Morgan Stanley: EPS of 95 cents, vaguely in line with expectations – at least, at headline level.
Boring, say some.
Net revenues in fixed income sales and trading down 85 per cent to $414m. Loss in credit products after “continued dislocation” in the credit markets. No great surprise.
Then there’s this:
This loss included a $120 million negative adjustment to marks previously taken in a trader’s book that did not comply with Firm policies.
Now, $120m isn’t huge. On the face of it, sounds similar to problems at Lehman, London (a review of valuation methodology of positions in exotic equity derivatives), and the “pricing errors” in structured credit at Credit Suisse (though that was a lot larger).
The MS trader concerned is in London- and has apparently been suspended. More to come on FT.com.
Post-crunch, the investment banks seem to have had a great deal of trouble getting all desks in their trading empires valuing positions in a manner consistent with best practise, or failing that bank policy. And that’s without accusations of outright fiction, Kerviel style.
Update – From the conference call, via MarketWatch:
“What we have had this quarter is a trader who was mis-marking his book. We found it. Our controls picked it up,” CFO Colm Kelleher said. He said the activity under review includes some from the previous quarter and possibly before that. “We did not think it was material but we certainly thought it was time to disclose it to people and a very strong message that we hold zero tolerance on this sort of behavior. I do believe it is isolated.”
Related links:
Morgan Stanley slides as earnings sink 57% – FT.com