Morgan Stanley's fiscal fourth-quarter net loss narrowed on fewer investment losses as leverage levels continue to tumble for the company as it deal with its new status as a bank holding company.
Morgan Stanley's shares fell 5.8% premarket to $15.20, as the results were worse than analysts expected.
For the period ended Nov. 30, Morgan Stanley reported a net loss of $2.3 billion, or $2.34 a share, compared with a year-earlier net loss of $3.59 billion, or $3.61 a share.
The company posted revenue of net revenue of $1.83 billion, compared with prior-year negative revenue of $432 million caused by the write-downs.
Analysts polled by Thomson Reuters expected a loss of 34 cents on revenue of $3.79 billion.
The investment bank's report comes a day after rival Goldman Sachs Group Inc. posted a worse-than-expected loss, its first since going public a decade ago, amid slumping results at its trading and principal investments business.
Morgan and Goldman are now the only major independent U.S. brokerages left after the economic downturn and a series of bad investments forced their other competitors to bankruptcy or into the arms of rivals.
The two firms have become bank holding companies, providing them with access to the federal government's $700 billion rescue plan, allowing them to borrow at the Federal Reserve's discount window and making it easier to get stable sources of funding.
Morgan Stanley's leverage ratio slumped to 11.4 at the end of the quarter from 32.6 times a year earlier.
The company's results in the latest quarter were buffeted by the worsening markets around the globe and across asset classes.
At Morgan Stanley's institutional-securities business, which includes capital markets and investment banking, its pretax loss narrowed to $2.1 billion from $6.5 billion as mortgage-related losses tumbled to $1.2 billion from $9.4 billion. The segment also reported $1.7 billion mark-to-market losses on loans and commitments, largely related to leveraged buyouts.
In global wealth management, Morgan Stanley swung to a $55 million loss amid $364 million in write-downs and legal settlement related to auction-rate securities. Revenues fell 21%.
The asset-management division also swung to a loss of $1.22 billion, on real-estate and other investment losses.
Standard & Poor's said last week that Morgan Stanley holds $7.7 billion in commercial real-estate loan assets that will likely have to be written down at some point.