4.22.2009

Morgan Stanley Reports Results

As we mentioned first right here, today Morgan Stanley reported results and as expected, they changed their first quarter to Jan/Feb/Mar and allowed December to get lost in the shuffle. Unlike Goldman Sachs, Morgan Stanley was actually fairly transparent... to a point.

Goldman's initial press release was a disappointment because it did not actually state that they had changed their fiscal year which forced them to change the first quarter from Dec/Jan/Feb to Jan/Feb/Mar. Morgan however, had the following right after the first paragraph of the press release:

"The results for the current quarter are compared with the results of the first quarter of the prior year, which have been recasted on a calendar basis due to a change in the Company's fiscal year end from Novmeber 30th to December 31st"
Not only did Goldman fail to disclose openly in their press release that the fiscal year had changed, Goldman also compared the results from first quarter 2009 (Jan/Feb/Mar) to the results from first quarter of 2008 (Dec/Jan/Feb). Hardly apples to apples! Morgan Stanley recast their results from 2008 so they compared first quarter 2009 (Jan/Feb/Mar) to first quarter 2008 (Jan/Feb/Mar). That is exactly what Goldman should have done, but they did not. The question is why did they do that and why does no one care?
To make matters worse Goldman booked huge losses into December which were not included in the results and probably booked huge trading profits during March which was then included in the quarter. If you were skeptical you might think December was the proverbial kitchen sink where any and all losses were declared to boost the actual quarter that was reported.
Morgan Stanley, however was not perfect. Goldman did report results just for the month of December so if you read the entire press release you can see the losses that were generated for the month. Morgan Stanley did not break out the results for December only in the press release. You have to be just a little curious as to how that month looked and if Morgan dumped significant losses into that month since they did not even report it.
CNBC's David Faber makes the case today that despite Morgan Stanley reporting worse than expected losses the news was probably NOT as bad as it seems. Faber said the reason for a lot of the losses were due to credit spreads. Trading, as you would expect, looked pretty good.
The overriding issue is according to Goldman Sachs because they became a bank holding company they were required to change from a fiscal year to a calendar year. Same rules applied for Morgan Stanley. The issue is why were the two firms able to report their quarters in two different formats?! As has been the case with all financials this quarter, things continue to not add up.