Global Credit Crunch Hits Stanley’s Q3 Profits

Large write-downs and losses in quantitative trading strategies dashed third quarter profits at Morgan Stanley, the nation’s second largest investment bank and retail broker by 17 percent.

Falling short of Wall Street expectations, the company’s net income from continuing operations sank from $1.59 billion in the third quarter of 2006 to $1.47 billion this year.

Suffering badly from the summer's global credit crisis, the company was forced to write-down nearly $1 billion worth of loans, implying a 4 percent cut in the loan value.

Though it was the company’s first drop in profits under John J. Mack, Chairman and CEO, Morgan Stanley managed to build up its book value by 4 percent. The New York-based firm also delivered a 17 percent return-on-equity, just behind its record of 17.5 percent.

Offering a mixed outlook for investment banking, Colm Kelleher, a capital markets banker scheduled to take over as the chief financial officer at Morgan Stanley in December said, "We have a cautious outlook."

"Despite reasonable confidence that the market for U.S. mortgage loans and mortgage securities is opening, some of the more opaque products churned out by banks will continue to suffer", Kelleher predicted.

Founded in 1935, Morgan Stanley is a global financial services firm that operates in three business segments: Institutional Securities, Global Wealth Management Group, and Asset Management. It is ranked the second-largest brokerage firm in terms of market value.

Headquartered at New York City, the company has over 600 offices spread in 32 countries worldwide, with customer base ranging from corporations, governments, institutions to individuals.

With over 55,000 employees hired worldwide, ‘Great Place to Work Institute Japan’ in 2007 ranked Morgan Stanley as the second best corporation to work in Japan. The results were based on the opinions of the employees and the corporate culture.

For the year 2007, the company has also been honored with the titles of ‘Best Investment Bank- Spain’, ‘Best M&A House – UK’ and ‘Best Debt House – China’, among others.