MS · Forward model · Intersegment Eliminations · Bear case
What has to happen in Intersegment Eliminations
Model as of
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Intersegment Eliminations
The fourth reported line in Morgan Stanley's own segment table and the reason the other three sum above the firm. It is NEGATIVE in every one of the fourteen quarters, -$194M of net revenues and -$15M of pre-tax income in the basis quarter, and it has grown roughly in step with intersegment activity (from -$128M in 2023 Q1). It is carried as its own vertical because without it the verticals would overstate reported net revenues by 0.91% in the basis quarter and the reconciliation would not close. It is not a business and has no thesis beyond that.
Latest: −$245M (2031Q2E)
| Period | Value |
|---|---|
| 2023Q1 | −$128M |
| 2023Q2 | −$138M |
| 2023Q3 | −$136M |
| 2023Q4 | −$153M |
| 2024Q1 | −$137M |
| 2024Q2 | −$141M |
| 2024Q3 | −$157M |
| 2024Q4 | −$165M |
| 2025Q1 | −$173M |
| 2025Q2 | −$167M |
| 2025Q3 | −$184M |
| 2025Q4 | −$190M |
| 2026Q1 | −$195M |
| 2026Q2 | −$194M |
| 2026Q3E | −$196M |
| 2026Q4E | −$198M |
| 2027Q1E | −$200M |
| 2027Q2E | −$202M |
| 2027Q3E | −$205M |
| 2027Q4E | −$207M |
| 2028Q1E | −$209M |
| 2028Q2E | −$212M |
| 2028Q3E | −$214M |
| 2028Q4E | −$217M |
| 2029Q1E | −$219M |
| 2029Q2E | −$222M |
| 2029Q3E | −$225M |
| 2029Q4E | −$227M |
| 2030Q1E | −$230M |
| 2030Q2E | −$233M |
| 2030Q3E | −$236M |
| 2030Q4E | −$239M |
| 2031Q1E | −$242M |
| 2031Q2E | −$245M |
Assumptions & reasoning
- This is the structural difference between the Morgan Stanley page and the Goldman page. Goldman has three segments that sum exactly to total net revenues with no elimination; Morgan Stanley has three segments PLUS a published Intersegment Eliminations line, and reconciliation requires all four. Without it the verticals would overstate reported net revenues by 0.91% in the basis quarter.
- Nothing here is invented. The line is printed in the Consolidated Financial Summary of every quarterly financial supplement, on BOTH the net revenue table and the pre-tax income table: -$194M of net revenues and -$15M of income before provision for income taxes in the basis quarter, and negative in all fourteen quarters back to -$128M in 2023 Q1.
- The 7.732% margin is -$15M over -$194M. BOTH figures are negative, so the ratio is POSITIVE, and a positive margin applied to negative revenue correctly reproduces negative pre-tax income: -194 x 7.732% = -15.0. The terminal 7.0% sits between the 6.86% fourteen-quarter blend and the 8.16% last-six blend; the ratio is stable and immaterial.
- capexIntensity is EXACTLY ZERO, and this is the one place the 0.2% premises convention must not be applied. Revenue is negative in all fourteen quarters, so a positive intensity would produce a negative capex - a phantom cash inflow that would flatter free cash flow. For the same reason this vertical carries NO seasonal factors: multiplying a negative base by a factor above 1.0 deepens the drag in exactly the quarters a factor above 1.0 is meant to signal strength.
- Every scenario neutralises this line. bear, bull and pick each carry a verticalDelta on intersegmentEliminations that exactly cancels the firm-wide marginDelta, because a reconciling line is not a business and should not respond to a view on the cycle.