Morgan Stanley 2010 Annual Report Download - page 72

Non-interest Expenses. Non-interest expenses increased 30% in 2010, primarily due to higher costs related to a
full year of MSSB operating expenses and the amortization of MSSB’s intangible assets. Compensation and
benefits expense increased 28% in 2010, primarily due to a full year of MSSB operating expenses.
Non-compensation expenses increased 34% in 2010. In 2010, brokerage, clearing and exchange fees expense
increased 38%, information processing and communications expense increased 41%, and other expenses
increased 51%, primarily due to a full year of MSSB operating expenses. In 2010, professional services expense
increased 43%, primarily due to a full year of MSSB operating expenses and increased technology consulting
costs related to the MSSB integration.
2009 Compared with Fiscal 2008.
Investment banking revenues increased 40% in 2009 from fiscal 2008, primarily due to the consolidation of the
operating revenues of MSSB and higher equity underwriting activity, partially offset by lower underwriting
activity across fixed income and unit trust products. Principal transactions trading revenues increased 97% in
2009 from fiscal 2008, primarily due to the consolidation of the operating revenues of MSSB and higher
revenues from municipal and corporate fixed income securities, partially offset by lower revenues from
government securities. The results in 2009 also reflected net gains related to investments associated with certain
employee deferred compensation plans. Principal transactions net investment gains were $3 million in 2009
compared with net investment losses of $54 million in fiscal 2008. The results in 2009 primarily reflected net
gains related to investments associated with certain employee deferred compensation plans compared with losses
on such plans in fiscal 2008. Commission revenues increased 48% in 2009 compared with fiscal 2008, reflecting
the operating results of MSSB, partially offset by lower client activity. Asset management, distribution and
administration fees increased 68% in 2009 compared with fiscal 2008, primarily due to consolidating the
operating revenues of MSSB, fees associated with customer account balances in the bank deposit program and
the change in classification of the bank deposit program noted above. Balances in the bank deposit program rose
to $112.5 billion at December 31, 2009 from $38.8 billion at December 31, 2008, primarily due to MSSB, which
include balances held at Citi’s depository institutions. Deposits held by certain of the Company’s FDIC-insured
depository institutions were $54 billion of the $112.5 billion deposits at December 31, 2009. Client assets in
fee-based accounts increased 175% to $379 billion at December 31, 2009 and represented 24% of total client
assets compared with 25% at December 31, 2008. Total client asset balances increased to $1,560 billion at
December 31, 2009 from $550 billion at December 31, 2008, primarily due to MSSB. Client asset balances in
households greater than $1 million increased to $1,090 billion at December 31, 2009 from $351 billion at
December 31, 2008.
Other revenues decreased 74% in 2009 compared with fiscal 2008. The results in 2009 included the operating
revenues of MSSB. Fiscal 2008 results included $743 million related to the sale of MSWM S.V., the Spanish
onshore mass affluent wealth management business, and the Global Wealth Management Group business
segment’s share ($43 million) of the Company’s repurchase of debt (see “Overview of 2010 Financial Results—
Morgan Stanley Debt” herein for further discussion).
Net interest revenues decreased 29% in 2009 compared with fiscal 2008. The decrease was primarily due to the
change in the classification of the bank deposit program noted above, a decline in customer margin loan balances
and increased funding costs.
Non-interest expenses increased 51% in 2009 and included the operating costs of MSSB, the amortization of
MSSB’s intangible assets, and a one-time expense of $124 million, primarily for replacement deferred
compensation awards. The cost of these replacement awards was fully allocated to Citi within noncontrolling
interests. Compensation and benefits expense increased 60% in 2009, primarily reflecting MSSB and the
replacement awards noted above. Non-compensation expenses increased 32%. Occupancy and equipment
expense increased 91%, primarily due to the consolidation of operating costs of MSSB and real estate
abandonment charges. Information processing and communications expense increased 70%, and professional
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