Morgan Stanley became the first US investment bank to truly bear the brunt of the credit crunch as it reported a 17pc drop in profits in the last three months.In full: the credit crisis
Worst of crisis is over, Lehman claims
The bank, reporting its first dip in profits under the reign of chairman and chief executive John Mack, announced a $940m write-down to the value of loans on its balance sheet.
The bank's outgoing chief financial officer, David Sidwell, admitted: "There were amazing market disruptions during this quarter."
His successor, Colm Kelleher, who takes over later this year, said the credit crisis has been worse than the slump that followed the Russian crisis and the collapse of Long-Term Capital Management in 1998.
Morgan Stanley's fixed income took a hit, down 3pc on the same quarter last month with revenues of $2.2bn. Mr Mack admitted the fall was driven by significantly lower credit revenues due to wider spreads, lower liquidity and higher volatility.
Revenues from trading commodities also fell - however these were partially offset by record trading in currency and interest rates.
But there was good news from other parts of the bank, including equity trading, with revenue up 16pc to $1.8bn, however that was marred by a $480m loss from what the bank referred to as "unfavourable positioning."
Investment banking produced $1,4bn in revenue, up 45pc, boosting overall group revenues 130c to $7.96bn.
Shares in Morgan Stanley, in spite of the profit fall, were trading up $1.03 at $69.54 in early trading in New York as the markets surged following Tuesday's decision to cut the Federal Funds rate by 0.5pc, a decision which forced many hedge funds to close short positions across the banking sector.
Morgan is the second of four big US investment banks to report quarterly results this week, after Lehman announced its results on Tuesday. Goldman Sachs and Bear Stearns are due to release their numbers tomorrow.
His successor, Colm Kelleher, who takes over later this year, said the credit crisis has been worse than the slump that followed the Russian crisis and the collapse of Long-Term Capital Management in 1998.
Morgan Stanley's fixed income took a hit, down 3pc on the same quarter last month with revenues of $2.2bn. Mr Mack admitted the fall was driven by significantly lower credit revenues due to wider spreads, lower liquidity and higher volatility.
Revenues from trading commodities also fell - however these were partially offset by record trading in currency and interest rates.
But there was good news from other parts of the bank, including equity trading, with revenue up 16pc to $1.8bn, however that was marred by a $480m loss from what the bank referred to as "unfavourable positioning."
Investment banking produced $1,4bn in revenue, up 45pc, boosting overall group revenues 130c to $7.96bn.
Shares in Morgan Stanley, in spite of the profit fall, were trading up $1.03 at $69.54 in early trading in New York as the markets surged following Tuesday's decision to cut the Federal Funds rate by 0.5pc, a decision which forced many hedge funds to close short positions across the banking sector.
Morgan is the second of four big US investment banks to report quarterly results this week, after Lehman announced its results on Tuesday. Goldman Sachs and Bear Stearns are due to release their numbers tomorrow.
This article is from Telegraph.co.uk 21/09/2007
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