MORGAN STANLEY yesterday reported a smaller than expected drop in first-quarter profit as strength in the bank's sales and trading businesses easily offset writedowns on mortgage-related assets and leveraged loans.
The results beat those of Goldman Sachs, Morgan Stanley's chief rival, and offered a big boost to John Mack, chief executive, who had come under pressure from some shareholders following previous actions during the credit squeeze.
Morgan Stanley executives yesterday echoed comments from Lehman and Goldman on Tuesday, saying the bank's liquidity position remained strong, further calming investors, who had feared that the crisis that led to the collapse of Bear Stearns could spread.
Morgan Stanley shares rose 7 per cent to $45.88 in midday trade in New York.
Colm Kelleher, chief financial officer, said Morgan Stanley had "tested" a lending facility provided by the Federal Reserve to ease concern that Wall Street banks could face short-term funding problems.
The Fed has given investment banks access to its so-called discount window, previously reserved for commercial banks.
Mr Kelleher said he was "relaxed" about the prospect of more close supervision by the Fed in the future in return for access to the window.
Previously, banks feared that using the window would suggest they have funding shortages. Erin Callan, Lehman chief financial officer, said on Tuesday that the facility was "very attractive".
Morgan Stanley said it earned $1.55 billion, or $1.45 per share, in the quarter, down 33 per cent from $2.31 billion last year. Analysts had expected profits of $1.03 per share.
Goldman on Tuesday reported a 53 per cent profit decline to $1.51 billion. Morgan Stanley reported a return on equity of 19.7 per cent compared to 14.8 per cent for Goldman.
- (Financial Times)
