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Morgan Stanley beats Street
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September 24, 1998: 10:01 a.m. ET
Banker blames emerging markets for 3Q drop, pulls 2 cents ahead of estimates
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NEW YORK (CNNfn) - Morgan Stanley Dean Witter & Co. Thursday reported a 5-percent drop in fiscal third-quarter earnings, due largely to losses in overseas investments.
The financial services firm, which still beat Wall Street estimates by 2 cents a share, earned $645 million for the quarter ended Aug. 31, or $1.05 a diluted share, down 5 percent from $678 million, or $1.09 a share, a year earlier.
Analysts had predicted Morgan Stanley would earn $1.03 a share, according to First Call.
Revenue fell 6 percent to $3.8 billion from $4.1 billion last year.
Compared with second-quarter earnings of $854 million, profit was down 24.5 percent .
"Our company continued to perform very well despite the turmoil in global financial markets," Chairman Philip J. Purcell and President John J. Mack said in a statement. "The diverse revenue streams from our three major businesses -- securities, asset management and credit cards -- allowed us to post strong earnings in a difficult market environment."
Earlier this month, Morgan Stanley warned investors that losses from emerging market investments would erode quarterly earnings by $110 million.
In recent weeks, Steven Eisman, an analyst at CIBC Oppenheimer, lowered his 1998 and 1999 earnings per share estimates for many large bank stocks by 10 to 20 percent, including Morgan Stanley's.
Among the firms cited in his report were J.P. Morgan & Co. (JPM), for which he also lowered rating to "hold" from "strong buy"; Bankers Trust Corp. (BT); Bear Stearns Co. (BSC); Morgan Stanley Dean Witter & Co. (MWD); PaineWebber Group Inc. (PWJ); and the merged Travelers Group Inc. (TRV) and Citicorp (CCI) unit.
Donaldson, Lufkin and Jenrette (DLJ), British-based Barclays PLC (BCS) and Nomura Securities of Japan also have blamed emerging market volatility, particularly Russia's, for driving down third-quarter profits.
Russia still is struggling to get its economy and currency back on track after President Boris Yeltsin fired his former government and the central bank allowed the ruble essentially to devalue.
Shares of Morgan Stanley (MWD) were off 1-3/4 at 55-1/2 Thursday morning on the New York Stock Exchange, down dramatically from a 52-week high of 97-1/2 set in July. 
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Morgan Stanley
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