Give John Mack a Hand
Sure, Morgan Stanley’s worse-than-expected first quarter loss of $177 million is nothing to cheer about. And investors, in early trading, are beating up on the stock, pushing shares down 7%. But give Morgan Stanley CEO John Mack credit for putting out an earnings report that doesn’t try to hide the investment firm’s warts.
It seems much of the bad news at Morgan Stanley is tied to bad bets on the real estate market—both investments in residential and commercial properties. The firm posted a net loss of $1 billion on real estate-related investments in the quarter. That’s a particularly huge loss when you consider that Morgan Stanley lost $2.5 billion on its real estate investments for all of 2008.
Real estate, of course, continues to be a big black hole of losses for many banks. Goldman Sachs, for instance, reported a $640 million loss on “real estate principal investments,” in the first quarter. Goldman Sachs otherwise wowed the Street by reporting a better-than-expected profit of $1.81 billion.
But here’s the thing: with Morgan Stanley you can at least get some idea where the real estate losses are coming from and where future problems may still exist. How’s that? Simply, turn to page 17 of the 21-page financial supplement that Morgan Stanley published along with its earnings release. Morgan Stanley, like many other big banks, has been publishing a such supplement for years. The supplement offers a deeper dive for investors, analysts and business reports.
Goldman, as I pointed out yesterday, still feels no need to provide investors with such a detailed filing. The firm says it will provide more information in its 10Q, which may not come out for another few weeks.
I guess then we’ll just have to wait and see how much detailed information Goldman provides on its real estate losses.