Under Gorman, Morgan Stanley has been cutting jobs and trimming expenses to make up for unsteady returns. The bank shed nearly 3,000 jobs, or about 5 percent of its workforce, over the year. The bank spent slightly more on compensation and benefits, $4.4 billion versus $4.3 billion a year ago, though that included $138 million it spent to lay off workers in January.
Morgan Stanley has also been cutting its exposure to risky European markets. The bank's gross exposure — which doesn't include hedges it has taken to protect itself — to Italy fell to $1.9 billion from $2.9 billion in January. It also trimmed its exposure to Greece and Spain, though its exposure to Ireland increased.
The bank is still paying for concerns from last fall over its European exposure. In the third quarter, its stock plunged more than 40 percent on worries about its exposure to Europe, and it still hasn't fully recovered.
Excluding the accounting adjustment, Morgan Stanley earned $1.3 billion on continuing operations, up from $866 million the year before.
The bank had to book a $2 billion hit to its revenue because of accounting rules related to an increase in the cost of the bank's debt. Because the bank would theoretically have to buy back its debt at a higher price, accounting rules require that a loss be recorded.
Including those charges for this quarter and previous quarters, revenue was down, falling to $6.9 billion from $7.6 billion in the year-ago period. With the accounting charge, the bank swung to a loss instead of a profit, losing $103 million on continuing operations.
The bank also lost money for the quarter when discontinued operations are included. The bank is selling Saxon, a mortgage-servicing unit.
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