Morgan Stanley profit slips but easily beats Wall Street expectations

By
USA Today
September 16, 2008, 5:53 PM ET
2 min read

NEW YORK -- Morgan Stanley MS said Tuesday that its core businesses continue to generate solid profits, as the No. 2 investment bank hurried to convince investors that it is withstanding the financial turmoil that has dramatically changed the face of Wall Street over the past few days.

Although its fiscal third-quarter profit slipped 7%, the result surpassed Wall Street's expectations. Morgan Stanley reported strong performance in its core prime brokerage, commodities and equities businesses.

The New York-based investment bank — which reported results a day earlier than scheduled — earned $1.43 billion, or $1.32 a share, compared with $1.54 billion, or $1.44 a share in the year-ago period. Thomson Reuters said analysts expected earnings of 78 cents a share.

Revenue rose modestly to $8.05 billion from $7.96 billion.

Morgan Stanley shares were up slightly in after-hours trading after closing the regular session down $3.49, or 10.8%, to $28.70.

Morgan Stanley's report came on the same day that Goldman Sachs issued a profit that slightly exceeded expectations.

Now the only remaining independent investment banks on Wall Street, the two are trying to reassure both clients and investors that they can weather the credit crisis that drove Lehman Brothers into bankruptcy, Bear Stearns into a forced sale to JPMorgan and Merrill Lynch into the arms of Bank of America.

"Despite unprecedented market conditions, Morgan Stanley's core client franchise achieved solid revenue growth, profitability and return-on-equity this quarter," said Chairman and Chief Executive John Mack in a statement.

Investment losses were $245 million, compared with gains of $217 million in the third quarter of 2007, reflecting losses on investments in real estate funds, the firm said.

Fixed income sales and trading net revenue fell 8% to $1.9 billion, due to the widening of credit spreads on certain long-term debt. Morgan Stanley also reported other sales and trading net losses of about $410 million, primarily from mark-to-market losses on loans and other commitments.