Morgan Stanley swings into red after downgrade costs it $2.3bn

Tim Wallace
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US INVESTMENT bank Morgan Stanley reported a loss in the third quarter due to a multi-billion dollar accounting charge. However underlying profits improved, with bond trading revenues particularly strong.

The bank lost $1.03bn in the three-month period, largely because of the $2.3bn charge which hit the bank after a downgrade. That represents a swing into the red from a profit of $2.13bn in the same period last year.

Expenses were up: compensation rose from $3.6bn to $3.9bn, and non-pay expenses from $2.5bn to $2.8bn. But bond trading revenues jumped 33 per cent to $1.5bn, while asset management revenues more than tripled on the year to $631m, taking the unit from a $118m loss to a $198m profit.

“The rebound in fixed income and commodities sales and trading indicates that clients have re-engaged after the uncertainty of the rating review in the previous quarter,” said chief executive and chairman James Gorman. “We are beginning to unlock the full potential of the global wealth management franchise”.

Headcount fell seven per cent on the year to 57,726.