US Banks results - Update on Goodwill Impairments and DVA/CVA impact on earnings.

Following my previous posts on the rise of Goodwill impairments for Banks as well as a post on the impact of FAS 159 - Debt Valuation Adjustments on earnings, please find below an update in relation to latest earnings release for Morgan Stanley and Bank of America.


Morgan Stanley also faced the same music as Citigroup in relation to the Boomerang effect of FAS 159 and the tightening of its credit spread:

http://www.businesswire.com/news/home/20110120005705/en/Morgan-Stanley-Reports-Full-Year-Fourth-Quarter-2010

Morgan Stanley Reports Full-Year and Fourth Quarter 2010:
•Full-Year Net Revenues of $31.6 Billion and Income from Continuing Operations of $2.44 per Diluted Share
•Fourth Quarter Net Revenues of $7.8 Billion and Income from Continuing Operations of $0.43 per Diluted Share
•Net Revenues for Full-Year and Fourth Quarter Include Negative Impact of $873 Million and $945 Million, Respectively for Tightening of Morgan Stanley’s Debt-Related Credit Spreads

Due to DVA, sales and trading net revenue for the quarter ended December 31, 2010 included negative revenue of $945 million (fixed income: $842 million; equity: $103 million) and sales and trading net revenue for the quarter ended December 31, 2009 included positive (negative) revenue of ($589) million (fixed income: ($453) million; equity: ($221) million; other: $85 million).

In relation to Bank of America the impact of Goodwill impairments is significant on earnings:

http://www.businesswire.com/news/home/20110121005370/en/Bank-America-Reports-Fourth-Quarter-2010-Financial-Results


Bank of America Reports Fourth-Quarter and 2010 Financial Results
Fourth-Quarter Net Loss of $1.2 Billion, or $0.16 per Diluted Share, Includes Goodwill Impairment Charge of $2.0 Billion

Excluding Goodwill Impairment Charge, Fourth-Quarter Net Income Was $756 Million, or $0.04 per Diluted Share

Total goodwill impairment charges for Bank of America in 2010: 12.4 billion USD.

The goodwill impairment charge of 2 billion USD is directly linked to Countrywide.

As indicated in my previous post "Goodwill Hunting - The rise in Goodwill impairments on Banks Balance Sheet"

"It is therefore paramount to track goodwill impairments in relation to future banks earnings. As we can see in the case of Bank of America and DBS, the impact on the income can be very significant."