Morgan Stanley, the second-biggest US securities firm, says profit dropped by more than 50% on declines in trading, asset management and investment banking, The Telegraph reports.
Earnings from continuing operations fell to $1.03 billion in the second quarter from $2.36 billion. The news from Morgan Stanley came as John Paulson, founder of hedge fund Paulson & Co and one of the world’s richest financiers, warned that global writedowns and losses from the credit crisis may reach $1.3 trillion.
“We’re only about a third of the way through the writedowns,” says Paulson. “There are a lot of problems out there and it will continue to be felt through the year. We don’t see any signs of stabilizing.”
Morgan Stanley, led by chief executive John Mack, reported its first loss as a public company in December after $9.4 billion of writedowns on mortgage-related investments. Mack last month announced plans to reduce its headcount by as much as 5% on top of the 3,000 jobs eliminated since October.
“We’re expecting continued weakness across all their business units,” says William Fitzpatrick, an equity analyst at Optique Capital Management Inc. in Racine, Wisconsin, which manages $1.6 billion. “It’s going to take some time for these markets to really improve.”