Third straight quarterly loss for MorgStan

MORGAN Stanley reported a worse-than-expected second quarter loss yesterday on the back of charges linked to its government bailout and tightening credit spreads.<br /><br />The Wall Street bank slumped to a loss of $1.26bn (&pound;770m), or $1.10 a share, during the three months to the end of June, as it incurred an $850m charge on the $10bn it took from the US government&rsquo;s Troubled Asset Relief Programme (Tarp).<br /><br />Without one-off charges, the bank&rsquo;s loss was $159m.<br /><br />A $734m decline in the value of its real estate investments also dented Morgan Stanley&rsquo;s bottom line.<br /><br />Revenues fell from $6.1bn in the second quarter of 2008 to $5.4bn as the bank was hit by a $2.3bn reduction in revenues due to the negative impact of debt-related credit spreads.<br /><br />Integration costs relating to Smith Barney, the brokerage joint venture the bank bought into with Citigroup, totalled $245m.<br /><br />Chief executive John Mack said he was unhappy with the performance in fixed income, an area in which rivals Goldman Sachs and JPMorgan Chase have booked huge profits.<br /><br />&ldquo;We are not satisfied with our performance in... key areas of fixed income trading and in asset management, and we are taking steps to deliver better results in those businesses,&rdquo; he said in a statement.<br /><br />But he said the bank would have made a profit if not for the one-off repayment of Tarp and the cost of tightening spreads on its own debt.<br /><br />And Mack said that a $6.9bn stock sale during the quarter would help drive the bank to a healthy tier one capital ratio at year end of 15.8 per cent.<br /><br />Despite the losses, the bank put aside $3.9bn to pay staff, up from $3.1bn during the same period last year.