Morgan Stanley Negative Revnue Q4
Was notified of this by a friend:
http://finance.yahoo.com/news/Morgan-Stanley-Stan…
"Earnings for the reported quarter included negative revenue of 36 cents related to Morgan Stanley’s debt-related credit spreads and gain from the sale of its investment in China International Capital Corporation Limited"
Not an accountant, but negative revenue?
1) Note that MS did not have negative NET revenue for the quarter or year (neither did its operating segments). Net revenues for the 3 months/12 months ended 12/31/2010: $7.8bn/$31.6bn http://sec.gov/Archives/edgar/data/895421/000115752311000250/a6574280ex…
2) What MS DID have was a negative adjustment to income related to their DVA, which has to do with mark-to-market accounting for their assets and liabilities and is something banks may have any given period. "Net revenues in the current year included negative revenue of $873 million, or $0.30 per diluted share, related to Morgan Stanley’s debt-related credit spreads (DVA) compared with negative revenue from DVA of $5.5 billion in the prior year."
3) Due to revenue recognition rules, negative revenue is possible a couple different ways even though that's not what is going on here. For example, BX had negative revenue in 2009 due to reversing carried interest/management fees they had "booked" but not realized, which they had to reverse when they wrote down their investments due to mark-to-market. a) Big DVA adjustments for a bank like MS b) Actual negative interest income at a commercial bank due to a loan book that earns less than their interest expense c) Write-down of previously recognized income in an asset manager or other business that recognizes unearned income (consulting for example) http://www.revenuerecognition.com/content/experts/9011.asp
x
Negative for the quarter but positive for the year. 4Q10: "Fixed income sales and trading losses were $29 million compared with net revenues of $663 million in last year’s fourth quarter. DVA resulted in negative revenue of $842 million in the current quarter compared with negative revenue of $453 million a year ago. Results reflected lower levels of activity."
FY10 "Fixed income sales and trading net revenues were $5.9 billion for the year and reflected negative revenue of $703 million related to DVA. Results for the current year primarily reflected solid customer flows in IRCC, which were partly offset by a challenging environment. Commodities results reflected low levels of client activity and market volatility."
x
I don't think that's right-My interpretation is Gross Revenues of $813mm+ DVA of $(842)mm=Net Revenues of $(29)mm.
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