By Joseph A. Giannone
NEW YORK (Reuters) - Morgan Stanley
The investment bank and brokerage's loss was far worse than analysts had expected and disappointed investors who had been cheered by strong trading results at rival Goldman Sachs Group Inc
"I guess this shows not all banks are alike. It looks like (Chief Executive) John Mack took less risk and missed out on a chance to pick up some trading revenue," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati.
Morgan Stanley posted a net loss applicable to common shareholders of $578 million, or 57 cents a share, for the first quarter, compared with shareholder income of $1.31 billion, or $1.26 a share, in the comparable period last year. Analysts on average expected a loss of 9 cents a share, according to Reuters Estimates.
Morgan Stanley cut its quarterly dividend by 80 percent, to 5 cents a share from 27 cents.
"We remain cautious," Chief Financial Officer Colm Kelleher said in an interview, though he stressed Morgan Stanley has more than enough capital and cash on hand to go back on offense.
"We're ready to go when we see the right risk-adjusted returns," he said. "We always saw 2009 as a year of transition, so we don't see it as a mortal sin being safe for an extra three months."
First-quarter revenue fell 62 percent to $3.0 billion, dragged down by two major losses.
Morgan, one of the largest commercial real estate investors in the world, recorded $1 billion of net losses on real estate and a $1.5 billion accounting loss on its own debt, reflecting the rising value of Morgan Stanley credit this year.
TRADING RESULTS WEAKER
Morgan Stanley's fixed income sales and trading revenue dropped 58 percent to $1.3 billion, in contrast to Goldman Sachs, which last week posted $6.56 billion of trading revenue from fixed income, currency and commodities, more than double the level in its first quarter last year.
"People had expected the credit desk trading profits to be a pleasant surprise, and I think they were OK, but they were just overwhelmed by the negative surprises in the writedowns," said Michael Holland, founder of New York money management firm Holland & Co.
Morgan Stanley is also taking less risk than Goldman Sachs, by at least one measure. Morgan Stanley's value at risk, the largest possible trading loss on 95 percent of the quarter's trading days, was $115 million, compared with Goldman's $240 million. And while Morgan Stanley's value at risk was up 16 percent from the first quarter of last year, Goldman's rose an eye-popping 52 percent.
Goldman and Morgan Stanley both switched to a fiscal year ending in late December from one ending in November. Morgan Stanley recast its 2008 quarterly results to match the current quarter, but Goldman's first quarter of 2008 ended February 29.
Morgan Stanley shares were down $1.80, or 7.3 percent, at $22.85 in morning trade on the New York Stock Exchange after falling as low as $22.36 earlier. The shares have fallen by half over the past 12 months but have surged about 40 percent this year, including the recent rally sparked by higher-than-expected profit at Goldman Sachs.
(Additional reporting by Dan Wilchins, Editing by John Wallace)
