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Morgan Stanley Sees Loss of $159 Million; Stock Falls
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Morgan Stanley, one of a handful of Wall Street banking titans left more or less intact after the credit meltdown of the past two years, reported a second-quarter loss of $159 million that was significantly worse than analyst expectations.
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Earnings were hurt by a charge from repaying government bailout money.
The New York-based Morgan [MS
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] swung to a loss applicable to common shareholders of $1.26 billion, or $1.10 per share, in the second quarter, compared with a profit of $1.1 billion, or $1.02 a share, a year earlier.
It was the company's third consecutive loss.
Net revenue dropped 11 percent to $5.4 billion.
During the quarter, Morgan Stanley repaid $10 billion from the government's Troubled Asset Relief Program, incurring a one-time charge of $850 million.
Chief Financial Officer Colm Kelleher, in an interview with Reuters Television, said the company was not satisfied with its performance in fixed income and asset management.
A drop in net revenue against a jump in compensation expenses contributed to the loss, as did a slight increase in non-compensation expenses.
The company said its earnings also were impacted by its joint Smith Barney venture with Citigroup [C
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As Morgan Stanley scaled back on risk after the collapse of the financial sector last fall, it found itself posting lackluster earnings compared with longtime rival Goldman Sachs [GS
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], which last week reported net revenue of $3.4 billion.
Despite the second-quarter loss, Morgan Stanley set aside $3.9 billion for compensation expenses, up from $3.1 billion set aside a year earlier.
The bank, which ratcheted down risk-taking after the fall of some of its competitors last year, said its risk measurements were flat in the quarter.
The bank's "value at risk," a measure of the maximum possible losses it faced on 95 percent of its trading days, on average was $113 million, compared with $100 million a year ago and $115 million in the first quarter of 2009.
Morgan Stanley shares fell slightly in early trading Wednesday.
—Reuters contributed to this report.
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