Morgan Stanley 2010 Annual Report Download - page 54

(16) Pre-tax profit margin is a non-GAAP financial measure that the Company considers to be a useful measure that the Company and
investors use to assess operating performance. Percentages represent income from continuing operations before income taxes as a
percentage of net revenues.
(17) Global representatives at December 31, 2010 and December 31, 2009 include additional global representatives of businesses contributed
by Citi related to MSSB.
(18) Annualized net revenues per global representative for 2010, 2009, fiscal 2008 and the one month ended December 31, 2008 equals
Global Wealth Management Group’s net revenues (excluding the sale of Morgan Stanley Wealth Management S.V., S.A.U. (“MSWM
S.V.”) for fiscal 2008) divided by the quarterly weighted average global representative headcount for 2010, 2009, fiscal 2008 and the one
month ended December 31, 2008, respectively.
(19) Beginning in 2009, amounts for Corporate and other accounts are presented in the appropriate client segment.
(20) Client assets per global representative equal total period-end client assets divided by period-end global representative headcount.
(21) Approximately $55 billion and $54 billion of the bank deposit balances at December 31, 2010 and December 31, 2009, respectively, are
held at Company-affiliated depositories with the remainder held at Citi-affiliated depositories. These deposit balances are held at certain
of the Company’s Federal Deposit Insurance Corporation (the “FDIC”) insured depository institutions for the benefit of the Company’s
clients through their accounts.
Global Market and Economic Conditions in 2010.
Global market and economic conditions continued to improve, and global capital markets continued to recover,
during 2010 and 2009, as compared with the severe economic and financial downturn that occurred in the fall of
2008.
In the U.S., major equity market indices ended 2010 higher compared with the beginning of the year. The
increase was primarily due to better than expected corporate earnings. Positive market and economic
developments were partially offset by a persistently high unemployment rate, continued investor concerns about
U.S. regulatory reform within the financial services industry, a sharp temporary decline in stock prices on May 6,
2010 (speculated to have been caused by high-speed electronic trading) and the continued sovereign debt crisis
within the European region. Government and business spending increased, while certain sectors of the real estate
market remained challenged. Consumer spending began to show signs of improvement toward the end of the
year. Deficit reductions and balanced budgets remain critical items at the federal, state and local levels of
government. The unemployment rate decreased to 9.4% at December 31, 2010 from 9.9% at December 31, 2009.
The Federal Open Market Committee (“FOMC”) of the Board of Governors of the Federal Reserve System (the
“Federal Reserve”) kept key interest rates at historically low levels, and at December 31, 2010, the federal funds
target rate was between zero and 0.25%, and the discount rate was 0.75%. The FOMC pursued quantitative
easing policies during 2010 and 2009, in which the FOMC purchased securities with the objective of improving
economic conditions by increasing the money supply.
In Europe, equity market indices in the United Kingdom (“U.K.”) and Germany ended 2010 higher, while in
France, they ended lower, as compared with the beginning of the year. Results in the European equity markets
were impacted by adverse economic developments, including investor concerns about the outcome of regulatory
stress testing of European banks and the sovereign debt crisis, especially in Greece and Ireland. Industrial output
in the region was primarily driven by German exports. The euro area unemployment rate remained relatively
unchanged at approximately 10% at December 31, 2010. At December 31, 2010, the European Central Bank’s
benchmark interest rate was 1.00% and the Bank of England’s (“BOE”) benchmark interest rate was 0.50%. The
BOE pursued quantitative easing policies during 2010 and 2009, in which the BOE purchased securities,
including U.K. Government Gilts, with the objective of improving economic conditions by increasing the money
supply.
In Asia, industrial output was driven by exports from both China and Japan. China’s economy also continued to
benefit from government spending for capital projects, a significant amount of foreign currency reserves and a
relatively high domestic savings rate. Equity markets in Hong Kong ended 2010 higher compared with the
beginning of the year, while results in China and Japan were lower, as compared with the beginning of the year.
During 2010, the People’s Bank of China raised the one-year yuan lending rate by 0.50% from 5.31% to 5.81%,
and the one-year yuan deposit rate by 0.50% from 2.25% to 2.75% (on two separate occasions: 0.25% in October
2010 and 0.25% in December 2010). In February 2011, the People’s Bank of China raised the one-year yuan
lending rate by 0.25% from 5.81% to 6.06% and the one-year yuan deposit rate by 0.25% from 2.75% to 3.00%.
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