Snakes and ladders

18 June 2008 By Antony Currie Follow @AntonyMCurrie

A good start to the year helped rehabilitate the Morgan Stanley boss s reputation after last year s trading loss. But a series of smaller riskmanagement mishaps made a tough second quarter even worse. Strip out oneoff gains, and Mack s firm only just broke even.

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Morgan Stanley reported secondquarter earnings of $1.026bn, or 95 cents a share. The firm was hit by writedowns of $519m on leveraged loans and associated hedges, $436m in proprietary mortgage losses connected to last year's trading woes, $257m on its realestate investments and $120m on positions mismarked by a trader in London who has been suspended from the firm.

In addition, Morgan Stanley took an unspecified hit on oil and electricity bets that went against the firm, and proprietary equities trading had a tough quarter.

Morgan Stanley booked a $698m pretax gain from selling its Spanish wealth management unit, a $732m pretax gain from selling a chunk of MSCI in a secondary offering, and a $190m pretax gain on marks taken on its own debt securities.

Excluding the sale of its Spanish business, wealth management still posted good results, with a return on equity of 51%.

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In addition, Morgan Stanley took an unspecified hit on oil and electricity bets that went against the firm, and proprietary equities trading had a tough quarter.

Excluding the sale of its Spanish business, wealth management still posted good results, with a return on equity of 51%.

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