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?

Comments (6)

Jan 20, 2011 - 4:10pm
Kenny_Powers_CFA, what's your opinion? Comment below:

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/a6574280ex99-1.htm

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 MSb) 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

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Jan 20, 2011 - 4:34pm
Kenny_Powers_CFA, what's your opinion? Comment below:

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."

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Jan 20, 2011 - 6:17pm
Kenny_Powers_CFA, what's your opinion? Comment below:

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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Apr 24, 2013 - 9:16am
ShreddiesBrah, what's your opinion? Comment below:

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