Morgan Stanley incurred a significant charge from its legal battle with bond insurer MBIA, weighing down the company’s quarterly results. The company reported a loss of $275 million, or $0.15 per share. For the fourth quarter of the previous year, the company reported a profit of $0.41 per share.
A legal settlement with the bond insurer MBIA resulted in a one-time $1.7 billion charge for the company, accounting for a loss of $0.59 a share. Morgan Stanley logged net revenue of $5.71 billion for the quarter, a decrease of 26% from the same period last year.
Revenue for the fourth quarter in the company’s institutional securities division fell 42% to $2.07 billion. The company’s asset management division reported a sharp drop in revenue to $424 million for the quarter, a decrease of 50% from the same period a year ago. The drop was attributed to lower gains on investments made in the company’s merchant banking and real estate investing divisions.
The firm’s global wealth management division was the one bright spot for the quarter, posting net revenue of $3.25 billion. This is down just 3% from the same quarter one year ago. The division had $1.6 trillion in assets under management in the quarter, a figure unchanged from the previous quarter.
The bank’s chief executive, James P. Gorman, spoke positively about the earnings release, saying that the company was “in better shape” than where it started at the beginning of the year and that a number of vexing issues had been dealt with. Morgan Stanley is trying to navigate through a difficult economic environment with tighter regulatory requirements. These regulations force firms to hold more capital against certain operations and to stay out of other businesses altogether.
Morgan Stanley was hit hard by the credit crisis and the last two years has been spent rebuilding the firm. The company has reduced the risk in many divisions and focused a great deal of energy on building its wealth management division, a low risk operation that delivers steady returns.