Morgan Stanley 2015 Annual Report Download - page 46

Return on Average Common Equity.
• The return on average common equity was 8.5% in 2015, or 7.8% excluding DVA, and 7.0% excluding DVA and
the net discrete tax benefits. For 2014, the return on average common equity was 4.8%, or 4.1% excluding DVA,
and 0.8% excluding DVA and the net discrete tax benefits.
2014 Compared with 2013.
Consolidated Results.
• The Company reported net revenues of $34,275 million in 2014, a 5% increase compared with $32,493 million in
2013. Net revenues in 2014 included positive revenues due to the impact of DVA of $651 million compared with
negative revenues of $681 million in 2013. In addition, net revenues in 2014 included a charge of approximately
$468 million related to the implementation of FVA (see “Critical Accounting Policies” herein and Note 2 to the
consolidated financial statements in Item 8), which was recorded in the Institutional Securities business segment.
• For 2014, net income applicable to Morgan Stanley was $3,467 million, or $1.60 per diluted common share,
compared with $2,932 million, or $1.36 per diluted common share, in 2013. 2014 included net discrete tax benefits
of $2,226 million, or $1.13 per diluted common share, compared with $407 million, or $0.21 per diluted common
share, in 2013. For a further discussion of these net discrete tax benefits, see “Supplemental Financial Information
and Disclosures—Income Tax Matters” herein.
• Excluding DVA, net revenues were $33,624 million in 2014 compared with $33,174 million in 2013, and net
income applicable to Morgan Stanley was $3,049 million, or $1.39 per diluted common share, in 2014 compared
with $3,384 million, or $1.59 per diluted common share, in 2013. Excluding both DVA and the net discrete tax
benefits, net income applicable to Morgan Stanley was $823 million, or $0.26 per diluted common share, in 2014
compared with $2,977 million, or $1.38 per diluted common share, in 2013.
Business Segments.
• Institutional Securities net revenues of $16,871 million in 2014 increased 9% compared with $15,519 million in
2013, primarily as a result of an increase in Sales and trading net revenues and Investment banking revenues,
partially offset by lower net investment gains.
• Wealth Management net revenues of $14,888 million in 2014 increased 5% from $14,143 million in 2013, primarily
as a result of higher Asset management, distribution and administration fees and an increase in net interest income,
partially offset by lower transactional revenues.
• Investment Management net revenues of $2,712 million in 2014 decreased 11% from $3,059 million in 2013. The
decrease in net revenues was primarily related to lower net investment gains, including from investments in the
Company’s employee deferred compensation and co-investment plans, and lower carried interest, partially offset by
higher management and administration revenues.
Expenses.
• Compensation and benefits expenses of $17,824 million in 2014 increased 10% from $16,277 million in 2013,
primarily due to the 2014 compensation actions of approximately $1,137 million (see “Supplemental Financial
Information and Disclosures—Discretionary Incentive Compensation” herein).
• Non-compensation expenses were $12,860 million in 2014 compared with $11,658 million in 2013, representing a
10% increase, primarily due to higher legal expenses.
Return on Average Common Equity.
• The return on average common equity was 4.8% in 2014, or 4.1% excluding DVA, and 0.8% excluding DVA and
the net discrete tax benefits. Return on average common equity in 2013 was 4.3%, or 4.9% excluding DVA, and
4.3% excluding DVA and the net discrete tax benefits.
40