BOSTON (MarketWatch) — Morgan Stanley said Wednesday it's writing down an additional $5.7 billion of mortgage-related assets, taking the total fourth-quarter loss to nearly $10 billion in the latest sign that the credit crunch is worsening.
On another front, the Wall Street giant unveiled an agreement with a Chinese sovereign fund that will inject $5 billion in fresh capital through equity units with mandatory conversion into common stock.
In a written statement, Chief Executive John Mack called the write-downs for the quarter as a whole "deeply disappointing" and said he won't accept a bonus for 2007.
"Across the firm, we have moved aggressively to make the necessary changes, and these isolated losses by a small trading team in one part of the firm should not overshadow the momentum we see in virtually all of our other businesses," Mack said.
MS48.07, -1.46, -2.9%) booked the additional $5.7 billion of write-downs in November. The company's total announced write-downs since the third quarter now stands at $10.3 billion, a sum that ranks third among banks taking losses stemming from the turmoil in the mortgage market.
Morgan Stanley reported a loss from continuing operations of $3.59 billion, or $3.61 a share, for the fourth quarter ended Nov. 30.
The previous year, Morgan Stanley posted net income from continuing operations of $1.98 billion, or $1.87 a share. It said the results for Discover Financial Services prior to its spin-off in June were reported as discontinued operations.
With Wednesday's announcement, Morgan Stanley also became the latest U.S. financial titan to announce a big investment by an investment fund controlled by a foreign government.
China Investment Corp.'s total passive ownership in Morgan Stanley common shares, assuming the conversion of the equity units, amounts to 9.9% or less of total shares outstanding, the company said. The equity units will pay a fixed annual payment rate of 9% and convert into Morgan Stanley common shares in 2010.
China's sovereign wealth fund also has a stake in private-equity firm Blackstone Group
Underscoring the difficulty that most Wall Street firms have run up against lately, Morgan Stanley said net revenue for the November quarter was negative $450 million, compared with positive $7.85 billion in the year-ago period.
Analysts polled by Thomson Financial had forecast a loss of 39 cents a share on revenue of $4.23 billion.
The company said it's taking steps to address the turmoil in the mortgage-securities market, including management changes, additional risk monitoring and consolidating all proprietary trading under common leadership.
The reshuffling reflects more housecleaning by Mack in the wake of recent losses on mortgage-related assets. On Nov. 29, Mack ousted co-President Zoe Cruz, who oversaw Morgan Stanley's institutional-securities business, after the firm disclosed $3.7 billion in mortgage-related write-downs.
Morgan Stanley blamed the $9.4 billion total write-down on "the continued deterioration and lack of liquidity in the market for subprime and other mortgage-related securities since August."
About $7.8 billion of the fourth-quarter loss came from U.S. subprime trading positions. The company said its remaining direct net U.S. exposure to subprime mortgages was $1.8 billion as of Nov. 30, down from $10.4 billion the previous quarter.
Morgan Stanley's institutional securities business saw a pretax loss of $6.48 billion driven by mortgage-related write-downs, the results indicated. Advisory revenue rose 30% from a year earlier to $779 million.
Fourth-quarter pretax income in the global wealth management group more than doubled to $378 million as net revenue rose 23% from the prior year. Morgan Stanley recently named former Fidelity Investments executive Ellyn McColgan president and chief operating officer of global wealth management, effective in April.
Earlier this week, rival Goldman Sachs reported fourth-quarter results that topped Wall Street's expectations, but investors worried over its cautious outlook. See full story.
On one hand, we complain about human rights violations in China. Unfair trade practices. On the other hand, we're like "bail us out please". Sigh. Fire sale of assets to foreigners at this point.
those you wishing for economic demise of U.S. corps make get your wish afterall.
On one hand, we complain about human rights violations in China. Unfair trade practices. On the other hand, we're like "bail us out please". Sigh. Fire sale of assets to foreigners at this point.
those you wishing for economic demise of U.S. corps make get your wish afterall.
On one hand, we complain about human rights violations in China. Unfair trade practices. On the other hand, we're like "bail us out please". Sigh. Fire sale of assets to foreigners at this point.
those you wishing for economic demise of U.S. corps make get your wish afterall.
On one hand, we complain about human rights violations in China. Unfair trade practices. On the other hand, we're like "bail us out please". Sigh. Fire sale of assets to foreigners at this point.
those you wishing for economic demise of U.S. corps make get your wish afterall.
On one hand, we complain about human rights violations in China. Unfair trade practices. On the other hand, we're like "bail us out please". Sigh. Fire sale of assets to foreigners at this point.
those you wishing for economic demise of U.S. corps make get your wish afterall.
