New York - Morgan Stanley has become the latest US investment bank to write off billions of dollars in losses in subprime mortgage assets and cut its forecast for fourth-quarter earnings. The second-largest US securities firm reported losses of 3.7 billion dollars in September and October as an unprecedented number of defaults in subprime mortgage loans has rocked financial markets. The writedown led the New York-based bank to cut expected earnings for the year-end quarter by 2.5 billion dollars, which could lead to a loss.
The move comes after the top US investment bank Citigroup said revenues would decline as much as 11 billion dollars, leading to the resignation of its chief executive Charles Prince. The third biggest, Merril Lynch, last month said it wrote down 8.4 billion dollars.
Morgan Stanley's comparatively lower writedown led its stock price to rise more than 2.5 per cent in trading on Wall Street Thursday.
"The healing process will take longer," Morgan Stanley's Chief Financial Officer Colm Kelleher told Bloomberg News Wednesday. "The dislocation in the market has been quite severe, liquidity has dried up."
Morgan Stanley also said it was implicated in a widening probe by the Securities and Exchange Comission, the US financial watchdog, into the subprime mortgage practices of investment banks.
