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Morgan Stanley 3Q falls
September 21, 2001: 1:43 p.m. ET

Brokerage profit hurt by weakness on Wall St., slowing economy
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NEW YORK (CNNfn) - Morgan Stanley posted a 41 percent drop in earnings for the latest quarter Friday as the brokerage firm struggled with declining investment activity and the slowing economy.

However, the results came in a penny a share ahead of Wall Street forecasts.

For its fiscal third quarter ended Aug. 31, Morgan Stanley earned $735 million, or 65 cents a share, excluding one-time items, down from $1.2 billion, or $1.09 a share, a year earlier. Analysts on average had anticipated a profit of 64 cents a share, according to earnings tracker First Call.

"In this market, I don't think this changes anything," said Jim Mitchell, an analyst at Putnam Lovell Securities. "I don't think the results are going to stop the fall."

Morgan Stanley (MWD: Research, Estimates), one of the nation's biggest brokers, was the largest tenant at New York's World Trade Center, which was destroyed in the Sept. 11 attacks that killed thousands.

"It is obviously difficult to focus on financial results in the aftermath of last week's tragic events," CEO Philip Purcell and President Robert Scott said in a statement. "However, we want investors to know that Morgan Stanley remains strong not just financially, but also in terms of the will of our people, who have again proven their resilience."

Morgan Stanley's shares have dropped 20 percent since Sept. 10, the last day of trading before the air attack. U.S. stock markets closed for four days following the assault.

The firm said quarterly revenue fell 16 percent to $5.3 billion from $6 billion, led by steep declines in equity trading and investment banking activity.

A year-long slowdown in the U.S. economy has been accompanied by a bear market that has cut into revenue at many brokerages.

Morgan Stanley's advisory revenue fell 30 percent to $360 million, while underwriting revenue fell 34 percent to $417 million as a weak stock market kept companies from issuing stock or pulling the trigger on mergers.

Institutional sales and trading revenue fell 8 percent to $1.8 billion, with fixed-income revenues offsetting weakness in equities. Revenue from its asset management unit fell 12 percent to $603 million, and its Discover credit card subsidiary pulled in revenue of $1.03 billion, down from $1.08 billion a year ago.

The firm's results were its worst since the third quarter of 1998, when Morgan Stanley bailed out one of its own emerging leverage funds and was one of 11 firms that put up cash to rescue another troubled hedge fund, Long-Term Capital Management. Stock markets three years ago were also roiled by financial tumult in Asia and Russia.

Morgan (MWD: Research, Estimates) shares slid $4.37 to $37.62 Thursday. Morgan said it planned to repurchase its shares more aggressively. graphic

-- from staff and wire reports


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Morgan Stanley

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