Bond trading, Japanese investment pull down Morgan Stanley
Bond trading revenue decreases, along with losses at a Japanese investment, caused Morgan Stanley's first-quarter income to fall by 48 percent
Mike Segar / Reuters / File
The New York investment bank booked $655 million in losses from its 40 percent stake in a Japanese joint venture, Mitsubishi UFJ Morgan Stanley Securities. The venture lost more than $1 billion from bets in the fixed income markets, while operating expenses soared.
The joint venture was part of a $9 billion investment that Morgan Stanley received from Mitsubishi at the height of the financial crisis in 2008. Morgan Stanley's chief financial officer, Ruth Porat, said in a conference call with analysts Thursday that Mitsubishi is replacing the leadership at the joint venture and has started a "thorough and strategic risk management review" there.
Mitsubishi is also converting its $7.8 billion convertible preferred shares into common shares in Morgan Stanley, pending a review by U.S. regulators. The move will save Morgan $784 million in annual dividends and give Mitsubishi a 22.4 percent stake in Morgan Stanley.
Investors liked what they heard. Morgan Stanley's stock rose 1.7 percent to close at $26.48 Thursday.