||||
Implied weighted average cost of capital / (C)(D) | 14% | 14% | ||||||||||||
Exit multiple / (A)(D) | 10 times | 10 times | ||||||||||||
Capitalization rate / (C)(D) | 5% to 10% | 6% | ||||||||||||
Equity discount rate / (C)(D) | 18% to 35% | 21% | ||||||||||||
Market approach(3): | ||||||||||||||
EBITDA multiple / (A)(D) | 9 to 19 times | 11 times | ||||||||||||
Forward capacity price / (A)(D) | $5 to $9 | $7 | ||||||||||||
Comparable pricing: | ||||||||||||||
Comparable equity price / (A) | 75% to 100% | 84% | ||||||||||||
Other | 312 | Discounted cash flow: | ||||||||||||
Implied weighted average cost of capital / (C)(D) | 10% | 10% | ||||||||||||
Exit multiple / (A)(D) | 10 times | 10 times | ||||||||||||
Market approach: | ||||||||||||||
EBITDA multiple / (A) | 8 to 14 times | 10 times |
19 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Balance at September 30, 2015 | Valuations Technique(s) / Significant Unobservable Input(s) / Sensitivity of the Fair Value to | Range(1) | Averages(2) | |||||||||||
(dollars in millions) | ||||||||||||||
Comparable pricing(3): | ||||||||||||||
Comparable equity price / (A) | 100% | 100% | ||||||||||||
Liabilities at Fair Value | ||||||||||||||
Short-term borrowings | $ | 69 | Comparable pricing: | |||||||||||
Comparable equity price / (A) | 20% | 20% | ||||||||||||
Corporate equities | 97 | Comparable pricing: Comparable equity price / (A) | 0% to 100% | 80% | ||||||||||
Securities sold under agreements to repurchase | 154 | Discounted cash flow: | ||||||||||||
Funding spread / (A) | 96 to 123 basis points | 113 basis points | ||||||||||||
Other secured financings | 341 | Comparable pricing: | ||||||||||||
Comparable bond price / (A) | 100 points | 100 points | ||||||||||||
Discounted cash flow(3): | ||||||||||||||
Discount rate / (C) | 4% to 17% | 5% | ||||||||||||
Discounted cash flow: | ||||||||||||||
Funding spread / (A) | 108 to 130 basis points | 119 basis points | ||||||||||||
Long-term borrowings | 2,462 | Option model(3): | ||||||||||||
At the money volatility / (C)(D) | 22% to 40% | 29% | ||||||||||||
Volatility skew / (A)(D) | -2% to 0% | -1% | ||||||||||||
Equity - Equity correlation / (A)(D) | 40% to 97% | 78% | ||||||||||||
Equity - Foreign exchange | -70% to 35% | -42% | ||||||||||||
Option model: | ||||||||||||||
Equity alpha / (A) | 25% to 80% | 63% | ||||||||||||
Correlation model: | ||||||||||||||
Credit correlation / (B) | 40% to 60% | 44% | ||||||||||||
Comparable pricing: | ||||||||||||||
Comparable equity price / (A) | 100% | 100% |
At December 31, 2014.
Balance at December 31, 2014 | Valuation Technique(s) / Significant | Range(1) | Averages(2) | |||||||||||
(dollars in millions) | ||||||||||||||
Assets at Fair Value | ||||||||||||||
Trading assets: | ||||||||||||||
Corporate and other debt: | ||||||||||||||
Residential mortgage-backed securities | $ | 175 | Comparable pricing: | |||||||||||
Comparable bond price / (A) | 3 to 90 points | 15 points | ||||||||||||
Commercial mortgage-backed securities | 96 | Comparable pricing: | ||||||||||||
Comparable bond price / (A) | 0 to 7 points | 1 point | ||||||||||||
Asset-backed securities | 76 | Comparable pricing: | ||||||||||||
Comparable bond price / (A) | 0 to 62 points | 23 points | ||||||||||||
Corporate bonds | 386 | Comparable pricing: | ||||||||||||
Comparable bond price / (A) | 1 to 160 points | 90 points | ||||||||||||
Collateralized debt and loan obligations | 1,152 | Comparable pricing(3): | ||||||||||||
Comparable bond price / (A) | 20 to 100 points | 66 points | ||||||||||||
Correlation model: | ||||||||||||||
Credit correlation / (B) | 47% to 65% | 56% | ||||||||||||
Loans and lending commitments | 5,874 | Corporate loan model: | ||||||||||||
Credit spread / (C) | 36 to 753 basis points | 373 basis points | ||||||||||||
Margin loan model: | ||||||||||||||
Credit spread / (C)(D) | 150 to 451 basis points | 216 basis points | ||||||||||||
Volatility skew / (C)(D) | 3% to 37% | 21% |
![]() | 20 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Balance at December 31, 2014 | Valuation Technique(s) / Significant | Range(1) | Averages(2) | |||||||||||
(dollars in millions) | ||||||||||||||
Discount rate / (C)(D) | 2% to 3% | 3% | ||||||||||||
Option model: | ||||||||||||||
Volatility skew / (C) | -1% | -1% | ||||||||||||
Comparable pricing(3): | ||||||||||||||
Comparable loan price / (A) | 15 to 105 points | 89 points | ||||||||||||
Other debt | 285 | Comparable pricing(3): | ||||||||||||
Comparable loan price / (A) | 0 to 75 points | 39 points | ||||||||||||
Comparable pricing: | ||||||||||||||
Comparable bond price / (A) | 15 points | 15 points | ||||||||||||
Option model: | ||||||||||||||
At the money volatility / (A) | 15% to 54% | 15% | ||||||||||||
Corporate equities | 272 | Net asset value: | ||||||||||||
Discount to net asset value / (C) | 0% to 71% | 36% | ||||||||||||
Comparable pricing: | ||||||||||||||
Comparable price / (A) | 83% to 96% | 85% | ||||||||||||
Comparable pricing(3): | ||||||||||||||
Comparable equity price / (A) | 100% | 100% | ||||||||||||
Market approach: | ||||||||||||||
EBITDA multiple / (A)(D) | 6 to 9 times | 8 times | ||||||||||||
Price / Book ratio / (A)(D) | 0 times | 0 times | ||||||||||||
Net derivative and other contracts(4): | ||||||||||||||
Interest rate contracts | (173) | Option model: | ||||||||||||
Interest rate volatility concentration liquidity multiple / (C)(D) | 0 to 3 times | 2 times | ||||||||||||
Interest rate - Foreign exchange correlation / (A)(D) | 28% to 62% | 44% / 42% | (5) | |||||||||||
Interest rate volatility skew / (A)(D) | 38% to 104% | 86% / 60%(5) | ||||||||||||
Interest rate quanto correlation / (A)(D) | -9% to 35% | 6% / -6%(5) | ||||||||||||
Interest rate curve correlation / (A)(D) | 44% to 87% | 73% / 80%(5) | ||||||||||||
Inflation volatility / (A)(D) | 69% to 71% | 70% / 71%(5) | ||||||||||||
Interest rate - Inflation correlation / (A)(D) | -44% to -40% | -42% / -43%(5) | ||||||||||||
Credit contracts | (743) | Comparable pricing: | ||||||||||||
Cash synthetic basis / (C)(D) | 5 to 13 points | 9 points | ||||||||||||
Comparable bond price / (C)(D) | 0 to 55 points | 18 points | ||||||||||||
Correlation model(3): | ||||||||||||||
Credit correlation / (B) | 42% to 95% | 63% | ||||||||||||
Foreign exchange | 151 | Option model: | ||||||||||||
Interest rate quanto correlation / (A)(D) | -9% to 35% | 6% / -6%(5) | ||||||||||||
Interest rate - Credit spread correlation / (A)(D) | -54% to -2% | -17% / -11%(5) | ||||||||||||
Interest rate curve correlation / (A)(D) | 44% to 87% | 73% / 80%(5) | ||||||||||||
Interest rate - Foreign exchange correlation / (A)(D) | 28% to 62% | 44% / 42%(5) | ||||||||||||
Interest rate curve / (A)(D) | 0% to 2% | 1% / 1%(5) | ||||||||||||
Equity contracts(6)(7) | (2,165) | Option model: | ||||||||||||
At the money volatility / (A)(D) | 14% to 51% | 29% | ||||||||||||
Volatility skew / (A)(D) | -2% to 0% | -1% | ||||||||||||
Equity - Equity correlation / (C)(D) | 40% to 99% | 72% | ||||||||||||
Equity - Foreign exchange correlation / (C)(D) | -50% to 10% | -16% | ||||||||||||
Equity - Interest rate correlation / (C)(D) | -18% to 81% | 26% / 11%(5) | ||||||||||||
Commodity contracts | 1,146 | Option model: | ||||||||||||
Forward power price / (C)(D) | $5 to $106 per | $38 per | ||||||||||||
Megawatt hour | Megawatt hour | |||||||||||||
Commodity volatility / (A)(D) | 11% to 90% | 19% | ||||||||||||
Cross commodity correlation / (C)(D) | 33% to 100% | 93% |
21 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Balance at December 31, 2014 | Valuation Technique(s) / Significant | Range(1) | Averages(2) | |||||||||||
(dollars in millions) | ||||||||||||||
Investments: | ||||||||||||||
Principal investments | 835 | Discounted cash flow: | ||||||||||||
Implied weighted average cost of capital / (C)(D) | 11% | 11% | ||||||||||||
Exit multiple / (A)(D) | 10 times | 10 times | ||||||||||||
Discounted cash flow: | ||||||||||||||
Equity discount rate / (C) | 25% | 25% | ||||||||||||
Market approach(3): | ||||||||||||||
EBITDA multiple / (A)(D) | 4 to 14 times | 10 times | ||||||||||||
Price / Earnings ratio / (A)(D) | 23 times | 23 times | ||||||||||||
Forward capacity price / (A)(D) | $5 to $7 | $7 | ||||||||||||
Comparable pricing: | ||||||||||||||
Comparable equity price / (A) | 64% to 100% | 95% | ||||||||||||
Other | 323 | Discounted cash flow: | ||||||||||||
Implied weighted average cost of capital / (C)(D) | 10% to 13% | 11% | ||||||||||||
Exit multiple / (A)(D) | 6 to 9 times | 9 times | ||||||||||||
Market approach: | ||||||||||||||
EBITDA multiple / (A)(D) | 9 to 13 times | 10 times | ||||||||||||
Comparable pricing(3): | ||||||||||||||
Comparable equity price / (A) | 100% | 100% | ||||||||||||
Liabilities at Fair Value | ||||||||||||||
Trading liabilities: | ||||||||||||||
Corporate and other debt: | ||||||||||||||
Corporate bonds | $ | 78 | Option model: | |||||||||||
Volatility skew / (C)(D) | -1% | -1% | ||||||||||||
At the money volatility / (C)(D) | 10% | 10% | ||||||||||||
Securities sold under agreements to repurchase | 153 | Discounted cash flow: | ||||||||||||
Funding spread / (A) | 75 to 91 basis points | 86 basis points | ||||||||||||
Other secured financings | 149 | Comparable pricing: | ||||||||||||
Comparable bond price / (A) | 99 to 101 points | 100 points | ||||||||||||
Discounted cash flow(3): | ||||||||||||||
Funding spread / (A) | 82 to 98 basis points | 95 basis points | ||||||||||||
Long-term borrowings | 1,934 | Option model(3): | ||||||||||||
At the money volatility / (C)(D) | 18% to 32% | 27% | ||||||||||||
Volatility skew / (A)(D) | -1% to 0% | 0% | ||||||||||||
Equity - Equity correlation / (A)(D) | 40% to 90% | 68% | ||||||||||||
Equity - Foreign exchange correlation / (C)(D) | -73% to 30% | -32% | ||||||||||||
Option model: | ||||||||||||||
Equity alpha / (A) | 0% to 94% | 67% | ||||||||||||
Correlation model: | ||||||||||||||
Credit correlation / (B) | 48% to 65% | 51% |
EBITDA-Earnings before interest, taxes, depreciation and amortization
(1) | The ranges of significant unobservable inputs are represented in points, percentages, basis points, times or megawatt hours. Points are a percentage of par; for example, 80 points would be 80% of par. A basis point equals 1/100th of 1%; for example, 831 basis points would equal 8.31%. |
(2) | Amounts represent weighted averages except where simple averages and the median of the inputs are provided (see footnote 5 below). Weighted averages are calculated by weighting each input by the fair value of the respective financial instruments except for collateralized debt and loan obligations, principal investments, other debt, corporate bonds, long-term borrowings and derivative instruments where some or all inputs are weighted by risk. |
(3) | This is the predominant valuation technique for this major asset or liability class. |
(4) | Credit Valuation Adjustment ("CVA") and Funding Valuation Adjustments ("FVA") are included in the balance, but excluded from the Valuation Technique(s) and Significant Unobservable Input(s) in the table above. CVA is a Level 3 input when the underlying counterparty credit curve is unobservable. FVA is a Level 3 input in its entirety given the lack of observability of funding spreads in the principal market. |
![]() | 22 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
(5) | The data structure of the significant unobservable inputs used in valuing interest rate contracts, foreign exchange contracts and certain equity contracts may be in a multi-dimensional form, such as a curve or surface, with risk distributed across the structure. Therefore, a simple average and median, together with the range of data inputs, may be more appropriate measurements than a single point weighted average. |
(6) | Includes derivative contracts with multiple risks ( i.e., hybrid products). |
(7) | Net liability Level 3 derivative equity contracts increased by $785 million to correct the fair value level assigned to these contracts at December 31, 2014. This correction did not result in a change to the Valuation Technique(s), Significant Unobservable Inputs, Ranges or Averages. |
Sensitivity of the fair value to changes in the unobservable inputs:
(A) | Significant increase (decrease) in the unobservable input in isolation would result in a significantly higher (lower) fair value measurement. |
(B) | Significant changes in credit correlation may result in a significantly higher or lower fair value measurement. Increasing (decreasing) correlation drives a redistribution of risk within the capital structure such that junior tranches become less (more) risky and senior tranches become more (less) risky. |
(C) | Significant increase (decrease) in the unobservable input in isolation would result in a significantly lower (higher) fair value measurement. |
(D) | There are no predictable relationships between the significant unobservable inputs. |
For a description of the Company's significant unobservable inputs included in the September 30, 2015 and December 31, 2014 tables above for all major categories of assets and liabilities, see Note 4 to the consolidated financial statements in the 2014 Form 10-K.
During the quarter and nine months ended September 30, 2015, there were no significant updates made to the Company's significant unobservable inputs.
Fair Value of Investments that are Measured at Net Asset Value.
For a description of the Company's investments in private equity funds, real estate funds and hedge funds measured at fair value based on NAV, see Note 4 to the consolidated financial statements in the 2014 Form 10-K. The following tables present information solely about the Company's investments in private equity funds, real estate funds and hedge funds measured at fair value using the NAV per share, or its equivalent, at September 30, 2015 and December 31, 2014:
At September 30, 2015 | At December 31, 2014 | |||||||||||||||
Fair Value | Commitment | Fair Value | Commitment | |||||||||||||
(dollars in millions) | ||||||||||||||||
Private equity funds | $ | 1,962 | $ | 597 | $ | 2,569 | $ | 613 | ||||||||
Real estate funds | 1,664 | 135 | 1,753 | 112 | ||||||||||||
Hedge funds(1): | ||||||||||||||||
Long-short equity hedge funds | 447 | - | 433 | - | ||||||||||||
Fixed income/credit-related hedge funds | 73 | - | 76 | - | ||||||||||||
Event-driven hedge funds | 3 | - | 39 | - | ||||||||||||
Multi-strategy hedge funds | 129 | 4 | 139 | 3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 4,278 | $ | 736 | $ | 5,009 | $ | 728 | ||||||||
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|
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|
|
|
|
|
(1) | Fixed income/credit-related hedge funds, event-driven hedge funds and multi-strategy hedge funds are redeemable at least on a three-month period basis, primarily with a notice period of 90 days or less. At September 30, 2015, approximately 32% of the fair value amount of long-short equity hedge funds was redeemable at least quarterly, 48% is redeemable every six months and 20% of these funds have a redemption frequency of greater than six months. At December 31, 2014, approximately 36% of the fair value amount of long-short equity hedge funds was redeemable at least quarterly, 47% is redeemable every six months and 17% of these funds have a redemption frequency of greater than six months. The notice period for long-short equity hedge funds at September 30, 2015 and December 31, 2014 was primarily greater than six months. |
23 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Private Equity Funds and Real Estate Funds.
Investments in these funds generally are not redeemable due to the closed-ended nature of these funds. Instead, distributions from each fund will be received as the underlying investments of the funds are disposed and monetized. The following table presents information about the fair value of the funds estimated to be liquidated over time:
At September 30, 2015 | ||||||||||||||||
Fair Value of the Funds Estimated to be Liquidated | ||||||||||||||||
Fund Type | Less than 5 years | 5-10 years | Over 10 years | Total | ||||||||||||
(dollars in millions) | ||||||||||||||||
Private equity funds | $ | 139 | $ | 1,151 | $ | 672 | $ | 1,962 | ||||||||
Real estate funds | 235 | 882 | 547 | 1,664 |
Hedge Funds.
Investments in hedge funds may be subject to initial period lock-up restrictions or gates. A hedge fund lock-up provision is a provision that provides that, during a certain initial period, an investor may not make a withdrawal from the fund. The purpose of a gate is to restrict the level of redemptions that an investor in a particular hedge fund can demand on any redemption date. The following table presents information about lock-up restrictions and gates by hedge fund type:
At September 30, 2015 | ||||||||||||
Hedge Fund Restrictions | ||||||||||||
Hedge Fund Type | Fair Value | Lock-up Restrictions | Gate Restrictions | |||||||||
(dollars in millions) | ||||||||||||
Long-short equity(1)(2) | $ | 447 | 1 | % | 12 | % | ||||||
Fixed income/credit-related(1) | 73 | 13 | % | N/A | ||||||||
Event-driven(1) | 3 | 3 | % | N/A | ||||||||
Multi-strategy(1)(2) | 129 | 37 | % | 28 | % |
N/A-Not Applicable.
(1) | The remaining restriction period subject to lock-up restrictions was primarily over three years at September 30, 2015. |
(2) | The restriction period for these investments subject to an exit restriction was indefinite at September 30, 2015. |
![]() | 24 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Fair Value Option.
The Company elected the fair value option for certain eligible instruments that are risk managed on a fair value basis to mitigate income statement volatility caused by measurement basis differences between the elected instruments and their associated risk management transactions or to eliminate complexities of applying certain accounting models. The following table presents net gains (losses) due to changes in fair value for items measured at fair value pursuant to the fair value option election for the quarters and nine months ended September 30, 2015 and 2014, respectively:
Interest | Gains (Losses) | |||||||||||
Trading | Income | Included in | ||||||||||
Revenues | (Expense) | Net Revenues | ||||||||||
(dollars in millions) | ||||||||||||
Three Months Ended September 30, 2015 | ||||||||||||
Securities purchased under agreements to resell | $ | (1 | ) | $ | 2 | $ | 1 | |||||
Short-term borrowings(1) | (85 | ) | - | (85 | ) | |||||||
Securities sold under agreements to repurchase | - | (2 | ) | (2 | ) | |||||||
Long-term borrowings(1) | 1,137 | (129 | ) | 1,008 | ||||||||
Nine Months Ended September 30, 2015 | ||||||||||||
Securities purchased under agreements to resell | $ | (4 | ) | $ | 7 | $ | 3 | |||||
Short-term borrowings(1) | (127 | ) | - | (127 | ) | |||||||
Securities sold under agreements to repurchase | 4 | (5 | ) | (1 | ) | |||||||
Long-term borrowings(1) | 2,226 | (399 | ) | 1,827 | ||||||||
Three Months Ended September 30, 2014 | ||||||||||||
Securities purchased under agreements to resell | $ | (2 | ) | $ | 2 | $ | - | |||||
Short-term borrowings(2) | 5 | 2 | 7 | |||||||||
Securities sold under agreements to repurchase | 3 | (2 | ) | 1 | ||||||||
Long-term borrowings(2) | 1,579 | (174 | ) | 1,405 | ||||||||
Nine Months Ended September 30, 2014 | ||||||||||||
Securities purchased under agreements to resell | $ | (4 | ) | $ | 6 | $ | 2 | |||||
Short-term borrowings(2) | (32 | ) | 2 | (30 | ) | |||||||
Securities sold under agreements to repurchase | (2 | ) | (4 | ) | (6 | ) | ||||||
Long-term borrowings(2) | 631 | (520 | ) | 111 |
(1) | Of the total gains (losses) recorded in Trading revenues for short-term and long-term borrowings for the quarter and nine months ended September 30, 2015, $435 million and $742 million, respectively, are attributable to changes in the credit quality of the Company and other credit factors, and the respective remainder is attributable to changes in foreign currency rates or interest rates or movements in the reference price or index for structured notes before the impact of related hedges. |
(2) | Of the total gains (losses) recorded in Trading revenues for short-term and long-term borrowings for the quarter and nine months ended September 30, 2014, $215 million and $428 million, respectively, are attributable to changes in the credit quality of the Company and other credit factors, and the respective remainder is attributable to changes in foreign currency rates or interest rates or movements in the reference price or index for structured notes before the impact of related hedges. |
In addition to the amounts in the above table, as discussed in Note 2 to the consolidated financial statements in the 2014 Form 10-K, all of the instruments within Trading assets or Trading liabilities are measured at fair value, either through the election of the fair value option or as required by other accounting guidance. The amounts in the above table are included within Net revenues and do not reflect gains or losses on related hedging instruments, if any.
25 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
The Company hedges the economics of market risk for short-term and long-term borrowings ( i.e ., risks other than that related to the credit quality of the Company) as part of its overall trading strategy and manages the market risks embedded within the issuance by the related business unit as part of the business unit's portfolio. The gains and losses on related economic hedges are recorded in Trading revenues and largely offset the gains and losses on short-term and long-term borrowings attributable to market risk.
At September 30, 2015 and December 31, 2014, a breakdown of the short-term and long-term borrowings measured at fair value on a recurring basis by business unit responsible for risk-managing each borrowing is shown in the table below.
Short-Term and Long-Term Borrowings | ||||||||
Business Unit | At September 30, 2015 | At December 31, 2014 | ||||||
(dollars in millions) | ||||||||
Equity | $ | 17,054 | $ | 17,253 | ||||
Interest rates | 13,614 | 13,545 | ||||||
Credit and foreign exchange | 1,947 | 2,105 | ||||||
Commodities | 540 | 636 | ||||||
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| |||||
Total | $ | 33,155 | $ | 33,539 | ||||
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The following tables present information on the Company's short-term and long-term borrowings (primarily structured notes), and loans and lending commitments for which the fair value option was elected:
Gains (Losses) due to Changes in Instrument-Specific Credit Risk.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(dollars in millions) | ||||||||||||||||
Short-term and long-term borrowings(1) | $ | 435 | $ | 215 | $ | 742 | $ | 428 | ||||||||
Loans and other debt(2) | (32 | ) | 25 | 39 | 153 | |||||||||||
Lending commitments(3) | 5 | 2 | 13 | 29 |
(1) | The change in the fair value of short-term and long-term borrowings (primarily structured notes) includes an adjustment to reflect the change in credit quality of the Company based upon observations of the Company's secondary bond market spreads and changes in other credit factors. |
(2) | Loans and other debt instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates. |
(3) | Gains (losses) on lending commitments were generally determined based on the differential between estimated expected client yields and contractual yields at each respective period-end. |
Net Difference between Contractual Principal Amount and Fair Value.
Contractual Principal Amount Exceeds Fair Value | ||||||||
At September 30, 2015 | At December 31, 2014 | |||||||
(dollars in millions) | ||||||||
Loans and other debt(1) | $ | 14,186 | $ | 14,990 | ||||
Loans 90 or more days past due and/or on nonaccrual status(1)(2) | 11,798 | 12,916 | ||||||
Short-term and long-term borrowings(3) | 694 | (670 | ) |
![]() | 26 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
(1) | The majority of the difference between principal and fair value amounts for loans and other debt emanates from the Company's distressed debt trading business, which purchases distressed debt at amounts well below par. |
(2) | The aggregate fair value of loans that were in nonaccrual status, which includes all loans 90 or more days past due, was $2,070 million and $1,367 million at September 30, 2015 and December 31, 2014, respectively. The aggregate fair value of loans that were 90 or more days past due was $916 million and $643 million at September 30, 2015 and December 31, 2014, respectively. |
(3) | Short-term and long-term borrowings do not include structured notes where the repayment of the initial principal amount fluctuates based on changes in the reference price or index. |
The tables above exclude non-recourse debt from consolidated VIEs, liabilities related to failed sales of financial assets, pledged commodities and other liabilities that have specified assets attributable to them.
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis.
Certain assets and liabilities were measured at fair value on a non-recurring basis and are not included in the tables above. These assets and liabilities may include loans, other investments, premises, equipment and software costs, intangible assets and lending commitments.
The following tables present, by caption on the Company's condensed consolidated statements of financial condition, the fair value hierarchy for those assets measured at fair value on a non-recurring basis for which the Company recognized a non-recurring fair value adjustment for the quarters and nine months ended September 30, 2015 and 2014.
Three Months and Nine Months Ended September 30, 2015.
Fair Value Measurements Using: | ||||||||||||||||||||||||
Carrying Value at September 30, 2015(1) | Quoted in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Gains (Losses) for the Three Months Ended September 30, 2015(2) | Total Gains (Losses) for the Nine Months Ended September 30, 2015(2) | |||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Loans(3) | $ | 5,089 | $ | - | $ | 3,060 | $ | 2,029 | $ | 12 | $ | (201 | ) | |||||||||||
Other investments(4) | - | - | - | - | - | (2 | ) | |||||||||||||||||
Premises, equipment and software costs(5) | - | - | - | - | (2 | ) | (24 | ) | ||||||||||||||||
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Total assets | $ | 5,089 | $ | - | $ | 3,060 | $ | 2,029 | $ | 10 | $ | (227 | ) | |||||||||||
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Liabilities: | ||||||||||||||||||||||||
Other liabilities and accrued expenses(3) | $ | (427 | ) | $ | - | $ | (365 | ) | $ | (62 | ) | $ | (144 | ) | $ | (171 | ) | |||||||
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| |||||||||||||
Total liabilities | $ | (427 | ) | $ | - | $ | (365 | ) | $ | (62 | ) | $ | (144 | ) | $ | (171 | ) | |||||||
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27 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Three Months and Nine Months Ended September 30, 2014.
Fair Value Measurements Using: | ||||||||||||||||||||||||
Carrying Value at September 30, 2014(1) | Quoted in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Gains (Losses) for the Three Months Ended September 30, 2014(2) | Total Gains (Losses) for the Nine Months Ended September 30, 2014(2) | |||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Loans(3) | $ | 2,672 | $ | - | $ | 1,996 | $ | 676 | $ | (45 | ) | $ | (55 | ) | ||||||||||
Other investments(4) | 38 | - | - | 38 | (2 | ) | (27 | ) | ||||||||||||||||
Premises, equipment and software costs(5) | - | - | - | - | (27 | ) | (43 | ) | ||||||||||||||||
Intangible assets(4) | 20 | - | - | 20 | (4 | ) | (6 | ) | ||||||||||||||||
Other assets(5) | - | - | - | - | - | (9 | ) | |||||||||||||||||
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| |||||||||||||
Total assets | $ | 2,730 | $ | - | $ | 1,996 | $ | 734 | $ | (78 | ) | $ | (140 | ) | ||||||||||
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(1) | Carrying values relate only to those assets that had fair value adjustments during the quarters ended September 30, 2015 and 2014. |
(2) | Changes in the fair value of Loans and losses related to Other investments are recorded within Other revenues in the Company's condensed consolidated statements of income. Losses related to Premises, equipment and software costs, Intangible assets and Other assets are recorded within Other expenses if not held for sale and within Other revenues if held for sale. Losses related to Other liabilities and accrued expenses are recorded within Other revenues and represent non-recurring fair value adjustments for certain lending commitments designated as held for sale. |
(3) | Non-recurring changes in the fair value of loans and lending commitments held for investment or held for sale were calculated using recently executed transactions; market price quotations; valuation models that incorporate market observable inputs where possible, such as comparable loan or debt prices and credit default swap spread levels adjusted for any basis difference between cash and derivative instruments; or default recovery analysis where such transactions and quotations are unobservable. |
(4) | Losses related to Other investments and Intangible assets were determined primarily using discounted cash flow models and methodologies that incorporate multiples of certain comparable companies. |
(5) | Losses related to Premises, equipment and software costs and Other assets were determined primarily using a default recovery analysis. |
In addition to the table above, as a result of entering into an agreement to sell the global oil merchanting unit of the commodities division, the Company recognized an impairment charge of $10 million and $69 million in Other revenues in the Company's condensed consolidated statements of income in the quarter and nine months ended September 30, 2015, respectively, to reduce the carrying amount of the unit to its estimated fair value less costs to sell.
There were no significant liabilities measured at fair value on a non-recurring basis during the quarter and nine months ended September 30, 2014.
![]() | 28 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Financial Instruments Not Measured at Fair Value.
The tables below present the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value in the Company's condensed consolidated statements of financial condition. The tables below exclude certain financial instruments such as equity method investments and all non-financial assets and liabilities such as the value of the long-term relationships with our deposit customers.
For a further discussion of the Company's financial instruments not measured at fair value, see Note 4 to the consolidated financial statements in 2014 Form 10-K.
At September 30, 2015.
At September 30, 2015 | Fair Value Measurements Using: | |||||||||||||||||||
Carrying Value | Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||
Cash and due from banks | $ | 19,244 | $ | 19,244 | $ | 19,244 | $ | - | $ | - | ||||||||||
Interest bearing deposits with banks | 34,274 | 34,274 | 34,274 | - | - | |||||||||||||||
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements | 35,552 | 35,552 | 35,552 | - | - | |||||||||||||||
Investment securities-HTM securities | 3,530 | 3,528 | 1,007 | 2,521 | - | |||||||||||||||
Securities purchased under agreements to resell | 126,397 | 126,397 | - | 125,731 | 666 | |||||||||||||||
Securities borrowed | 148,245 | 148,232 | - | 148,148 | 84 | |||||||||||||||
Customer and other receivables(1) | 46,134 | 46,028 | - | 41,230 | 4,798 | |||||||||||||||
Loans(2) | 78,209 | 79,026 | - | 17,317 | 61,709 | |||||||||||||||
Financial Liabilities: | ||||||||||||||||||||
Deposits | $ | 147,226 | $ | 147,248 | $ | - | $ | 147,248 | $ | - | ||||||||||
Short-term borrowings | 214 | 214 | - | 214 | - | |||||||||||||||
Securities sold under agreements to repurchase | 57,973 | 58,036 | - | 55,598 | 2,438 | |||||||||||||||
Securities loaned | 20,644 | 20,657 | - | 20,488 | 169 | |||||||||||||||
Other secured financings | 6,721 | 6,720 | - | 5,441 | 1,279 | |||||||||||||||
Customer and other payables(1) | 190,434 | 190,434 | - | 190,434 | - | |||||||||||||||
Long-term borrowings | 128,956 | 130,826 | - | 130,747 | 79 |
29 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
At December 31, 2014.
At December 31, 2014 | Fair Value Measurements Using: | |||||||||||||||||||
Carrying Value | Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||
Cash and due from banks | $ | 21,381 | $ | 21,381 | $ | 21,381 | $ | - | $ | - | ||||||||||
Interest bearing deposits with banks | 25,603 | 25,603 | 25,603 | - | - | |||||||||||||||
Cash deposited with clearing organizations or segregated under federal and other regulations or requirements | 40,607 | 40,607 | 40,607 | - | - | |||||||||||||||
Investment securities-HTM securities | 100 | 100 | 100 | - | - | |||||||||||||||
Securities purchased under agreements to resell | 82,175 | 82,165 | - | 81,981 | 184 | |||||||||||||||
Securities borrowed | 136,708 | 136,708 | - | 136,696 | 12 | |||||||||||||||
Customer and other receivables(1) | 45,116 | 45,028 | - | 39,945 | 5,083 | |||||||||||||||
Loans(2) | 66,577 | 67,800 | - | 18,212 | 49,588 | |||||||||||||||
Financial Liabilities: | ||||||||||||||||||||
Deposits | $ | 133,544 | $ | 133,572 | $ | - | $ | 133,572 | $ | - | ||||||||||
Short-term borrowings | 496 | 496 | - | 496 | - | |||||||||||||||
Securities sold under agreements to repurchase | 69,337 | 69,433 | - | 63,921 | 5,512 | |||||||||||||||
Securities loaned | 25,219 | 25,244 | - | 24,740 | 504 | |||||||||||||||
Other secured financings | 7,581 | 7,881 | - | 5,465 | 2,416 | |||||||||||||||
Customer and other payables(1) | 178,373 | 178,373 | - | 178,373 | - | |||||||||||||||
Long-term borrowings | 120,998 | 124,961 | - | 124,150 | 811 |
HTM-held to maturity
(1) | Accrued interest, fees, and dividend receivables and payables where carrying value approximates fair value have been excluded. |
(2) | Amounts include all loans measured at fair value on a non-recurring basis. |
The fair value of the Company's lending commitments, primarily related to corporate lending in the Company's Institutional Securities business segment, that are not carried at fair value at September 30, 2015 was $1,807 million, of which $1,544 million and $263 million would have been categorized in Level 2 and Level 3 of the fair value hierarchy, respectively. The notional amount of these commitments was $109.8 billion.
The fair value of the Company's lending commitments, primarily related to corporate lending in the Company's Institutional Securities business segment, that are not carried at fair value at December 31, 2014 was $1,178 million, of which $928 million and $250 million would have been categorized in Level 2 and Level 3 of the fair value hierarchy, respectively. The notional amount of these commitments was $86.8 billion.
4. | Derivative Instruments and Hedging Activities. |
The Company trades and makes markets globally in listed futures, over-the-counter ("OTC") swaps, forwards, options and other derivatives referencing, among other things, interest rates, currencies, investment grade and non-investment grade corporate credits, loans, bonds, U.S. and other sovereign securities, emerging market bonds and loans, credit indices, asset-backed security indices, property indices, mortgage-related and other asset-backed securities, and real estate loan products. The Company uses these instruments for trading, foreign currency exposure management, and asset and liability management.
![]() | 30 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
The Company manages its 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). The Company manages the market risk associated with its trading activities on a Company-wide basis, on a worldwide trading division level and on an individual product basis.
Offsetting of Derivative Instruments.
In connection with its derivative activities, the Company generally enters into master netting agreements and collateral agreements with its counterparties. For a further discussion of these agreements, see Note 12 to the consolidated financial statements in the 2014 Form 10-K. The following tables present information about the offsetting of derivative instruments and related collateral amounts. See information related to offsetting of certain collateralized transactions in Note 6.
At September 30, 2015 | ||||||||||||||||||||||||
Gross Amounts(1) | Amounts Offset in the Condensed Consolidated Statements of Financial Condition | Net Amounts Presented in the Condensed Consolidated Statements of Financial Condition | Amounts Not Offset in the Condensed Consolidated Statements of Financial Condition(2) | Net Exposure | ||||||||||||||||||||
Financial Instruments Collateral | Other Cash Collateral | |||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||||
Bilateral OTC | $ | 379,609 | $ | (351,265 | ) | $ | 28,344 | $ | (9,967 | ) | $ | (8 | ) | $ | 18,369 | |||||||||
Cleared OTC(3) | 129,262 | (127,987 | ) | 1,275 | - | - | 1,275 | |||||||||||||||||
Exchange traded | 31,948 | (28,273 | ) | 3,675 | - | - | 3,675 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total derivative assets | $ | 540,819 | $ | (507,525 | ) | $ | 33,294 | $ | (9,967 | ) | $ | (8 | ) | $ | 23,319 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Derivative liabilities | ||||||||||||||||||||||||
Bilateral OTC | $ | 361,467 | $ | (332,549 | ) | $ | 28,918 | $ | (6,967 | ) | $ | - | $ | 21,951 | ||||||||||
Cleared OTC(3) | 128,153 | (127,267 | ) | 886 | - | (2 | ) | 884 | ||||||||||||||||
Exchange traded | 34,242 | (28,273 | ) | 5,969 | (735 | ) | - | 5,234 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total derivative liabilities | $ | 523,862 | $ | (488,089 | ) | $ | 35,773 | $ | (7,702 | ) | $ | (2 | ) | $ | 28,069 | |||||||||
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31 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
At December 31, 2014 | ||||||||||||||||||||||||
Gross Amounts(4) | Amounts Offset in the Condensed Consolidated Statements of Financial Condition | Net Amounts Presented in the Condensed Consolidated Statements of Financial Condition | Amounts Not Offset in the Condensed Consolidated Statements of Financial Condition(2) | Net Exposure | ||||||||||||||||||||
Financial Instruments Collateral | Other Cash Collateral | |||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||||
Bilateral OTC | $ | 427,079 | $ | (396,582 | ) | $ | 30,497 | $ | (9,844 | ) | $ | (19 | ) | $ | 20,634 | |||||||||
Cleared OTC(3) | 217,169 | (215,576 | ) | 1,593 | - | - | 1,593 | |||||||||||||||||
Exchange traded | 32,123 | (27,819 | ) | 4,304 | - | - | 4,304 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total derivative assets | $ | 676,371 | $ | (639,977 | ) | $ | 36,394 | $ | (9,844 | ) | $ | (19 | ) | $ | 26,531 | |||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Derivative liabilities | ||||||||||||||||||||||||
Bilateral OTC | $ | 410,003 | $ | (375,095 | ) | $ | 34,908 | $ | (11,192 | ) | $ | (179 | ) | $ | 23,537 | |||||||||
Cleared OTC(3) | 211,695 | (211,180 | ) | 515 | - | (6 | ) | 509 | ||||||||||||||||
Exchange traded | 32,608 | (27,819 | ) | 4,789 | (726 | ) | - | 4,063 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total derivative liabilities | $ | 654,306 | $ | (614,094 | ) | $ | 40,212 | $ | (11,918 | ) | $ | (185 | ) | $ | 28,109 | |||||||||
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(1) | Amounts include $6.2 billion of derivative assets and $6.9 billion of derivative liabilities, which are either not subject to master netting agreements or collateral agreements or are subject to such agreements but the Company has not determined the agreements to be legally enforceable. See also "Fair Value and Notional of Derivative Instruments" herein, for additional disclosure about gross fair values and notionals for derivative instruments by risk type. |
(2) | Amounts relate to master netting agreements and collateral agreements, which have been determined by the Company to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance. |
(3) | Amounts include OTC derivatives that are centrally cleared in accordance with certain regulatory requirements. |
(4) | Amounts include $6.5 billion of derivative assets and $6.9 billion of derivative liabilities, which are either not subject to master netting agreements or collateral agreements or are subject to such agreements but the Company has not determined the agreements to be legally enforceable. See also "Fair Value and Notional of Derivative Instruments" herein, for additional disclosure about gross fair values and notionals for derivative instruments by risk type. |
The Company incurs credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the failure of a counterparty to perform according to the terms of the contract. The Company's exposure to credit risk at any point in time is represented by the fair value of the derivative contracts reported as assets. The fair value of a derivative represents the amount at which the derivative could be exchanged in an orderly transaction between market participants and is further described in Note 2 to the consolidated financial statements in the 2014 Form 10-K and Note 3.
![]() | 32 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
OTC Derivative Products-Trading Assets.
The tables below present a summary by counterparty credit rating and remaining contract maturity of the fair value of OTC derivatives in a gain position at September 30, 2015 and December 31, 2014. Fair value is presented in the final column, net of collateral received (principally cash and U.S. government and agency securities):
At September 30, 2015(1) | ||||||||||||||||||||||||||||
Years to Maturity | Cross-Maturity and Cash Collateral Netting(3) | Net
Exposure Post-cash Collateral | Net Exposure Post-collateral | |||||||||||||||||||||||||
Credit Rating(2) | Less than 1 | 1-3 | 3-5 | Over 5 | ||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||
AAA | $ | 260 | $ | 289 | $ | 895 | $ | 4,174 | $ | (4,514 | ) | $ | 1,104 | $ | 924 | |||||||||||||
AA | 2,599 | 2,493 | 1,848 | 11,978 | (13,432 | ) | 5,486 | 2,887 | ||||||||||||||||||||
A | 10,807 | 9,428 | 5,885 | 22,520 | (38,543 | ) | 10,097 | 6,606 | ||||||||||||||||||||
BBB | 4,202 | 4,711 | 2,414 | 12,306 | (15,682 | ) | 7,951 | 5,654 | ||||||||||||||||||||
Non-investment grade | 4,502 | 3,339 | 1,521 | 3,755 | (8,144 | ) | 4,973 | 3,573 | ||||||||||||||||||||
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|
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|
| |||||||||||||||
Total | $ | 22,370 | $ | 20,260 | $ | 12,563 | $ | 54,733 | $ | (80,315 | ) | $ | 29,611 | $ | 19,644 | |||||||||||||
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|
|
At December 31, 2014(1) | ||||||||||||||||||||||||||||
Years to Maturity | Cross-Maturity and Cash Collateral Netting(3) | Net Exposure Post-cash Collateral | Net Exposure Post-collateral | |||||||||||||||||||||||||
Credit Rating(2) | Less than 1 | 1-3 | 3-5 | Over 5 | ||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||
AAA | $ | 499 | $ | 246 | $ | 1,313 | $ | 4,281 | $ | (5,009 | ) | $ | 1,330 | $ | 1,035 | |||||||||||||
AA | 2,679 | 2,811 | 2,704 | 14,137 | (15,415 | ) | 6,916 | 4,719 | ||||||||||||||||||||
A | 11,733 | 10,833 | 7,585 | 23,968 | (43,644 | ) | 10,475 | 6,520 | ||||||||||||||||||||
BBB | 5,119 | 3,753 | 2,592 | 13,132 | (15,844 | ) | 8,752 | 6,035 | ||||||||||||||||||||
Non-investment grade | 3,196 | 3,089 | 1,541 | 2,499 | (5,727 | ) | 4,598 | 3,918 | ||||||||||||||||||||
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|
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|
|
|
| |||||||||||||||
Total | $ | 23,226 | $ | 20,732 | $ | 15,735 | $ | 58,017 | $ | (85,639 | ) | $ | 32,071 | $ | 22,227 | |||||||||||||
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|
|
(1) | Fair values shown represent the Company's net exposure to counterparties related to the Company's OTC derivative products. Amounts include centrally cleared OTC derivatives. The tables do not include exchange-traded derivatives and the effect of any related hedges utilized by the Company. |
(2) | Obligor credit ratings are determined by the Company's Credit Risk Management Department. |
(3) | Amounts represent the netting of receivable balances with payable balances for the same counterparty across maturity categories. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. Cash collateral received is netted on a counterparty basis, provided legal right of offset exists. |
For a discussion of hedge accounting, fair value hedges-interest rate risk and net investment hedges, see Note 12 to the consolidated financial statements in the 2014 Form 10-K.
33 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Fair Value and Notional of Derivative Instruments.
The following tables summarize the fair value of derivative instruments designated as accounting hedges and the fair value of derivative instruments not designated as accounting hedges by type of derivative contract and the platform on which these instruments are traded or cleared on a gross basis. Fair values of derivative contracts in an asset position are included in Trading assets, and fair values of derivative contracts in a liability position are reflected in Trading liabilities in the Company's condensed consolidated statements of financial condition (see Note 3):
Derivative Assets at September 30, 2015 | ||||||||||||||||||||||||||||||||
Fair Value | Notional | |||||||||||||||||||||||||||||||
Bilateral OTC | Cleared OTC(1) | Exchange Traded | Total | Bilateral OTC | Cleared OTC(1) | Exchange Traded | Total | |||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||
Derivatives designated as accounting hedges: | ||||||||||||||||||||||||||||||||
Interest rate contracts | $ | 3,565 | $ | 1,828 | $ | - | $ | 5,393 | $ | 38,389 | $ | 43,193 | $ | - | $ | 81,582 | ||||||||||||||||
Foreign exchange contracts | 210 | 5 | - | 215 | 6,533 | 438 | - | 6,971 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total derivatives designated as accounting hedges | 3,775 | 1,833 | - | 5,608 | 44,922 | 43,631 | - | 88,553 | ||||||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||
Derivatives not designated as accounting hedges(2): | ||||||||||||||||||||||||||||||||
Interest rate contracts | 242,212 | 123,482 | 436 | 366,130 | 4,570,771 | 6,416,792 | 1,231,155 | 12,218,718 | ||||||||||||||||||||||||
Credit contracts | 21,246 | 3,535 | - | 24,781 | 684,536 | 171,985 | - | 856,521 | ||||||||||||||||||||||||
Foreign exchange contracts | 70,521 | 412 | 102 | 71,035 | 1,964,784 | 13,908 | 42,417 | 2,021,109 | ||||||||||||||||||||||||
Equity contracts | 25,261 | - | 26,399 | 51,660 | 356,509 | - | 294,745 | 651,254 | ||||||||||||||||||||||||
Commodity contracts | 16,230 | - | 5,011 | 21,241 | 87,566 | - | 103,188 | 190,754 | ||||||||||||||||||||||||
Other | 364 | - | - | 364 | 7,568 | - | - | 7,568 | ||||||||||||||||||||||||
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|
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|
|
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|
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|
|
| |||||||||||||||||
Total derivatives not designated as accounting hedges | 375,834 | 127,429 | 31,948 | 535,211 | 7,671,734 | 6,602,685 | 1,671,505 | 15,945,924 | ||||||||||||||||||||||||
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|
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|
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|
| |||||||||||||||||
Total derivatives | $ | 379,609 | $ | 129,262 | $ | 31,948 | $ | 540,819 | $ | 7,716,656 | $ | 6,646,316 | $ | 1,671,505 | $ | 16,034,477 | ||||||||||||||||
Cash collateral netting | (54,391 | ) | (2,480 | ) | - | (56,871 | ) | - | - | - | - | |||||||||||||||||||||
Counterparty netting | (296,874 | ) | (125,507 | ) | (28,273 | ) | (450,654 | ) | - | - | - | - | ||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||
Total derivative assets | $ | 28,344 | $ | 1,275 | $ | 3,675 | $ | 33,294 | $ | 7,716,656 | $ | 6,646,316 | $ | 1,671,505 | $ | 16,034,477 | ||||||||||||||||
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![]() | 34 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Derivative Liabilities at September 30, 2015 | ||||||||||||||||||||||||||||||||
Fair Value | Notional | |||||||||||||||||||||||||||||||
Bilateral OTC | Cleared OTC(1) | Exchange Traded | Total | Bilateral OTC | Cleared OTC(1) | Exchange Traded | Total | |||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||
Derivatives designated as accounting hedges: | ||||||||||||||||||||||||||||||||
Interest rate contracts | $ | 61 | $ | 98 | $ | - | $ | 159 | $ | 2,000 | $ | 4,519 | $ | - | $ | 6,519 | ||||||||||||||||
Foreign exchange contracts | 37 | 2 | - | 39 | 4,155 | 153 | - | 4,308 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
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|
|
| |||||||||||||||||
Total derivatives designated as accounting hedges | 98 | 100 | - | 198 | 6,155 | 4,672 | - | 10,827 | ||||||||||||||||||||||||
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|
|
|
| |||||||||||||||||
Derivatives not designated as accounting hedges(2): | ||||||||||||||||||||||||||||||||
Interest rate contracts | 224,805 | 124,372 | 321 | 349,498 | 4,259,745 | 6,013,571 | 1,189,701 | 11,463,017 | ||||||||||||||||||||||||
Credit contracts | 21,224 | 3,418 | - | 24,642 | 617,011 | 165,496 | - | 782,507 | ||||||||||||||||||||||||
Foreign exchange contracts | 72,572 | 263 | 60 | 72,895 | 1,968,292 | 12,137 | 9,274 | 1,989,703 | ||||||||||||||||||||||||
Equity contracts | 28,858 | - | 28,553 | 57,411 | 351,276 | - | 293,615 | 644,891 | ||||||||||||||||||||||||
Commodity contracts | 13,859 | - | 5,308 | 19,167 | 79,641 | - | 89,147 | 168,788 | ||||||||||||||||||||||||
Other | 51 | - | - | 51 | 4,170 | - | - | 4,170 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total derivatives not designated as accounting hedges | 361,369 | 128,053 | 34,242 | 523,664 | 7,280,135 | 6,191,204 | 1,581,737 | 15,053,076 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total derivatives | $ | 361,467 | $ | 128,153 | $ | 34,242 | $ | 523,862 | $ | 7,286,290 | $ | 6,195,876 | $ | 1,581,737 | $ | 15,063,903 | ||||||||||||||||
Cash collateral netting | (35,675 | ) | (1,760 | ) | - | (37,435 | ) | - | - | - | - | |||||||||||||||||||||
Counterparty netting | (296,874 | ) | (125,507 | ) | (28,273 | ) | (450,654 | ) | - | - | - | - | ||||||||||||||||||||
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|
|
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|
|
|
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|
|
| |||||||||||||||||
Total derivative liabilities | $ | 28,918 | $ | 886 | $ | 5,969 | $ | 35,773 | $ | 7,286,290 | $ | 6,195,876 | $ | 1,581,737 | $ | 15,063,903 | ||||||||||||||||
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|
|
Derivative Assets at December 31, 2014 | ||||||||||||||||||||||||||||||||
Fair Value | Notional | |||||||||||||||||||||||||||||||
Bilateral OTC | Cleared OTC(1) | Exchange Traded | Total | Bilateral OTC | Cleared OTC(1) | Exchange Traded | Total | |||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||
Derivatives designated as accounting hedges: | ||||||||||||||||||||||||||||||||
Interest rate contracts | $ | 3,947 | $ | 1,053 | $ | - | $ | 5,000 | $ | 44,324 | $ | 27,692 | $ | - | $ | 72,016 | ||||||||||||||||
Foreign exchange contracts | 498 | 6 | - | 504 | 9,362 | 261 | - | 9,623 | ||||||||||||||||||||||||
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|
|
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|
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|
|
|
|
|
|
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| |||||||||||||||||
Total derivatives designated as accounting hedges | 4,445 | 1,059 | - | 5,504 | 53,686 | 27,953 | - | 81,639 | ||||||||||||||||||||||||
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|
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|
|
| |||||||||||||||||
Derivatives not designated as accounting hedges(3): | ||||||||||||||||||||||||||||||||
Interest rate contracts | 281,214 | 211,552 | 407 | 493,173 | 4,854,953 | 9,187,454 | 1,467,056 | 15,509,463 | ||||||||||||||||||||||||
Credit contracts | 27,776 | 4,406 | - | 32,182 | 806,441 | 167,390 | - | 973,831 | ||||||||||||||||||||||||
Foreign exchange contracts | 72,362 | 152 | 83 | 72,597 | 1,955,343 | 11,538 | 9,663 | 1,976,544 | ||||||||||||||||||||||||
Equity contracts | 23,208 | - | 24,916 | 48,124 | 299,363 | - | 271,164 | 570,527 | ||||||||||||||||||||||||
Commodity contracts | 17,698 | - | 6,717 | 24,415 | 115,792 | - | 156,440 | 272,232 | ||||||||||||||||||||||||
Other | 376 | - | - | 376 | 5,179 | - | - | 5,179 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total derivatives not designated as accounting hedges | 422,634 | 216,110 | 32,123 | 670,867 | 8,037,071 | 9,366,382 | 1,904,323 | 19,307,776 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total derivatives | $ | 427,079 | $ | 217,169 | $ | 32,123 | $ | 676,371 | $ | 8,090,757 | $ | 9,394,335 | $ | 1,904,323 | $ | 19,389,415 | ||||||||||||||||
Cash collateral netting | (58,541 | ) | (4,654 | ) | - | (63,195 | ) | - | - | - | - | |||||||||||||||||||||
Counterparty netting | (338,041 | ) | (210,922 | ) | (27,819 | ) | (576,782 | ) | - | - | - | - | ||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total derivative assets | $ | 30,497 | $ | 1,593 | $ | 4,304 | $ | 36,394 | $ | 8,090,757 | $ | 9,394,335 | $ | 1,904,323 | $ | 19,389,415 | ||||||||||||||||
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35 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Derivative Liabilities at December 31, 2014 | ||||||||||||||||||||||||||||||||
Fair Value | Notional | |||||||||||||||||||||||||||||||
Bilateral OTC | Cleared OTC(1) | Exchange Traded | Total | Bilateral OTC | Cleared OTC(1) | Exchange Traded | Total | |||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||
Derivatives designated as accounting hedges: | ||||||||||||||||||||||||||||||||
Interest rate contracts | $ | 125 | $ | 99 | $ | - | $ | 224 | $ | 2,024 | $ | 7,588 | $ | - | $ | 9,612 | ||||||||||||||||
Foreign exchange contracts | 5 | 1 | - | 6 | 1,491 | 121 | - | 1,612 | ||||||||||||||||||||||||
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|
|
|
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|
|
| |||||||||||||||||
Total derivatives designated as accounting hedges | 130 | 100 | - | 230 | 3,515 | 7,709 | - | 11,224 | ||||||||||||||||||||||||
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|
|
| |||||||||||||||||
Derivatives not designated as accounting hedges(3): | ||||||||||||||||||||||||||||||||
Interest rate contracts | 264,579 | 207,482 | 293 | 472,354 | 4,615,886 | 9,138,417 | 1,714,021 | 15,468,324 | ||||||||||||||||||||||||
Credit contracts | 28,165 | 3,944 | - | 32,109 | 714,181 | 154,054 | - | 868,235 | ||||||||||||||||||||||||
Foreign exchange contracts | 72,156 | 169 | 21 | 72,346 | 1,947,178 | 11,477 | 1,761 | 1,960,416 | ||||||||||||||||||||||||
Equity contracts | 30,061 | - | 25,511 | 55,572 | 339,884 | - | 302,205 | 642,089 | ||||||||||||||||||||||||
Commodity contracts | 14,740 | - | 6,783 | 21,523 | 93,019 | - | 132,136 | 225,155 | ||||||||||||||||||||||||
Other | 172 | - | - | 172 | 5,478 | - | - | 5,478 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total derivatives not designated as accounting hedges | 409,873 | 211,595 | 32,608 | 654,076 | 7,715,626 | 9,303,948 | 2,150,123 | 19,169,697 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total derivatives | $ | 410,003 | $ | 211,695 | $ | 32,608 | $ | 654,306 | $ | 7,719,141 | $ | 9,311,657 | $ | 2,150,123 | $ | 19,180,921 | ||||||||||||||||
Cash collateral netting | (37,054 | ) | (258 | ) | - | (37,312 | ) | - | - | - | - | |||||||||||||||||||||
Counterparty netting | (338,041 | ) | (210,922 | ) | (27,819 | ) | (576,782 | ) | - | - | - | - | ||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total derivative liabilities | $ | 34,908 | $ | 515 | $ | 4,789 | $ | 40,212 | $ | 7,719,141 | $ | 9,311,657 | $ | 2,150,123 | $ | 19,180,921 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Amounts include OTC derivatives that are centrally cleared in accordance with certain regulatory requirements. |
(2) | Notional amounts include gross notionals related to open long and short futures contracts of $886 billion and $950 billion, respectively. The unsettled fair value on these futures contracts (excluded from the table above) of $432 million and $9 million is included in Customer and other receivables and Customer and other payables, respectively, in the Company's condensed consolidated statements of financial condition. |
(3) | Notional amounts include gross notionals related to open long and short futures contracts of $685 billion and $1,122 billion, respectively. The unsettled fair value on these futures contracts (excluded from the table above) of $472 million and $21 million is included in Customer and other receivables and Customer and other payables, respectively, in the Company's condensed consolidated statements of financial condition. |
At September 30, 2015, cash collateral payables of $3 million and at December 31, 2014, cash collateral receivables and payables of $21 million and $30 million, respectively, were not offset against certain contracts that did not meet the definition of a derivative. The Company had no cash collateral receivable at September 30, 2015 that was not offset against certain contracts that did not meet the definition of a derivative.
![]() | 36 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
Derivatives Designated as Fair Value Hedges.
The following table presents gains (losses) reported on interest rate derivative instruments designated and qualifying as accounting hedges and the related hedged item as well as the hedge ineffectiveness included in Interest expense in the Company's condensed consolidated statements of income:
Gains (Losses) Recognized in Interest Expense | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Product Type | 2015 | 2014 | 2015 | 2014 | ||||||||||||
(dollars in millions) | ||||||||||||||||
Derivatives | $ | 1,531 | $ | (384 | ) | $ | 390 | $ | 547 | |||||||
Borrowings | (1,334 | ) | 757 | 386 | 429 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 197 | $ | 373 | $ | 776 | $ | 976 | ||||||||
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|
|
|
|
|
|
|
Derivatives Designated as Net Investment Hedges.
The following table presents gains (losses) reported on derivative instruments designated and qualifying as accounting hedges:
Gains (Losses) Recognized in OCI (effective portion) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
Product Type | 2015 | 2014 | 2015 | 2014 | ||||||||||||
(dollars in millions) | ||||||||||||||||
Foreign exchange contracts(1) | $ | 210 | $ | 438 | $ | 391 | $ | 262 | ||||||||
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|
|
|
|
|
| |||||||||
Total | $ | 210 | $ | 438 | $ | 391 | $ | 262 | ||||||||
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|
|
|
|
|
(1) | Losses of $37 million and $117 million related to the forward points on the hedging instruments were excluded from hedge effectiveness testing and recognized in interest income during the quarter and nine months ended September 30, 2015, respectively. Losses of $46 million and $143 million related to the forward points on the hedging instruments were excluded from hedge effectiveness testing and recognized in interest income during the quarter and nine months ended September 30, 2014, respectively. |
Derivatives Not Designated as Accounting Hedges.
The following table summarizes gains (losses) on derivative instruments not designated as accounting hedges:
Gains (Losses) Recognized in Income(1) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
Product Type | 2015 | 2014 | 2015 | 2014 | ||||||||||||
(dollars in millions) | ||||||||||||||||
Interest rate contracts | $ | 103 | $ | (37 | ) | $ | 579 | $ | (1,847 | ) | ||||||
Credit contracts | 99 | 407 | (110 | ) | 258 | |||||||||||
Foreign exchange contracts | 3,570 | 191 | (1,224 | ) | 1,795 | |||||||||||
Equity contracts | 3,678 | 114 | 1,658 | (2,212 | ) | |||||||||||
Commodity contracts | 787 | 60 | 1,435 | 531 | ||||||||||||
Other contracts | 35 | 22 | (30 | ) | 133 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total derivative instruments | $ | 8,272 | $ | 757 | $ | 2,308 | $ | (1,342 | ) | |||||||
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|
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37 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
(1) | Gains (losses) on derivative contracts not designated as hedges are primarily included in Trading revenues in the Company's condensed consolidated statements of income. Gains (losses) associated with certain derivative contracts that have physically settled are excluded from the table above. Gains (losses) on these contracts are reflected with the associated cash instruments, which are also included in Trading revenues in the Company's condensed consolidated statements of income. |
The Company also has certain embedded derivatives that have been bifurcated from the related structured borrowings. Such derivatives are classified in Long-term borrowings and had a net fair value of $19 million and $10 million at September 30, 2015 and December 31, 2014, respectively, and a notional value of $2,069 million at both September 30, 2015 and December 31, 2014. The Company recognized a loss of $6 million and a gain of $10 million related to changes in the fair value of its bifurcated embedded derivatives for the quarter and nine months ended September 30, 2015, respectively. The Company recognized a gain of $5 million and a loss of $23 million related to changes in the fair value of its bifurcated embedded derivatives for the quarter and nine months ended September 30, 2014, respectively.
Credit Risk-Related Contingencies.
In connection with certain OTC trading agreements, the Company 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 Company. 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 Company has posted collateral in the normal course of business.
At September 30, 2015 | ||||
(dollars in millions) | ||||
Net derivative liabilities | $ | 26,700 | ||
Collateral posted | 22,247 |
The additional collateral or termination payments which may be called in the event of a future credit rating downgrade vary by contract and can be based on ratings by either or both of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Services ("S&P"). At September 30, 2015, for such OTC trading agreements, the future potential collateral amounts and termination payments that could be called or required by counterparties or exchange and clearing organizations in the event of one-notch or two-notch downgrade scenarios based on the relevant contractual downgrade triggers were as follows:
At September 30, 2015 | ||||
(dollars in millions) | ||||
Incremental collateral or termination payments upon potential future ratings downgrade(1): | ||||
One-notch downgrade | $ | 1,111 | ||
Two-notch downgrade | 1,251 |
(1) | Amounts include $1,879 million related to bilateral arrangements between the Company and other parties where upon the downgrade of one party, the downgraded party must deliver collateral to the other party. These bilateral downgrade arrangements are a risk management tool used extensively by the Company as credit exposures are reduced if counterparties are downgraded. |
Credit Derivatives and Other Credit Contracts.
The Company enters into credit derivatives, principally through credit default swaps, under which it receives or provides protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. A majority of the Company's counterparties are banks, broker-dealers, insurance and other financial institutions, and monoline insurers.
![]() | 38 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
The tables below summarize the notional and fair value of protection sold and protection purchased through credit default swaps:
At September 30, 2015 | ||||||||||||||||
Maximum Potential Payout/Notional | ||||||||||||||||
Protection Sold | Protection Purchased | |||||||||||||||
Notional | Fair Value (Asset)/Liability | Notional | Fair Value (Asset)/Liability | |||||||||||||
(dollars in millions) | ||||||||||||||||
Single name credit default swaps | $ | 458,768 | $ | 1,241 | $ | 439,328 | $ | (593 | ) | |||||||
Index and basket credit default swaps | 264,416 | (148 | ) | 231,528 | (68 | ) | ||||||||||
Tranched index and basket credit default swaps | 74,353 | (1,394 | ) | 170,635 | 823 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 797,537 | $ | (301 | ) | $ | 841,491 | $ | 162 | |||||||
|
|
|
|
|
|
|
|
At December 31, 2014 | ||||||||||||||||
Maximum Potential Payout/Notional | ||||||||||||||||
Protection Sold | Protection Purchased | |||||||||||||||
Notional | Fair Value (Asset)/Liability | Notional | Fair Value (Asset)/Liability | |||||||||||||
(dollars in millions) | ||||||||||||||||
Single name credit default swaps | $ | 535,415 | $ | (2,479 | ) | $ | 509,872 | $ | 1,641 | |||||||
Index and basket credit default swaps | 276,465 | (1,777 | ) | 229,789 | 1,563 | |||||||||||
Tranched index and basket credit default swaps | 96,182 | (2,355 | ) | 194,343 | 3,334 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 908,062 | $ | (6,611 | ) | $ | 934,004 | $ | 6,538 | |||||||
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|
|
|
|
|
|
|
39 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
The tables below summarize the credit ratings of the reference obligation and maturities of protection sold through credit default swaps and other credit contracts:
At September 30, 2015 | ||||||||||||||||||||||||
Maximum Potential Payout/Notional | Fair
Value (Asset)/ Liability(1)(2) | |||||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||||||
Credit Ratings of the Reference Obligation | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Single name credit default swaps: | ||||||||||||||||||||||||
AAA | $ | 4,247 | $ | 13,475 | $ | 5,252 | $ | 1,587 | $ | 24,561 | $ | (253 | ) | |||||||||||
AA | 9,247 | 18,450 | 10,605 | 2,689 | 40,991 | (433 | ) | |||||||||||||||||
A | 18,861 | 36,875 | 11,145 | 1,825 | 68,706 | (803 | ) | |||||||||||||||||
BBB | 43,071 | 92,864 | 41,808 | 11,883 | 189,626 | (325 | ) | |||||||||||||||||
Non-investment grade | 35,030 | 66,058 | 28,914 | 4,882 | 134,884 | 3,055 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 110,456 | 227,722 | 97,724 | 22,866 | 458,768 | 1,241 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Index and basket credit default swaps: | ||||||||||||||||||||||||
AAA | 14,890 | 41,296 | 1,663 | - | 57,849 | (1,006 | ) | |||||||||||||||||
A | 4,700 | 4,668 | 6,271 | 12 | 15,651 | (197 | ) | |||||||||||||||||
BBB | 9,904 | 27,045 | 49,952 | 34,893 | 121,794 | (818 | ) | |||||||||||||||||
Non-investment grade | 24,331 | 82,978 | 16,048 | 20,118 | 143,475 | 479 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 53,825 | 155,987 | 73,934 | 55,023 | 338,769 | (1,542 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total credit default swaps sold | $ | 164,281 | $ | 383,709 | $ | 171,658 | $ | 77,889 | $ | 797,537 | $ | (301 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Other credit contracts(3) | $ | 1 | $ | 806 | $ | 340 | $ | 49 | $ | 1,196 | $ | (1,042 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total credit derivatives and other credit contracts | $ | 164,282 | $ | 384,515 | $ | 171,998 | $ | 77,938 | $ | 798,733 | $ | (1,343 | ) | |||||||||||
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|
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|
|
|
|
|
|
|
|
![]() | 40 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
At December 31, 2014 | ||||||||||||||||||||||||
Maximum Potential Payout/Notional | Fair
Value (Asset)/ Liability(1)(2) | |||||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||||||
Credit Ratings of the Reference Obligation | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Single name credit default swaps: | ||||||||||||||||||||||||
AAA | $ | 2,385 | $ | 9,400 | $ | 6,147 | $ | 692 | $ | 18,624 | $ | (113 | ) | |||||||||||
AA | 9,080 | 23,701 | 14,769 | 3,318 | 50,868 | (688 | ) | |||||||||||||||||
A | 22,861 | 52,291 | 22,083 | 2,944 | 100,179 | (1,962 | ) | |||||||||||||||||
BBB | 48,547 | 114,384 | 60,629 | 13,536 | 237,096 | (1,489 | ) | |||||||||||||||||
Non-investment grade | 29,857 | 66,066 | 29,011 | 3,714 | 128,648 | 1,773 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 112,730 | 265,842 | 132,639 | 24,204 | 535,415 | (2,479 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Index and basket credit default swaps: | ||||||||||||||||||||||||
AAA | 17,625 | 31,124 | 7,265 | 1,883 | 57,897 | (985 | ) | |||||||||||||||||
AA | 704 | 6,512 | 716 | 2,864 | 10,796 | (270 | ) | |||||||||||||||||
A | 1,283 | 6,841 | 10,154 | 30 | 18,308 | (465 | ) | |||||||||||||||||
BBB | 30,265 | 40,575 | 60,141 | 7,730 | 138,711 | (2,904 | ) | |||||||||||||||||
Non-investment grade | 25,750 | 88,105 | 22,971 | 10,109 | 146,935 | 492 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 75,627 | 173,157 | 101,247 | 22,616 | 372,647 | (4,132 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total credit default swaps sold | $ | 188,357 | $ | 438,999 | $ | 233,886 | $ | 46,820 | $ | 908,062 | $ | (6,611 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Other credit contracts(3) | $ | 51 | $ | 539 | $ | 1 | $ | 620 | $ | 1,211 | $ | (500 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total credit derivatives and other credit contracts | $ | 188,408 | $ | 439,538 | $ | 233,887 | $ | 47,440 | $ | 909,273 | $ | (7,111 | ) | |||||||||||
|
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|
|
|
|
|
|
|
|
|
|
(1) | Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting. |
(2) | Fair value amounts of certain credit default swaps where the Company sold protection have an asset carrying value because credit spreads of the underlying reference entity or entities tightened during the term of the contracts. |
(3) | Other credit contracts include credit-linked notes ("CLNs"), collateralized debt obligations ("CDOs") and credit default swaps that are considered hybrid instruments. Fair value amounts shown represent the fair value of the hybrid instruments. |
Single Name Credit Default Swaps.
A credit default swap protects the buyer against the loss of principal on a bond or loan in case of a default by the issuer. The protection buyer pays a periodic premium (generally quarterly) over the life of the contract and is protected for the period. The Company in turn will have to perform under a credit default swap if a credit event as defined under the contract occurs. Typical credit events include bankruptcy, dissolution or insolvency of the referenced entity, failure to pay and restructuring of the obligations of the referenced entity. In order to provide an indication of the current payment status or performance risk of the credit default swaps, a breakdown by credit ratings is provided. Agency ratings, if available, are used for this purpose; otherwise the Company's internal ratings are used.
Index and Basket Credit Default Swaps.
Index and basket credit default swaps are products where credit protection is provided on a portfolio of single name credit default swaps. Generally, in the event of a default on one of the underlying names, the Company will have to pay a pro rata portion of the total notional amount of the credit default swap.
The Company also enters into tranched index and basket credit default swaps where credit protection is provided on a particular portion of the portfolio loss distribution. The most junior tranches cover initial defaults, and once losses exceed the notional of the tranche, they are passed on to the next most senior tranche in the capital structure.
41 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
In order to provide an indication of the current payment status or performance risk of the credit default swaps, a breakdown by the Company's internal credit ratings is provided. Effective January 1, 2015, the Company utilized its internal credit ratings as compared with December 31, 2014 where external agency ratings, if available, were utilized. The change in the rating methodology did not have a significant impact on investment grade versus non-investment grade classifications or the fair values of tranched and non-tranched index and basket products in the above table.
Credit Protection Sold through CLNs and CDOs.
The Company has invested in CLNs and CDOs, which are hybrid instruments containing embedded derivatives, in which credit protection has been sold to the issuer of the note. If there is a credit event of a reference entity underlying the instrument, the principal balance of the note may not be repaid in full to the Company.
Purchased Credit Protection with Identical Underlying Reference Obligations.
For single name credit default swaps and non-tranched index and basket credit default swaps, the Company has purchased protection with a notional amount of approximately $668 billion and $731 billion at September 30, 2015 and December 31, 2014, respectively, compared with a notional amount of approximately $721 billion and $805 billion at September 30, 2015 and December 31, 2014, respectively, of credit protection sold with identical underlying reference obligations. In order to identify purchased protection with the same underlying reference obligations, the notional amount for individual reference obligations within non-tranched indices and baskets was determined on a pro rata basis and matched off against single name and non-tranched index and basket credit default swaps where credit protection was sold with identical underlying reference obligations.
The purchase of credit protection does not represent the sole manner in which the Company risk manages its exposure to credit derivatives. The Company manages its exposure to these derivative contracts through a variety of risk mitigation strategies, which include managing the credit and correlation risk across single name, non-tranched indices and baskets, tranched indices and baskets, and cash positions. Aggregate market risk limits have been established for credit derivatives, and market risk measures are routinely monitored against these limits. The Company may also recover amounts on the underlying reference obligation delivered to the Company under credit default swaps where credit protection was sold.
![]() | 42 |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)
5. | Investment Securities. |
The following tables present information about the Company'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 an after-tax basis as a component of Accumulated other comprehensive income (loss) ("AOCI").
At September 30, 2015 | ||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Other-than- Temporary Impairment | Fair Value | ||||||||||||||||
(dollars in millions) | ||||||||||||||||||||
AFS debt securities: | ||||||||||||||||||||
U.S. government and agency securities: | ||||||||||||||||||||
U.S. Treasury securities | $ | 24,718 | $ | 119 | $ | 3 | $ | - | $ | 24,834 | ||||||||||
U.S. agency securities(1) | 21,000 | 90 | 68 | - | 21,022 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total U.S. government and agency securities | 45,718 | 209 | 71 | - | 45,856 | |||||||||||||||
Corporate and other debt: | ||||||||||||||||||||
Commercial mortgage-backed securities: | ||||||||||||||||||||
Agency | 1,996 | 4 | 44 | - | 1,956 | |||||||||||||||
Non-agency | 2,174 | 16 | 12 | - | 2,178 | |||||||||||||||
Auto loan asset-backed securities | 2,679 | 3 | 1 | - | 2,681 | |||||||||||||||
Corporate bonds | 3,866 | 14 | 17 | - | 3,863 | |||||||||||||||
Collateralized loan obligations | 912 | - | 13 | - | 899 | |||||||||||||||
FFELP student loan asset-backed securities(2) | 3,807 | - | 93 | - | 3,714 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total corporate and other debt | 15,434 | 37 | 180 | - | 15,291 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total AFS debt securities | 61,152 | 246 | 251 | - | 61,147 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
AFS equity securities | 15 | - | 3 | - | 12 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total AFS securities | 61,167 | 246 | 254 | - | 61,159 | |||||||||||||||
HTM securities: | ||||||||||||||||||||
U.S. government securities: | ||||||||||||||||||||
U.S. Treasury securities | 1,002 | 5 | - | - | 1,007 | |||||||||||||||
U.S. agency securities(1) | 2,528 | 1 | 8 | - | 2,521 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total HTM securities | 3,530 | 6 | 8 | - | 3,528 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investment securities | $ | 64,697 | $ | 252 | $ | 262 | $ | - | $ | 64,687 | ||||||||||
|
|
|
|
|
|
|
|
|
|
43 | ![]() |
MORGAN STANLEY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(Continued)