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| Morgan Stanley |
The conversion will reduce Morgan Stanley's annual preferred dividends by roughly $800 million, increase the bank's earnings power and boost capital, Morgan Stanley said.
"Overall it puts us in a very strong position with added flexibility," Ruth Porat, Morgan Stanley's chief financial officer, said during a conference call Thursday.
Morgan Stanley profit fell 45% in the first quarter to $968 million, or 50 cents a share, after a $655 million pretax loss related to fixed-income trading in a joint venture managed by Mitsubishi UFJ. Morgan Stanley's return on equity for continuing operations rose from the previous quarter, to 6.2%, but is down from 17% in last year's first quarter.
James Gorman, Morgan Stanley's chief executive, said that though the firm had taken a number of steps to improve operating results, "we understand that significantly more progress is expected and it remains the focus of this management team."
Gorman characterized the trading loss as "significant" and said Mitsubishi would be injecting capital into the business to partly offset the loss.
Mitsubishi "has taken a number of steps to address the issues that gave rise to the loss and to materially de-risk the business," Gorman said.
The trading loss amounted to a 26-cent-a-share hit for the first quarter.
The overall results reflect Morgan Stanley's effort to shift its focus from proprietary operations to client businesses.
Porat said the investment bank could elect to trim more lower-producing financial advisers from its brokerage force in the second quarter. The firm's wealth unit, which consists mostly of the Smith Barney joint venture, reported headcount that fell 243 from the fourth quarter as it laid off some trainees and lower producers.
