August 14, 2008 / 2:18 PM / 10 years ago

UPDATE 1-Fox-Pitt cuts Morgan Stanley Q3 oper EPS view

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Aug 14 (Reuters) - Morgan Stanley’s (MS.N) third-quarter operating earnings estimates were cut by Fox-Pitt Kelton analyst David Trone to reflect an increase in his forecast for writedowns on mortgage and auction-rate securities.

Trone now expects the investment bank to earn 73 cents a share, compared with his earlier estimate of 79 cents.

Morgan Stanley will write down $1.2 billion in fixed income, currencies and commodities (FICC) in the third quarter, Trone said in a note to clients. Earlier he was expecting FICC-related net write-downs to be $800 million.

The $4.5 billion auction-rate securities that Morgan Stanley is buying back will result in writedowns of another $180 million, he added.

The analyst said his operating earnings-per-share estimate does not include an expected pre-tax gain of $720 million related to the secondary offering of MSCI Inc MXB.N, the investment analysis firm spun off from Morgan Stanley.

The gain would add 46 cents to the operating earnings estimate of 73 cents a share, he said.

Morgan Stanley shares were almost flat at $40.21 in morning trade on the New York Stock Exchange. (Reporting by Amiteshwar Singh in Bangalore; Editing by Himani Sarkar)

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