Morgan Stanley Loses $700M on RE Holdings

NEW YORK CITY-Morgan Stanley on Wednesday reported a $700-million write-down on the bank’s $17-billion commercial property portfolio, part of what the bank called “the industry-wide decline in this market.” The tally was attributed to real estate-related losses of $300 million in Morgan Stanley’s institutional securities business and a combined $200-million loss and $200-million of non-interest expenses in the asset management line.

Overall, the locally based bank posted a $159-million loss for the quarter. In a statement, CEO John Mack says Morgan Stanley “would have been solidly profitable” in Q2 were it not for repaying TARP funds and improving credit spreads.

The Financial Times on Thursday quoted CFO Colm Kelleher as saying he did not yet see the light “at the end of the commercial real estate tunnel. Peak to trough, you have already had a pretty nasty correction in the market but it is still not looking very good at the moment.”

Also on Wednesday, San Francisco-based Wells Fargo reported a 69% rise in non-performing commercial real estate loans, from $4.5 billion to $7.6 billion. However, the bank nonetheless posted a best-ever quarterly income of $3.17 billion.