Morgan Stanley, the world''s No. 2 securities firm, has reported seven per
cent fall in its third-quarter income, reflecting damage caused by the sell-off
in the mortgage and corporate loan markets.
Stanley said it suffered losses on loans for leveraged buyouts and a decline in
fixed-income trading revenue, though revenue from investment banking and stock
trading rose strongly.
from continuing operations fell seven per cent to $1.47 billion, or $1.38 a share,
in the quarter ended August 31, from $1.59 billion, or $1.50, a year earlier.
Net revenue rose 13 per cent to $8.0 billion from last year.
York-based Morgan Stanley, the second of four Wall Street firms reporting this
week, had a steeper profit slide than the 3 per cent drop cited yesterday by smaller
rival Lehman Brothers Holdings Inc. Morgan Stanley got higher revenue from equities,
investment banking and money management, but that was offset by a slump in fixed
income and $877 million in writedowns, mostly on leveraged loans.
including Morgan Stanley, have committed to provide about $320 billion of leverages
buy-out loans under terms set before credit markets began deteriorating. New York-based
Lehman yesterday took a $700 million loss after writing down mortgage holdings
and loan commitments by $700 million.
Kelleher, Morgan Stanley''s incoming chief financial officer, said the current
credit crisis was worse than the deterioration that followed Russia''s debt default
and the collapse of hedge fund Long-Term Capital Management LP in 1998.
Stanley said its total revenue rose 13 per cent to $7.96 billion. Return on equity
from continuing operations dropped to 17.2 per cent from 23.3 per cent. Including
results from the Discover credit card unit Morgan Stanley spun off in June, net
income fell 17 per cent to $1.54 billion, or $1.44 a share.
Stanley took a bigger role in mortgages in December, just as the subprime crisis
was unfolding, when it bought Saxon Capital Inc. for $705 million. Mortgage provider
Saxon also services home loans to people with patchy credit histories by collecting
payments, maintaining records and foreclosing on delinquent borrowers.