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Morgan Stanley takes $9.4bn hit Morgan Stanley takes $9.4bn hit
(about 6 hours later)
Morgan Stanley has revealed a bigger-than-expected write-down of assets and sold a $5bn (£2.5bn) stake to a Chinese sovereign wealth fund.Morgan Stanley has revealed a bigger-than-expected write-down of assets and sold a $5bn (£2.5bn) stake to a Chinese sovereign wealth fund.
The US investment bank said that it had been forced to write down $9.4bn for the three months to 30 November.The US investment bank said that it had been forced to write down $9.4bn for the three months to 30 November.
The bank said last month that it would be taking a charge of $3.7bn.The bank said last month that it would be taking a charge of $3.7bn.
Morgan Stanley said that the injection from China Investment Corp - which equates to 9.9% of the bank - would help it to replenish its capital.Morgan Stanley said that the injection from China Investment Corp - which equates to 9.9% of the bank - would help it to replenish its capital.
Chief executive John Mack said that the losses were "deeply disappointing" and that he would not be accepting a bonus for 2007. China's willingness to invest in Morgan Stanley was seen as a vote of confidence on Wall Street and the firm's shares rose 4% in Wednesday trading.
But the heavy losses will increase pressure on chief executive John Mack, who described the performance as "deeply disappointing" and said he would not accept a bonus for 2007.
The woes in the sector have already seen the firm's highest ranked woman, Zoe Cruz, leave the firm.The woes in the sector have already seen the firm's highest ranked woman, Zoe Cruz, leave the firm.
Other banks have also been hit, and Merrill Lynch's boss Stan O'Neal and Citigroup's chief executive Charles Prince have both left their posts. Other banks have also been hit, and Merrill Lynch's boss Stan O'Neal and Citigroup's chief executive Charles Prince have both left their posts recently.
"Huge write-downs caused the ouster of Stan O'Neal and Charles Prince," speculated Peter Cardillo, a market analyst at Avalon Partners.
"Maybe Morgan Stanley will follow them."
Sovereign investmentSovereign investment
Morgan Stanley, which saw a $1.2bn write-down in the three months to the end of August, said that it still had about $1.8bn-worth of exposure to sub-prime mortgages on its books.Morgan Stanley, which saw a $1.2bn write-down in the three months to the end of August, said that it still had about $1.8bn-worth of exposure to sub-prime mortgages on its books.
Over the past few weeks, a string of global banks have indicated how much they have lost as a result of exposure to investment products linked to US sub-prime mortgages.Over the past few weeks, a string of global banks have indicated how much they have lost as a result of exposure to investment products linked to US sub-prime mortgages.
So far announced losses have totalled over $70bn, but the final toll might be much higher.So far announced losses have totalled over $70bn, but the final toll might be much higher.
The losses have increased the pressure on boss John Mack
The Organization for Economic Cooperation and Development (OECD) has predicted that losses will reach $300bn, and Goldman Sachs is forecasting $400bn.The Organization for Economic Cooperation and Development (OECD) has predicted that losses will reach $300bn, and Goldman Sachs is forecasting $400bn.
Analysts said that while there was negative sentiment surrounding Morgan Stanley's write downs, the investment from China was positive.Analysts said that while there was negative sentiment surrounding Morgan Stanley's write downs, the investment from China was positive.
A number of other large investment banks have also received cash injections from sovereign wealth funds.A number of other large investment banks have also received cash injections from sovereign wealth funds.
In October, Bear Stearns agreed to a $1bn investment from Citic Securities, which is controlled by China's government.In October, Bear Stearns agreed to a $1bn investment from Citic Securities, which is controlled by China's government.
Meanwhile, Citigroup sold a stake worth $7.5bn to the Abu Dhabi government's investment arm.Meanwhile, Citigroup sold a stake worth $7.5bn to the Abu Dhabi government's investment arm.
And earlier this month, UBS revealed that it had received a $9.7bn injection of funds from the Government of Singapore Investment Corporation.And earlier this month, UBS revealed that it had received a $9.7bn injection of funds from the Government of Singapore Investment Corporation.