NEW YORK ( TheStreet) - Morgan Stanley ( MS) is a global financial services firm that is engaged in four distinct business areas: investment banking, sales and trading, wealth management for high net worth individuals and asset management.

It competes with other global financial services firms like Goldman Sachs ( GS), Citigroup ( C), UBS ( UBS) and Credit Suisse ( CS).

We believe that sales and trading is the largest driver of value for Morgan Stanley. We estimate that bonds, currencies and commodities trading constitutes around 26% of our $21.54 price estimate for Morgan Stanley's stock, with equities trading contributing around 20%.

Difficult Trading Environment in 2010

Morgan Stanley's third-quarter net revenue from fixed income sales and trading was $846 million compared to $2 billion in the same quarter last year. In the fourth quarter, trading volumes and liquidity have been down in the bonds, currencies and commodities segment, also known as FICC (Fixed Income, Currencies & Commodities). This is largely due to sovereign debt risk and interest rate volatility in Europe.

Morgan Stanley's yield on trading assets for FICC decreased to around 0% in 2007 due to the economic downturn. However, it recovered to 2.14% in 2009 as the economic environment improved. As volumes increase and returns improve across asset classes, we expect the Morgan Stanley's yield on FICC trading to follow an increasing trend, reaching nearly 3% towards the end of the Trefis forecast period.

However, if the recent downfall in FICC trading extends into the first few quarters of 2011, this can provide a downside to our forecasts. If Morgan Stanley's yield of FICC trading falls below 2% in 2011 and increases to around 2.5% by the end of our forecast period, it would mean a downside of around 8% to our current price estimate for Morgan Stanley's stock.

We estimate that Morgan Stanley's Asset Management division accounts for around 7% of our $21.54 price estimate for Morgan Stanley's stock. This division has been doing well in 2010. In the third quarter of 2010, the revenue from this division was around $800 million, around an 80% increase from the same quarter last year. For the first three quarters, the total revenue from this division was $1.86 billion, around 125% increase from the same period last year.

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