Wall Street firm, suffering first quarterly loss ever, takes $5.7 billion writedown and announces sale of $5 billion stake to China fund.
Morgan Stanley posted its first quarterly loss ever Wednesday and stunned the rest of Wall Street by taking additional $5.7 billion mortgage-related writedown, while announcing a $5 billion cash injection from a Chinese state-run investment fund.
The Wall Street firm said it lost $3.59 billion, or $3.61 a share, during the fourth quarter ended Nov. 30, marking the first time Morgan Stanley has posted a quarterly loss in its 72-year history. Just a year ago, Morgan Stanley posted a profit of $2.21 billion or $2.08 a share.
The loss was steeper than expected, as analysts polled by Thomson Financial were anticipating a loss of 39 cents a share.
The company said it would take a $5.7 billion writedown during the quarter, on top of $3.7 billion it previously announced.
Morgan Stanley blamed the hit on continued deterioration in the credit markets and a lack of liquidity for subprime and other mortgage-related securities.
John Mack, Morgan's chairman and chief executive, said the writedown was "deeply disappointing" to the entire firm as well as the company's shareholders.
Mack also blamed the quarter's losses on a small trading team in one part of the firm, but shouldered some of the blame, adding that he would not accept a bonus for 2007.
"Ultimately, accountability for our results rests with me, and I believe in pay for performance,
so I've told our compensation committee that I will not accept a bonus for 2007."
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