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Loss-making Morgan Stanley Sets Aside $3.88bn For Staff Compensation

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Morgan Stanley bucked the increasingly positive trend in the banking sector by delivering a $1.26bn (£765m) loss in the second quarter, its third consecutive quarterly loss.

The investment bank, led by chairman and chief executive John Mack, appeared to be hurt by core business areas including fixed income and commercial real estate, and delivered a loss that was beyond Wall Street's expectations.

The results for the three months to June compared poorly to those of its closest rival Goldman Sachs, which reported stellar second quarter results last week, and to those of banking conglomerates JP Morgan Chase and Bank of America.

Colm Kelleher, chief financial officer, went so far as to brand 2009 a "year of transition" pointing to the changes taking place in the firm's business, not least the integration of Morgan Stanley and Citigroup's wealth management arms under the rebranded Morgan Stanley Smith Barney.

The bank's $1.26bn loss compared to a profit of $1.1bn in the same period last year. It repaid its $10bn injection of US Treasury money in the period, on which it incurred a one-off hit of $850m.

Group revenues fell by 11pc to $5.4bn, due in part to a 24pc fall in sales in institutional securities business.

The reason behind the dramatic fall was partially related to a 29pc decrease in advisory revenues, and a 69.5pc fall in equity sales and trading revenues as the bank simply appeared to dramatically slow certain activities.

Although trading revenues from its fixed income business rose 44pc to $973m, this included a $1.3bn loss linked to debt-related credit spreads.

Other problem areas including the bank's commercial real estate division, which reported net losses of $700m, something that Mr Kelleher said he hoped would "decelerate" over time.

One of the key reasons behind the sizeable quarterly loss however was an improvement in the bank's own credit spreads, reducing overall revenue by $2.3bn.

In spite of the losses, the bank still set aside $3.88bn at the end of the quarter for staff compensation, some 72pc of total revenues. The ratio is considerably higher than the 48pc rival Goldman Sachs set aside for its compensation pot a week ago.

Banking what an industry to be in no matter what the performance you get a bonus.


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and banks arent lending to small business, that are forced to use credit cards.

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