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.
The Wall Street bank slumped to a loss of $1.26bn (£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’s Troubled Asset Relief Programme (Tarp).
Without one-off charges, the bank’s loss was $159m.
A $734m decline in the value of its real estate investments also dented Morgan Stanley’s bottom line.
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.
Integration costs relating to Smith Barney, the brokerage joint venture the bank bought into with Citigroup, totalled $245m.
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.
“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,” he said in a statement.
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.
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.
Despite the losses, the bank put aside $3.9bn to pay staff, up from $3.1bn during the same period last year.