July 23 (Reuters) - Several Wall Street analysts lowered their 2009 estimates for Morgan Stanley (MS.N) on Thursday to reflect the bank’s wider-than-expected quarterly loss, as well as concerns over its commercial real estate exposure and fixed income trading business.
The analysts, however, said there were signs of stabilization in results and that the bank’s performance was expected to ramp up next quarter.
FBR Capital Markets analysts predicted a return to profitability for Morgan Stanley in the third quarter.
“Despite a headline number that appeared worse than forecasted, the quarter’s results generally reflected our expectations for improving underlying business trends,” FBR analysts, including Steve Stelmach, said.
Hurt by disappointing fixed income and asset management results, as well as charges related to the repayment of U.S. government bailouts and the accounting ramifications of improvements in its debt prices, Morgan Stanley on Wednesday posted a loss of $1.26 billion for the second quarter. [ID:nN22329043]
Unlike rival Goldman Sachs Group Inc (GS.N), whose quarterly earnings rose on strong gains in trading and profit, Morgan Stanley, after leaning to a more conservative risk management position, appears to have failed to capture its share of equity trading flow on the heels of “pretty strong” equity issuance, analysts at William Blair & Co said.
But, according to FBR analysts, Morgan Stanley’s trading revenues will likely ramp up from previous levels as it has paid back government bailout funds, debt-value adjustments have largely run their course, and the liquidity environment is steadily improving.
During the second quarter, Morgan Stanley repaid $10 billion from the government’s Troubled Asset Relief Program, incurring a one-time charge of $850 million.
Analysts at Bernstein, William Blair, Keefe Bruyette & Woods, and FBR expect Morgan Stanley to post a loss of between 25 cents to 90 cents a share for 2009.
Previously, analysts at William Blair had forecast a loss of 22 cents a share, while the other analysts had projected a profit of between 22 cents and $1.01 a share.
Only J.P. Morgan Securities’ analysts expect Morgan Stanley to post a profit of 3 cents a share in 2009. This is, however, a decrease from their prior earnings estimate of $1.65 a share.
Morgan Stanley shares rose 1.3 percent in trading before the bell, after closing at $27.54 Wednesday on the New York Stock Exchange.
For a graphic on Morgan Stanley's results, double-click here (Reporting by Tenzin Pema in Bangalore; Editing by Himani Sarkar)