Morgan Stanley 2014 Annual Report Download - page 76

carry, gains (losses) on economic hedges related to the Company’s long-term borrowings and certain activities
associated with the Company’s corporate lending activities.
In 2014, other sales and trading recognized negative net revenues of $605 million compared with negative net
revenues of $372 million in 2013. Results in both periods included losses related to negative carry and losses on
economic hedges and other costs related to the Company’s long-term borrowings. Results in both periods also
included net revenues from corporate loans and lending commitments, which were $325 million and
$440 million in 2014 and 2013, respectively.
Investments. See “Business Segments—Net Revenues” herein for further information on what is included in
Investments.
Net investment gains of $240 million were recognized in 2014 compared with net investment gains of
$707 million in 2013. The decline reflects a gain recorded in the prior year related to the disposition of an
investment in an insurance broker, lower gains on principal investments and from investments associated with
the Company’s deferred compensation and co-investment plans.
Other. Other revenues were $684 million in 2014 and 2013. The results in 2014 included income of
$224 million, arising from the Company’s 40% stake in Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
(“MUMSS”) compared with income of $570 million in 2013 (see “Other Matters—Japanese Securities Joint
Venture” herein and Note 22 to the Company’s consolidated financial statements in Item 8). In 2014, Other
revenues also included a $112 million gain on sale of the Company’s ownership stake in TransMontaigne Inc.
(see “Global Oil Merchanting Business, CanTerm and TransMontaigne” herein), a gain on sale of a retail
property space of $84 million and a $39 million gain related to the acquisition of NaturEner USA, LLC (see Note
9 to the Company’s consolidated financial statements in Item 8).
Non-interest Expenses. Non-interest expenses increased 16% in 2014 compared with 2013. The increase was
primarily due to higher legal expenses and higher compensation expenses. Non-compensation expenses increased
18% in 2014 compared with 2013. The increase primarily reflected higher legal expenses related to certain
legacy residential mortgage matters (see “Other Matters—Legal” herein and “Contingencies—Legal” in Note 13
to the Company’s consolidated financial statements in Item 8). Compensation and benefits expenses increased
14% in 2014 from 2013. The increase was primarily due to the reduction of average deferral rates for
discretionary incentive-based awards, an increase in amortization due to accelerated vesting of certain awards,
and an increase in base salaries and fixed allowances partially offset by a decrease in the fair value of deferred
compensation plan referenced investments (see also “Business Segments—Compensation Expense—
Discretionary Incentive Compensation” herein).
2013 Compared with 2012.
Investment Banking. Investment banking revenues in 2013 increased 11% from 2012, reflecting higher
revenues from equity and fixed income underwriting transactions, partially offset by lower advisory revenues.
Overall, underwriting revenues of $3,067 million increased 20% from 2012. Equity underwriting revenues
increased 41% to $1,262 million in 2013, largely driven by increased client activity across Europe, Asia and the
Americas. Fixed income underwriting revenues were $1,805 million in 2013, an increase of 8% from 2012,
reflecting a continued favorable debt underwriting environment. Advisory revenues from M&A were
$1,310 million in 2013, a decrease of 4% from 2012, reflective of the lower level of deal activity in 2013.
Industry-wide announced M&A activity for 2013 was relatively flat compared with 2012, with increases in the
Americas offset by decreases in EMEA.
Sales and Trading Net Revenues. Total sales and trading net revenues increased to $9,751 million in 2013
from $6,673 million in 2012, reflecting higher revenues in equity and fixed income sales and trading net
revenues and lower losses in other sales and trading net revenues.
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