Morgan Stanley Trading Gains Topped $100 Million on 10 Days
Morgan Stanley Trading Gains Topped $100 Million on 10 Days
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The Morgan Stanley logo is displayed at their headquarters in New York.
The Morgan Stanley logo is displayed at their headquarters in New York. Photographer: Peter Foley/Bloomberg
May 9 (Bloomberg) -- Phil Angelides, chairman of the Federal Crisis Inquiry Commission, talks about the rising "risk" to implementing new regulations governing the financial markets and oversight agencies. Angelides, speaking with Lisa Murphy on Bloomberg Television's "Fast Forward," also discusses the investigations into mortgage fraud and the role Freddie Mac and Fannie Mae may have had in the crisis. (Source: Bloomberg)
Morgan Stanley CEO James Gorman
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James Gorman, chief executive officer of Morgan Stanley, changed management and increased hiring in the fixed-income trading unit to close the gap between the company and rivals Goldman Sachs Group Inc. and JPMorgan Chase & Co.
James Gorman, chief executive officer of Morgan Stanley, changed management and increased hiring in the fixed-income trading unit to close the gap between the company and rivals Goldman Sachs Group Inc. and JPMorgan Chase & Co. Photographer: Jin Lee/Bloomberg
Morgan Stanley (MS), the sixth-largest U.S. bank by assets, posted trading revenue of more than $100 million on 10 days in the first quarter.
The firm’s trading division lost money on 3 days during the period, compared with 13 days in the fourth quarter, New York- based Morgan Stanley said in a filing with the U.S. Securities and Exchange Commission. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) last week posted perfect quarters, with positive revenue on each trading day.
Morgan Stanley had $3.47 billion in sales and trading revenue in the three months ended March 31, more than triple its fourth-quarter figure and about half that of rivals Goldman Sachs Group Inc. (GS) and JPMorgan. Chief Executive Officer James Gorman, 52, has replaced management and increased hiring in the fixed-income trading unit to close the gap.
“Our trading results demonstrated considerable improvement and reflect continued focus and discipline,” Chief Financial Officer Ruth Porat said on a conference call last month. She said the daily revenue disclosure would be “another way of underscoring that with the addition of the team, greater presence with clients, greater client facilitation opportunities, that we’re productive.”
JPMorgan’s market risk-related revenue averaged $112 million a day in the quarter and was higher than $160 million on seven of the period’s 64 days, the New York-based lender said in a filing last week. The bank’s measure includes some market risk besides trading, such as principal transactions in its chief investment office and some mortgage fees and hedges.
Bank of America
Bank of America’s trading-related revenue was positive every day and exceeded $25 million on 98 percent of days during the year’s first three months, the Charlotte, North Carolina- based company said in a filing last week.
Gorman said in February that his “No. 1” priority is turning around the firm’s fixed-income trading unit, hoping to capture a 2 percentage-point gain in market share this year. Excluding gains and losses tied to their own debt, Morgan Stanley had about a 6 percent market share in 2010 among 11 of the largest U.S. and European banks, according to data compiled by analysts at JPMorgan and Nomura Holdings Inc.
Morgan Stanley also settled a lawsuit involving a collateralized debt obligation named Tourmaline, according to today’s filing. The firm settled at a loss that’s “substantially less” than the $273 million possible loss the company had previously disclosed, it said.
Legal Appeal
It’s “reasonably possible” Morgan Stanley could lose up to $240 million from a 2010 lawsuit brought by China Development Industrial Bank over a $275 million credit default swap, according to the filing. Morgan Stanley is appealing a court order denying its motion to dismiss the case, the company said.
Morgan Stanley’s derivative counterparty exposure to MBIA Inc. and other bond insurers was $782 million at March 31, after netting for credit valuation adjustments and hedges, according to the filing. That exposure was about negative $660 million at Dec. 31, when CVA and hedges related to MBIA exceeded the firm’s exposure by $1.1 billion.
The increase in the exposure was “primarily due to a reduction of MBIA-related hedges,” Morgan Stanley said. The firm lost $318 million related to the exposures and hedges in the first quarter, bringing its total losses to $1.04 billion in the past four quarters.
In February, Cambridge Place Investment Management Inc. filed a lawsuit against Morgan Stanley and other defendants alleging they “made untrue statements and material omissions” in the sale of mortgage pass-through certificates, according to the filing. Morgan Stanley said it’s accused of issuing, underwriting or selling $102 million of the securities.
Cambridge Place filed a similar suit in July 2010 accusing Morgan Stanley of issuing, underwriting or selling $242 million of the securities, according to a previous regulatory filing.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net.
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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