Financial Winners and Losers: Morgan Stanley

(Updated to reflect closing stock prices throughout, adds paragraph on Goldman Sachs.)

Bank stocks finished mixed Wednesday, with Wells Fargo ( WFC) and Morgan Stanley ( MS) losing ground after each reported quarterly results before the start of trading.

Morgan Stanley posted a second-quarter net loss from continuing operations of $1.37 a share, worse than the Thomson Reuters average estimate for a loss of 49 cents a share. Revenue fell 11.3% from a year ago to $5.41 billion, above the consensus of $5.35 billion.

The latest quarter's results included a charge of $1.32 a share related to continued improvement in Morgan Stanley's debt-related credit spreads and 74 cents a share related to the repurchase of Troubled Asset Relief Program, or TARP, capital.

On the other hand, Wells Fargo easily blew past Wall Street's estimates as net income surged 81%. The bank posted second-quarter earnings of 57 cents a share, well above the consensus estimate of 34 cents a share. Revenue rose 28% from a year ago to $22.5 billion, also higher than expectations.

However, concerns over Wells Fargo's credit losses pressured shares. The bank said net loan charge-offs rose to $4.39 billion in the second quarter, up from $3.26 billion in the previous quarter. Wells Fargo also said that nonperforming loans, which no longer generate revenue as they are past due or in default, rose to $18.3 billion in the quarter, an increase of 45.4% from the first quarter.

Morgan Stanley shares dropped as low as $25.88 earlier in the session before turning positive late in the day. Ultimately, shares lost 2 cents to $27.54.

Meanwhile, Wells Fargo shares were mired in the red for the entire session, falling as much as 7.6% before paring some of those losses. The stock ended down 90 cents, or 3.6%, to $24.45.

In other earnings news, Bank of New York Mellon ( BK) was also hit by a one-time charge related to its repayment of TARP funds and the FDIC's special assessment.

Bank of New York Mellon said second-quarter profit fell to $176 million, or 15 cents a share, compared to $309 million, or 27 cents a share, a year ago. Excluding the TARP redemption, FDIC charge, and other special items, earnings fell to 57 cents a share from 82 cents a share a year ago, but came in ahead of the Thomson Reuters average estimate of 53 cents a share.

However, the bank's credit-loss provisions for the second quarter totaled $61 million, more than quadrupling from $13 million in the year-ago quarter and up from the $59 million reported in the first quarter. Its securities portfolio losses ballooned to $256 million from $152 million in the second quarter of 2008, although that number improved from $295 million in the first quarter.

Still, Bank of New York Mellon shares tumbled $1.79, or 6.2%, to $27.32.

On the other hand, KeyCorp ( KEY) shares rebounded from sharp losses. The bank said its second-quarter loss narrowed to 68 cents a share from $2.70 a share in the year-ago period. Still, analysts expected the bank to lose 41 cents per share in the quarter.

KeyCorp shares performed better as the session wore on, reversing early losses to finish higher by 34 cents, or 7.1%, at $5.16.

Elsewhere, SunTrust Banks ( STI) swung to a net loss of $164 million, or 41 cents, although that was better than the 52-cent-a-share loss analysts polled by Thomson Reuters anticipated. SunTrust shares jumped $1.01, or 6.7%, to $16.19.

Among other winning stocks, US Bancorp ( USB) climbed 3.8%. US Bancorp reported second-quarter earnings of 12 cents a share, down from 53 cents a share in the year-ago quarter but 2 cents above the Thomson Reuters average estimate.

Elsewhere, Citigroup ( C) rose 5.7% and Bank of America ( BAC) tacked on 0.3%, while JPMorgan Chase ( JPM) slipped 0.3%.

Away from earnings, Goldman Sachs ( GS) said it has paid the full $1.1 billion that the Treasury Department requested to cancel warrants related to preferred stock that Goldman repurchased from the government last month. Goldman shares finished 66 cents, or 0.4%, higher at $160.46.

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