Morgan Stanley ( MS) 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

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).

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), 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) and Bank of America ( BAC), 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.

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