Morgan Stanley 2014 Annual Report Download - page 83

Client assets in fee-based accounts increased to $785 billion and represented 39% of total client assets at
December 31, 2014 compared with $697 billion and 37% at December 31, 2013, respectively. Total client asset
balances increased to $2,025 billion at December 31, 2014 from $1,909 billion at December 31, 2013, primarily
due to higher fee-based asset flows and the impact of market conditions. Fee-based client asset flows for 2014
were $58.8 billion compared with $51.9 billion in 2013.
Net Interest.
Interest income and Interest expense are a function of the level and mix of total assets and liabilities. Net interest
is driven by securities-based lending, mortgage lending, margin loans, securities borrowed and securities loaned
transactions and bank deposit program activity.
Net interest increased 25% from 2013 to $2,339 million in 2014, primarily due to higher lending balances and
growth in loans and lending commitments in PLA securities-based lending products. Total client liability
balances increased to $51 billion at December 31, 2014 from $39 billion at December 31, 2013, primarily due to
higher growth from PLA securities-based lending products and residential mortgage loans. The loans and lending
commitments in the Company’s Wealth Management business segment have grown in 2014, and the Company
expects this trend to continue. See “Other Matters—U.S. Subsidiary Banks Lending Activities” herein and
“Quantitative and Qualitative Disclosures about Market Risk—Credit Risk—Lending Activities” in Item 7A.
Other.
Other revenues were $320 million in 2014 compared with $390 million in 2013. The results in 2014 included a
$40 million gain on sale of a retail property space. The decrease in 2014 primarily reflected a gain on sale of the
U.K. operation of the Global Stock Plan Services business in the prior-year period and lower account fees.
Non-interest Expenses.
Non-interest expenses increased 3% in 2014 from 2013. Compensation and benefits expenses increased 7% in
2014 from 2013, primarily due to a higher formulaic payout to Wealth Management representatives linked to
higher net revenues, and an increase in base salaries. Non-compensation expenses decreased 6% in 2014 from
2013, primarily driven by non-recurring technology write-offs and an impairment expense related to certain
intangible assets (management contracts) associated with alternative investments funds in the prior-year period,
lower intangible amortization and a lower FDIC assessment on deposits partially offset by a provision in the
current year related to a rescission offer to Wealth Management clients who may not have received a prospectus
for certain securities transactions as required.
2013 Compared with 2012.
Transactional.
Investment Banking. Investment banking revenues increased 11% from 2012 to $923 million in 2013,
primarily due to higher levels of underwriting activity in closed-end funds and unit trusts.
Trading. Trading revenues increased 12% from 2012 to $1,161 million in 2013, primarily due to gains related
to investments associated with certain employee deferred compensation plans and higher revenues from fixed
income products.
Commissions and Fees. Commissions and fees revenues increased 6% from 2012 to $2,209 million in 2013,
primarily due to higher equity, mutual fund and alternatives activity.
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