Morgan Stanley Posts First Ever Quarterly Loss on Mortgage Woes

December 19, 2007 No Comments »

Morgan Stanley reported its first quarterly loss ever after announcing a higher-than-expected writedown related to bad mortgage debt.

The New York-based investment bank posted a fourth-quarter loss of $3.59 billion, or $3.61 a share, compared with year-earlier net income of $1.54 billion, or $1.44 a share.

Analysts polled by Thomson Financial expected a per-share loss of 39 cents on positive revenue of $4.23 billion.

The loss came as the investment bank wrote down $9.4 billion in the fourth quarter, significantly more than the $3.7 billion the company said it had expected in early November.

The company said the total includes $7.8 billion in subprime-related writedowns.

“The writedown Morgan Stanley took this quarter is deeply disappointing – to me, to our colleagues, to our Board and to our shareholders,” CEO John Mack said in a statement.

“Ultimately, accountability for our results rests with me, and I believe in pay for performance, so I’ve told our compensation committee that I will not accept a bonus for 2007.”

The investment bank said it had roughly $1.8 billion worth of subprime mortgage exposure left on its books at the end of the quarter on November 30, down from $10.4 billion on August 31.

Morgan Stanley also announced that a Chinese government-controlled investment vehicle will invest $5 billion into the company for a stake of no more than 9.9 percent once its investment converts to common shares in 2010.

Shares of Morgan Stanley were up on the news of a capital infusion, climbing $1.93, or 4.01%, to $50 in early afternoon trading on Wall Street.

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