Morgan Stanley Traders Lost Money on Seven Days in 3Q

Morgan Stanley (MS), the investment bank that’s shrinking its fixed-income unit, lost money from trading on seven days in the third quarter, down from eight a year earlier.

Traders generated more than $100 million on one day, a decrease from nine in the third quarter of 2012, the New York-based company said yesterday in a regulatory filing. None of the daily losses exceeded the bank’s so-called value-at-risk, an estimate of potential trading losses.

Morgan Stanley posted the highest equity-trading revenue among the five biggest Wall Street banks, while also generating the least fixed-income trading revenue. The firm already has reached its 2014 goal of cutting capital used by the fixed-income unit as part of Chief Executive Officer James Gorman’s plan to double return on equity.

Those cuts in risk-weighted assets and expense reductions mean Morgan Stanley can reach its ROE goals for fixed-income trading even if annual revenue falls below $6 billion, the average for the past three years, Chief Financial Officer Ruth Porat said last month. The firm has generated $3.5 billion from the business this year, excluding accounting charges, the lowest revenue for the first nine months since the credit crisis.

Morgan Stanley produced $5.11 billion from equity trading in the period, up 39 percent from a year earlier and the biggest jump among the nine largest global investment banks.

The firm also said its holdings of physical commodities fell to $3.41 billion, the lowest level in more than four years. The Federal Reserve is reviewing banks’ ability to own physical-commodity businesses, and Gorman has said the firm could pursue a deal related to the unit if he found one that worked.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Christine Harper at charper@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.