Morgan Stanley 2009 Annual Report Download - page 58

One Month Ended December 31, 2008 Compared with the One Month Ended December 31, 2007
Institutional Securities recorded losses before income taxes of $2,030 million in the one month ended
December 31, 2008 compared with income before income taxes of $904 million in the one month ended
December 31, 2007. Net revenues were $(1,353) million in the one month ended December 31, 2008 compared
with $2,303 million in the one month ended December 31, 2007. Net revenues in the one month ended
December 31, 2008 reflected sales and trading losses as compared with sales and trading revenues in the prior-
year period. Non-interest expenses decreased 52% to $677 million, primarily due to lower compensation and
benefits expense, reflecting lower net revenues. Non-compensation expenses decreased 3%.
Investment banking revenues decreased 45% to $177 million in the one month ended December 31, 2008 from
the prior-year period due to lower revenues from advisory fees and underwriting transactions, reflecting lower
levels of market activity. Advisory fees from merger, acquisition and restructuring transactions were $68 million,
a decrease of 58% from the prior-year period. Underwriting revenues decreased 33% from the prior-year period
to $109 million.
Equity sales and trading losses were $20 million in the one month ended December 31, 2008 compared with
revenues of $922 million in the one month ended December 31, 2007. Results in the one month ended
December 31, 2008 reflected lower revenues from equity cash and derivative products and prime brokerage.
Equity sales and trading losses also included approximately $75 million of losses from the tightening of the
Company’s credit spreads on certain long-term and short-term borrowings accounted for at fair value. Fixed
income sales and trading losses were $889 million in the one month ended December 31, 2008 compared with
revenues of $938 million in the one month ended December 31, 2007. Results in the one month ended
December 31, 2008 reflected losses in interest rate, credit and currency products where continued dislocation in
the credit markets contributed to the losses. In addition, fixed income sales and trading included approximately
$175 million losses from the tightening of the Company’s credit spreads on certain long-term and short-term
borrowings that are accounted for at fair value.
Other sales and trading losses were approximately $562 million in the one month ended December 31, 2008
compared with revenues of $63 million in the one month ended December 31, 2007. The one month ended
December 31, 2008 included writedowns related to mortgage-related securities portfolios in the Company’s
Subsidiary Banks, partially offset by mark-to-market gains on loans and lending commitments and related
hedges.
Principal transactions net investment losses of $158 million were recognized in the one month ended
December 31, 2008 compared with net investment gains of $25 million in the one month ended December 31,
2007. The losses in the one month ended December 31, 2008 were primarily related to net realized and
unrealized losses from the Company’s limited partnership investments in real estate funds and investments that
benefit certain employee deferred compensation and co-investment plans, and other principal investments.
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