Analysts are predicting that Morgan Stanley (NYSE:MS) will post a loss for the second quarter when the bank announces its earnings July 22. Analyst Steve Stemach at FBR Capital thinks Morgan's per-share return will flush out to 30 cents, a reversal from his previous prediction of a 33 cent PPS gain. From
Stemach:
While we ultimately expect the Morgan
Stanley franchise to rebound from what was a difficult 2008, headline
[earnings] will continue to suffer from mark-to-market losses on select
balance sheet exposures and debt valuation adjustments. Once Morgan is
able to move past the balance sheet-related noise and focus more
aggressively on its existing institutional and retail franchises, we
believe current valuation could prove attractive; but we would feel
more comfortable knowing that headline losses are largely behind the
company.Like its counterparts, the bank will take a hit from its $5 billion in gross commercial real estate exposure, which weighed down Goldman Sach Group Inc.'s (NYSE:GS) profit by
$500 million. Goldman at the end of the second quarter held $6.4 billion in commercial real estate loans,
which have continually lost value -- many by 50% -- due to defaults and
declining property values, according to
Reuters.
Morgan's
repayment of $10 billion in TARP loans is also expected to tug on its bottom line, and this quarter will bear the brunt of the bank's hard-won "freedom."
In the first quarter, Morgan Stanley
reported
a net loss of $177 million, or 57 cents per share. -
Sara Behunek
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