Morgan Stanley Loses $2.37 Billion in Fiscal 4Q

Since accounting rules require banks such as Morgan Stanley to mark their asset inventory at current market prices each quarter — even if the bank did not sell any assets — it has to take losses based solely on end-of-quarter valuations, Valentine said.

In this June 17, 2008 file photo, Morgan Stanley headquarters is shown in New York. Morgan Stanley...

In this June 17, 2008 file photo, Morgan Stanley headquarters is shown in New York. Morgan Stanley said Wednesday it lost $2.37 billion during its fiscal fourth quarter as it took a range of losses on assets amid one of the roughest quarters for investment banks.(AP Photo/Mark Lennihan, file )

(AP)

Morgan Stanley's asset write-downs and losses were widespread across most of its businesses. In its institutional securities division, losses ranged from $1.2 billion in the fixed income unit, because of mortgage-related losses, to $1.1 billion in losses and write-downs tied to acquisition financing and securities held by subsidiaries.

The asset management business was plagued by losses tied to principal investments and structured investment vehicles — complex investment funds that essentially collapsed earlier this year amid the market downturn.

Morgan Stanley's quarterly loss comes just a day after competitor Goldman Sachs Group Inc. reported its first quarterly loss since it went public in 1999. Goldman lost a wider-than-expected $2.29 billion, or $4.97 per share. Like Goldman, though, Morgan Stanley was able to post a full-year profit thanks to earnings in each of the three prior quarters. Morgan Stanley earned $1.59 billion, or $1.45 per share, during fiscal 2008.

The pair's fourth-quarter losses came during a period when the investment banking sector nearly collapsed in September as Lehman Brothers Holdings Inc. filed for bankruptcy protection and Merrill Lynch & Co. sold itself.

Both Morgan Stanley and Goldman quickly gained approval to become bank holding companies in an effort to remain independent. The banking structure change allows them to build large deposit bases to help fund operations, which is considered vital amid the market uncertainty that has all but shut down the credit markets.

Morgan Stanley has heartily embraced its new ability to increase its deposit base. Morgan Stanley has actively been raising deposits by offering certificates of deposit through its banking subsidiary. Other plans include using the company's 8,426 financial advisers to raise client awareness of banking services available to Morgan Stanley's global wealth management group; introducing new banking products, such as savings accounts and global currency accounts; and using the firm's Swiss bank to expand international operations.