Writedown costs Morgan Stanley $3.7 billion

Source: Exec Digital UK

Date :08/11/2007 09:29:46

The subprime losses keep on hitting Wall Street as Morgan Stanley said it has lost $3.7 billion (£1.8 billion) on its portfolio of its mortgage related investments.

Rolling on

The investment bank released a statement yesterday revealing the figures, which show that the subprime fiasco shows no sign of a abating.

After Citigroup and Merrill Lynch both posted giant losses that ultimately led to the loss of their CEO’s, Morgan Stanley’s John J Mack must be starting to cast a few nervous looks over his shoulder.

The company said that this figure could vary wildly:

“The actual impact on the Firm’s fourth quarter financial results, which will include results for the month of November, will depend on future market developments.”

In a worst-case scenario, the company stands to lose $6 billion (£2.9 billion) if its entire collection of subprime mortgage related assets loses their value.

“While these writedowns will negatively impact the fourth quarter results in the Firm’s fixed income business,” continued the statement, “Morgan Stanley expects to deliver solid results in each of its other businesses, including Investment Banking, Equities, Global Wealth Management and Asset Management.”

Caveat

However, the company admitted that this was still ‘subject to market conditions through the end of the year.’

Shares of Morgan Stanley dropped 6.1 percent, or $3.32, to close at $51.19, yet began to climb in electronic trading, rising 1.6 percent, or 81 cents, to $52.00.

November 8, 2007