Morgan Stanley’s Profits Plunge 83%

Apparently, no one invited Morgan Stanley to Wall Street’s summer beach party. All the brokers reported blow-out earnings until Morgan Stanley dropped the ball this morning.

I should say that if you ignore the “charges,” Morgan’s earnings really weren’t that bad. The problem is, you can’t ignore these charges. The company took a $1 beeellion charge for the sale of its aircraft-leasing business. On top of that, the company has had its costly boardroom drama. Earlier this year, the Group of Eight angry executives finally succeeded in getting rid of CEO Philip Purcell. He left but he took a lot of money with him. Last quarter, Morgan’s compensation charges increased by $178 million.

There was also bad news from Discover. Morgan’s credit card business saw its profits drop 28%. The company’s retail brokerage division managed pre-tax margins of just 2%, one-tenth of its rivals. Morgan has a long way to go to getting back to a healthy company. These earnings tell me that it’s going to get worse before it gets better.

Posted by on September 21st, 2005 at 2:22 pm


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