Morgan Stanley 2010 Annual Report Download - page 56

from the increase in the fair value of certain of the Company’s long-term and short-term borrowings, primarily
structured notes, for which the fair value option was elected, compared with negative revenues of approximately
$1,738 million in 2009. Lower results in the cash and derivatives businesses in 2010 reflected solid customer
flows offset by a challenging trading environment. Fixed income sales and trading revenues in 2010 increased
21% to $5,867 million in 2010 from $4,854 million in 2009. Fixed income sales and trading revenues reflected
negative revenues of approximately $703 million in 2010 due to the tightening of the Company’s credit spreads
resulting from the increase in the fair value of certain of the Company’s long-term and short-term borrowings,
primarily structured notes, for which the fair value option was elected compared with negative revenues of
approximately $3,321 million in 2009. Interest rate and currency product revenues decreased 38% in 2010
reflecting lower trading results across most businesses. Results for 2010 primarily reflected solid customer flows
in interest rate, credit and currency products, which were partly offset by a challenging trading environment.
Principal transaction net investment gains of $809 million were recognized in 2010 compared with net
investment losses of $864 million in 2009. Non-interest expenses increased 2% to $12,028 million in 2010 from
$11,765 million in 2009. Compensation and benefits expenses decreased 2% in 2010.
Global Wealth Management Group. Income from continuing operations before income taxes was $1,156
million in 2010 compared with $559 million in 2009. Net revenues were $12,636 million compared with $9,390
million in 2009. Investment banking revenues increased 39% in 2010, primarily benefiting from a full year of
MSSB and higher closed-end fund activity. Principal transactions trading revenues increased 8% in 2010,
primarily benefiting from a full year of MSSB, net gains related to investments associated with certain employee
deferred compensation plans and gains on certain investments. Commission revenues increased 28% in 2010,
primarily benefiting from a full year of MSSB and higher client activity. Asset management, distribution and
administration fees increased 39% in 2010 benefiting from a full year of MSSB and improved market conditions.
Net interest increased 70% in 2010 primarily resulting from an increase in interest income benefiting from a full
year of MSSB, the Securities Available for Sale (“AFS”) portfolio and the change in classification of the bank
deposit program, partially offset by increased funding costs (see “Global Wealth Management Group—Asset
Management, Distribution and Administration Fees” herein). Non-interest expenses were $11,480 million in
2010 compared with $8,831 million in 2009.
Asset Management. Income from continuing operations before income taxes was $723 million in 2010
compared with a loss of $653 million in 2009. Net revenues were $2,723 million in 2010 compared with $1,337
million in 2009. The Company recorded principal transactions net investment gains of $996 million in 2010
compared with losses of $173 million in 2009. Non-interest expenses were $2,000 million in 2010 compared
with $1,990 million in 2009.
Significant Items.
Mortgage-Related Trading. The Company recorded mortgage-related trading gains (losses) primarily related to
commercial mortgage-backed securities, commercial whole loan positions, U.S. subprime mortgage proprietary
trading exposures and non-subprime residential mortgages of $1.2 billion, $(0.6) billion, $(2.6) billion and $(0.1)
billion in 2010, 2009, fiscal 2008 and the one month ended December 31, 2008, respectively.
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