Morgan Stanley 2010 Annual Report Download - page 88

The following table sets forth the Company’s total assets and leverage ratios at December 31, 2010 and
December 31, 2009 and average balances during 2010:
Balance at Average Balance(1)
December 31,
2010
December 31,
2009 2010
(dollars in millions, except ratio data)
Total assets ........................................... $807,698 $771,462 $831,070
Common equity(2) ..................................... $ 47,614 $ 37,091 $ 42,399
Preferred equity ........................................ 9,597 9,597 9,597
Morgan Stanley shareholders’ equity ....................... 57,211 46,688 51,996
Junior subordinated debentures issued to capital trusts ......... 4,817 10,594 8,346
Less: Goodwill and net intangible assets(3) .................. (6,947) (7,612) (7,310)
Tangible Morgan Stanley shareholders’ equity ............... $ 55,081 $ 49,670 $ 53,032
Common equity(2) ..................................... $ 47,614 $ 37,091 $ 42,399
Less: Goodwill and net intangible assets(3) .................. (6,947) (7,612) (7,310)
Tangible common equity(4) .............................. $ 40,667 $ 29,479 $ 35,089
Leverage ratio(5) ....................................... 14.7x 15.5x 15.7x
Tier 1 common ratio(6) .................................. 10.5% 8.2% N/M
N/M—Not meaningful.
(1) The Company calculates its average balances based upon weekly balances, except where weekly balances are unavailable, the month-end
balances are used.
(2) During 2010, the calculation of average Common equity was adjusted to reflect the common stock issuance corresponding to the
redemption of the junior subordinated debentures underlying the CIC Equity Units. See “Redemption of CIC Equity Units and Issuance
of Common Stock” herein for further information.
(3) Goodwill and net intangible assets exclude mortgage servicing rights (net of disallowable mortgage servicing rights) of $141 million and
$123 million at December 31, 2010 and December 31, 2009, respectively, and include only the Company’s share of MSSB’s goodwill
and intangible assets.
(4) Tangible common equity, a non-GAAP financial measure, equals common equity less goodwill and net intangible assets as defined
above. The Company views tangible common equity as a useful measure to investors because it is a commonly utilized metric and
reflects the common equity deployed in the Company’s businesses.
(5) Leverage ratio, a non-GAAP financial measure, equals total assets divided by tangible Morgan Stanley shareholders’ equity. The
Company views the leverage ratio as a useful measure for investors to assess capital adequacy.
(6) The Tier 1 common ratio, a non-GAAP financial measure, equals Tier 1 common equity divided by Risk Weighted Assets (“RWA”).
The Company defines Tier 1 common equity as Tier 1 capital less qualifying perpetual preferred stock, qualifying trust preferred
securities and other restricted core capital elements, adjusted for the portion of goodwill and non-servicing intangible assets associated
with MSSB’s noncontrolling interests (i.e., Citi’s share of MSSB’s goodwill and intangibles). The Company views its definition of the
Tier 1 common equity as a useful measure for investors as it reflects the actual ownership structure and economics of MSSB. This
definition of Tier 1 common equity may evolve in the future as regulatory rules may be implemented based on a final proposal regarding
noncontrolling interest (also referred to as minority interest) as initially presented in December 2009 in the Basel Committee on Banking
Supervision Consultative Document Strengthening the resilience of the banking sector (“BCBS 164”). For a discussion of RWAs and
Tier 1 capital, see “Regulatory Requirements” herein. The year-over-year increase in the Company’s Tier 1 Common ratio was primarily
driven by net income and the issuance of approximately $5,579 million of common stock corresponding to the redemption of the junior
subordinated debentures underlying the CIC Equity Units. Please see “Redemption of CIC Equity Units and Issuance of Common
Stock” herein for more information.
Balance Sheet and Funding Activity in 2010.
During 2010, the Company issued notes with a principal amount of approximately $33 billion. In connection
with the note issuances, the Company generally enters into certain transactions to obtain floating interest rates
based primarily on short-term LIBOR trading levels. The weighted average maturity of the Company’s long-term
borrowings, based upon stated maturity dates, was approximately 5.2 years at December 31, 2010. Subsequent to
December 31, 2010 and through February 16, 2011, the Company’s long-term borrowings (net of repayments)
increased by approximately $5 billion.
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