Morgan Stanley hit by big losses

Morgan Stanley's losses were higher than expected

US investment bank Morgan Stanley has announced a fourth quarter loss of $2.19bn (£1.41bn), almost double what markets had expected.

The bank has been forced to write off investments and slash its fees from investment banking and broking.

On Wall Street, Morgan Stanley shares tumbled about 7% on the news.

Banks have been severely affected by the credit crisis and market turmoil - seeing the value of many of their assets plummeting in value.

'Poor numbers'

On Tuesday Goldman Sachs announced a quarterly loss of $2.29bn.

Goldman's loss was its first quarterly loss since it went public in 1999, and was also more than had been expected.

Morgan Stanley was able to report a full-year net profit of $1.7bn thanks to its earnings in each of the three preceding quarters.

Sal Arnuk of Themis Trading said: "The numbers are not good. The loss is great."

"They're cutting back on many, many different business lines so it calls into question what is the return on equity going to be down the road," he said.

Morgan Stanley's loss came during a quarter when the investment banking sector nearly collapsed.

In September as Lehman Brothers filed for bankruptcy protection and Merrill Lynch sold itself to the Bank of America.

Goldman and Morgan Stanley both changed their legal status from investment banks to commercial banks at that time, subjecting themselves to tighter regulation.

By the beginning of this week, Morgan Stanley's shares had plummeted 74% since January, as investors lost confidence.