Morgan Stanley 2014 Annual Report Download - page 75

2014 Compared with 2013.
Investment Banking. Investment banking revenues for 2014 increased 19% from 2013, reflecting increases
across equity and fixed income underwriting and advisory revenues. Overall, underwriting revenues of
$3,569 million increased 16% from 2013. Equity underwriting revenues increased 28% to $1,613 million in
2014, reflecting increased activity with clients across all regions. Fixed income underwriting revenues of
$1,956 million increased 8% from 2013, reflecting increased investment grade volumes and lower leveraged loan
issuance. Advisory revenues from merger, acquisition and restructuring transactions (“M&A”) were
$1,634 million in 2014, an increase of 25% from 2013, reflective of increased deal activity primarily driven by
the Americas and Asia-Pacific regions. Industry-wide announced M&A volume activity for 2014 increased
across all regions compared with 2013, primarily driven by cross-border activity.
Sales and Trading Net Revenues. Total sales and trading net revenues increased to $10,744 million in 2014
from $9,751 million in 2013, reflecting higher revenues in equity and fixed income and commodities sales and
trading net revenues partially offset by higher losses in other sales and trading net revenues.
Equity. Equity sales and trading net revenues increased 9% from 2013 to $7,135 million in 2014. The results in
equity sales and trading net revenues included positive revenues in 2014 of $232 million due to the impact of
DVA compared with negative revenues of $78 million in 2013. Equity sales and trading net revenues, excluding
the impact of DVA, increased 4% from 2013 to $6,903 million in 2014, primarily due to higher revenues in the
prime brokerage business driven by higher client balances partially offset by a decrease in derivatives revenues,
reflecting unfavorable volatility movement.
Exclusive of a charge related to the implementation of FVA, equity sales and trading net revenues in 2014
reflected gains of $18 million related to changes in the fair value of net derivative contracts attributable to the
tightening of counterparties’ credit default swap (“CDS”) spreads and other factors compared with gains of
$37 million in 2013. The Company’s CDS spreads and other factors did not have a material impact on equity
sales and trading net revenues for 2014 and 2013. The gains and losses on CDS spreads and other factors
included gains and losses on related hedging instruments.
Fixed Income and Commodities. Fixed income and commodities sales and trading net revenues increased 17%
from 2013 to $4,214 million in 2014. Results in 2014 included positive revenues of $419 million due to the
impact of DVA compared with negative revenues of $603 million in 2013. Excluding the impact of DVA, fixed
income and commodities sales and trading net revenues decreased 10% from 2013 to $3,795 million in 2014 as
lower fixed income product results were partially offset by higher commodity net revenues. Net revenues in 2014
included a charge of $466 million related to the implementation of FVA. Fixed income product net revenues,
excluding the impact of DVA, decreased 15% from 2013 as higher results in interest rate products were offset by
declines in credit products, which reflected an unfavorable market environment. Commodity net revenues,
excluding the impact of DVA, increased 34% from 2013, reflecting higher levels of client demand for structured
transactions and volatility in natural gas and power partly offset by lower revenues in the oil related businesses in
part attributable to TransMontaigne Inc., which was sold on July 1, 2014 (see “Global Oil Merchanting Business,
CanTerm and TransMontaigne” herein).
Exclusive of the FVA charge noted above, fixed income and commodities sales and trading net revenues in 2014
also reflected gains of $23 million related to changes in the fair value of net derivative contracts attributable to
the tightening of counterparties’ CDS spreads and other factors compared with gains of $127 million in 2013. In
addition, the Company also recorded losses of $55 million in 2014 related to changes in the fair value of net
derivative contracts attributable to the tightening of the Company’s CDS spreads and other factors compared
with losses of $114 million in 2013. The gains and losses on CDS spreads and other factors included gains and
losses on related hedging instruments.
Other. In addition to the equity and fixed income and commodities sales and trading net revenues discussed
above, sales and trading net revenues included other trading revenues, consisting of costs related to negative
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