Morgan Stanley rushes out earnings

Morgan Stanley, which saw its stock fall as much 28% at one point on Tuesday after a drop of 13.5% on Monday, rushed out its fiscal third-quarter earnings report after the market closed today, trying to reassure investors that it is standing up to the market turmoil that has felled some top competitors.
SEP 16, 2008
Morgan Stanley, which saw its stock fall as much 28% at one point on Tuesday after a drop of 13.5% on Monday, rushed out its fiscal third-quarter earnings report after the market closed today, trying to reassure investors that it is standing up to the market turmoil that has felled some top competitors. The New York-based investment bank booked earnings of $1.43 billion for the quarter ending Aug. 31 – down 7.6% from a year earlier but better than analysts had forecast. Today’s plunge might have been triggered by disappointment over Goldman Sachs’s report this morning after that paragon of Wall Street health said its net income plunged 70% from a year earlier. In a call with analysts after Morgan Stanley released its earnings, chief financial officer Colm Kelleher insisted that the company’s core businesses are for the most part solid and are and will generate strong results when the current crises of confidence in all financial firms abate. Like his counterpart at Goldman, David Viniar, Mr. Kelleher said Morgan Stanley does not need to buy or be bought by a commercial bank to ensure inexpensive funding (through customer deposits) for its cash-hungry businesses. He also said that the company is quick to mark its impaired mortgage holdings and other assets to their correct prices and take losses when warranted — a not-so-subtle allusion to charges that Lehman Brothers Holdings failed to properly mark its book or sell its deteriorating assets. Bank deposits are nice to have, Mr. Kelleher demurred, but “depository institutions are not key to our strategy.” He also said that Morgan Stanley’s once deteriorating brokerage franchise – composed primarily of the former Dean Witter network – is thriving and that the firm is eager to lure disgruntled Merrill Lynch brokers. Merrill’s brokerage force of over 16,000 is the world’s biggest and almost twice the size of Morgan Stanley’s approximately 8,500 financial advisors. ``We are clearly getting a lot of phone calls,’’ Mr. Kelleher said, adding that he is ``optimistic and very positive about the growth of that business.’’ Morgan Stanley co-president James Gorman was a former head of wealth management at Merrill Lynch.

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