Morgan Stanley May Take Bond Hit: Report

Morgan Stanley is expected to take an earnings hit due to an accounting peculiarity tied to the bond market rally, according to a published report.
Author:
Publish date:

Morgan Stanley

(MS) - Get Report

is expected to take an earnings hit due to an accounting peculiarity tied to the bond market rally, according to a published report Thursday.

The giant securities firm is expected to lose $1.2 billion to $1.7 billion on the bonds,

The Wall Street Journal

reported Thursday, noting that this is higher than the $500 million to $1 billion bond-related loss many analysts expected. That increases the chances Morgan Stanley could post a second straight quarterly loss. A Morgan Stanley spokesman declined to comment when contacted by

TheStreet.com

.

Despite the report, Morgan Stanley shares were rising 5.4% to $23.92 Thursday, on a broad-based banking sector rally, driven in part by a positive report from

Wells Fargo

(WFC) - Get Report

.

Rochdale Securities analyst

Richard Bove

lowered estimates for Morgan Stanley Wednesday. He said commercial real estate holdings could hurt short-term results. Longer-term, he believes the company is on the right track, but he argues CEO John Mack needs to be more articulate about the overall strategy.

Morgan Stanley has chosen to reinvent itself to focus on retail businesses in light of the crisis, which has been especially hard on securities firms. Nonetheless, Morgan Stanley's main rival,

Goldman Sachs

(GS) - Get Report

, has insisted it will continue to focus on institutional clients.

Morgan Stanley and Goldman have both benefitted by losing some important competitors to the crisis.

Lehman Brothers

filed for bankruptcy protection last year, and

Bear Stearns

and

Merrill Lynch

, were acquired by

JPMorgan Chase

(JPM) - Get Report

and

Bank of America

(BAC) - Get Report

, respectively.

Morgan Stanley is expected to report earnings the week of April 20. Analysts are looking for a loss of seven cents per share, according to Thomson Reuters estimates.