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Morgan Stanley (NYSE: MS) did worse than most investors thought it would. The investment bank reported income from continuing operations for the fiscal year ended November 30, 2007 of $2,563 million, or $2.37 per diluted share, compared with $6,335 million, or $5.99 per diluted share, a year ago.
The loss from continuing operations for the fourth quarter was $3,588 million, or $3.61 per diluted share, compared with income from continuing operations of $1,982 million, or $1.87 per diluted share, in the fourth quarter of 2006. Net revenues were negative $450 million, compared with $7,849 million in last year's fourth quarter
The part that was hard to swallow was unexpected trouble during November. The firm has an additional $5.7 billion writedown from U.S. subprime and other mortgage related exposures in November in addition to the $3.7 billion writedown it had announced last month as of October 31. This results in a total fourth quarter writedown of approximately $9.4 billion.
In other words, the Morgan Stanley balance sheet was in much worse shape than almost anyone had expected.
Of course, there was a bail-out. This time it came from China and not the Middle East. According to The Wall Street Journal, "Morgan Stanley also said it received an investment of $5 billion from China Investment Corp., the country's sovereign wealth fund." Like Bear Stearns (NYSE: BSC) executives announcement this morning, Morgan Stanley's CEO John Mack will skip his bonus (which he does not need having as he became fabulously wealthy from running other Wall Street firms).
The news does continue a troubling trend of overseas money being used to help ailing U.S. financial institutions. One has to wonder why no U.S. private equity interests were willing to step in.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-19-2007 @ 9:49AM
John Moran said...
I have been following this sub-prime mortgage debacle since it blew up. John Mack, of Morgan Stanley should have been the first one fired for his involvment in setting the strategies at MS, he is no Blankfein nor is MS a GS. I worked at MS for 18 years 1977/1995 and was the rescue manager at MS for the other Mortgage debacle the "savings and loan issue of the 80's/90's. Oddly enough John Mack was running the "Fixed Income Division" at MS during that time. History repeats itself, and he was just as defiant then and escaped without any bruises. I have never considered him even a marginal leader only a large antagonizing self centered individual. I together with Lewis Bernard and Dick Fisher shut down the mortgage product activity at MS then and re-engineered the unit to escape with no losses. In fact the new unit grew 5 times its size in 1 year following the re-org. As I recall John Mack sat their then as well and fired other persons who traded the product like he did this time. I see where he has agreed to forego his bonus for 2007 thats nice of him but a better solution and more permanent would be to resign. I have seen Morgan Stanley go from the #1 Investment Banking in the 80's/90's to off the charts when stacked up against Goldman/Lehman and the likes. The merger with Dean Witter was a major mistake and allowing the politics rather than the shareholders dictate the leadership following that event was devastating. I am still a stockholder and very disappointed in the results of this organization