Morgan Stanley, the second-largest investment bank in the US, saw its profits fall by more than half last quarter. That as the ongoing credit crunch slowed investment banking and fuelled trading losses, which were only partly offset by gains of 920 million euros from the sale of its Spanish wealth management business and shares in index provider MSCI.
The figures were better than predicted, but concern about the bank’s ability to generate profit growth in the future pulled down its shares. Morgan Stanley’s results were down 57% in the quarter – weak compared with its two main rivals. Earlier this week, Goldman Sachs posted a drop of just 11% while Lehman Brothers revealed a 1.8 billion euro loss.
Although revenue dropped in almost every area of Morgan Stanley’s business, the biggest losses were mortgage related in the wake of the sub-prime mortgage meltdown. That triggered the credit crunch which has been battering banks and brokers. The industry has been forced to write down at least 260 billion euros of assets, slash jobs and raise new capital by selling more shares.