Knockback

20 October 2010 By Antony Currie Follow @AntonyMCurrie

Accounting nags tripped up Q3 fixedincome trading but it was still worst among peers. A surprise writedown caused a loss, and the firm leaned on investments and a tax break to keep it from being worse. The setback is disappointing but shouldn t derail CEO Gorman s strategy.

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Morgan Stanley reported a thirdquarter net loss of $91 million, or 7 cents a share. The loss was a result of having to write down by $229 million the carrying value of Revel, the Atlantic City casino project it decided to sell earlier this year.

Excluding the writedown, Morgan Stanley earned $313 million, or 5 cents a share. The firm benefitted from a $176 million tax gain from repatriating nonU.S. earnings.

Underwriting and M&A fees rose 14 percent from the second quarter to $1 billion. Fixed income trading fell 58 percent to $846 million, although after removing an accounting gain in the second quarter and an accounting loss in the third linked to marking to market the firm's liabilities, revenue fell just 24 percent. Equities trading revenue fell 35 percent, or 13 percent after allowing for accounting for liabilities.

Global wealth management reported pretax income of $281 million, 36 percent more than the second quarter. Asset management reported pretax income of $279 million, compared with an $86 million loss in the second quarter. Asset management benefitted from a pretax gain of $195 million on principal investments in certain consolidated real estate funds.

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Excluding the writedown, Morgan Stanley earned $313 million, or 5 cents a share. The firm benefitted from a $176 million tax gain from repatriating nonU.S. earnings.

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