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November 8, 2007

Morgan Stanley Q4 losses estimated at $3.7bn

by Gill Montia

Story link: Morgan Stanley Q4 losses estimated at $3.7bn

Morgan Stanley, the investment bank, has forecast a loss of $3.7 billion against fourth-quarter revenues, with regard to the US sub-prime mortgage crisis.

The bank estimates its holding in US sub-prime debt at $12.3 billion and has a net exposure to bad debt of $6 billion.

Morgan Stanley only recently entered the mortgage-backed securities business, having previously focused on its advisory and equity underwriting activities.

The news follows an announcement from rival Wall Street bank, Merrill Lynch, which has admitted that the US Securities and Exchange Commission is investigating matters relating to its holdings of high-risk mortgages.

So far this year, losses suffered by financial institutions in relation to mortgage-backed securities are estimated at $55 billion.

Only yesterday American International Group (AIG) reported a $2.68 billion post-tax write-down of assets in the third quarter.

Both Merrill Lynch and Citigroup are seeking to appoint new chief executives, resignations having followed admissions that losses from bond investments backed by sub-prime mortgages are far bigger than expected.

They are rumoured to have identified the same prospective candidates: John Mack, Morgan Stanley chief executive; John Thain, head of the New York Stock Exchange; Larry Fink, chief executive of Black Rock fund managers; Robert Willumstad, chairman of AIG; and Josef Ackermann, head of Deutsche Bank.

 

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