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Morgan Stanley earnings drop on US$1.2 billion in legal costs

NEW YORK -- Morgan Stanley says its earnings fell in the fourth quarter as it was hit by legal costs related to mortgage-backed securities.

The New York investment bank earned US$433 million, or 20 cents a share, in the final three months of 2013. That compared to US$982 million, or 49 cents a share, a year earlier.

Excluding litigation costs and a tax benefit, the bank earned 50 cents a share, beating the 44 cents forecast by Wall Street analysts. The results also exclude accounting adjustments related to the value of the bank's debt.

Morgan Stanley reported legal expenses of US$1.2 billion related to mortgage-backed securities lawsuits and investigations for the quarter.

U.S. banks are still dealing with the fallout of the financial crisis more than half a decade after it began. JPMorgan on Tuesday reported results that were affected by legal expenses, and Citigroup said Thursday that it had US$800 million in legal costs in the fourth quarter and that it expected those kinds of expenses to continue for the industry.

Morgan Stanley's revenue rose 9 percent to US$8.2 billion from US$7.5 billion in the fourth quarter, beating analysts' forecasts of US$8.02 billion.

“Our fourth-quarter results demonstrated the consistency embedded in our business model, as revenues increased year-over-year in all three of our business segments,” James Gorman, the bank's CEO, said in prepared remarks. “Importantly, we are continuing to address many of the legal issues from the financial crisis.”

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