Morgan Stanley 2015 Annual Report Download - page 115

Credit risk metrics assigned to the Company’s borrowers during the evaluation process are incorporated into the Credit Risk
Management Department’s maintenance of the allowance for loan losses for the loans held for the investment portfolio. Such
allowance serves as a reserve for probable inherent losses, as well as probable losses related to loans identified for
impairment. For more information on the allowance for loan losses, see Notes 2 and 7 to the consolidated financial
statements in Item 8.
Risk Mitigation.
The Company may seek to mitigate credit risk from its lending and trading activities in multiple ways, including collateral
provisions, guarantees and hedges. At the transaction level, the Company seeks to mitigate risk through management of key
risk elements such as size, tenor, financial covenants, seniority and collateral. The Company actively hedges its lending and
derivatives exposure through various financial instruments that may include single-name, portfolio and structured credit
derivatives. Additionally, the Company may sell, assign or syndicate loans and lending commitments to other financial
institutions in the primary and secondary loan markets. In connection with its derivatives trading activities, the Company
generally enters into master netting agreements and collateral arrangements with counterparties. These agreements provide
the Company with the ability to demand collateral, as well as to liquidate collateral and offset receivables and payables
covered under the same master agreement in the event of a counterparty default.
Lending Activities.
The Company provides loans and lending commitments to a variety of customers, from large corporate and institutional
clients to high net worth individuals. In addition, the Company purchases loans in the secondary market. In the consolidated
statements of financial condition, these loans and lending commitments are carried at either fair value with changes in fair
value recorded in earnings; held for investment, which are recorded at amortized cost; or held for sale, which are recorded at
lower of cost or fair value. Loans held for investment and loans held for sale are classified in Loans, and loans held at fair
value are classified in Trading assets in the consolidated statements of financial condition. See Notes 3, 7 and 12 to the
consolidated financial statements in Item 8 for further information.
Loan Portfolio by Loan Type within the Institutional Securities and Wealth Management Business Segments.
At December 31, 2015
Institutional
Securities
Lending
Wealth
Management
Lending Total
(dollars in millions)
Corporate loans ................................................ $ 16,452 $ 7,102 $ 23,554
Consumer loans ............................................... — 21,528 21,528
Residential real estate loans ...................................... — 20,863 20,863
Wholesale real estate loans ....................................... 6,839 — 6,839
Loans held for investment, gross of allowance ...................... 23,291 49,493 72,784
Allowance for loan losses ....................................... (195) (30) (225)
Loans held for investment, net of allowance ....................... 23,096 49,463 72,559
Corporate loans ................................................ 11,924 — 11,924
Residential real estate loans ...................................... 45 59 104
Wholesale real estate loans ....................................... 1,172 — 1,172
Loans held for sale ............................................ 13,141 59 13,200
Corporate loans ................................................ 7,286 — 7,286
Residential real estate loans ...................................... 1,885 — 1,885
Wholesale real estate loans ....................................... 1,447 — 1,447
Loans held at fair value ........................................ 10,618 — 10,618
Total loans(1) ............................................. 46,855 49,522 96,377
Lending commitments(2)(3) ..................................... 95,572 5,821 101,393
Total loans and lending commitments(2)(3) .................... $ 142,427 $ 55,343 $ 197,770
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