Morgan Stanley posts loss, sells stake to China

Updated: 2007-12-20 10:23

"This loss was the result of an error in judgment that occurred at one (trading) desk ... and a failure to manage that risk appropriately," Mack said.

Morgan Stanley shares closed up US$2.01 at US$50.08 on the New York Stock Exchange, even as Morgan Stanley executives offered a sobering outlook and warned that its credit and mortgage business would slow.

Chief Financial Officer Colm Kelleher said the bank would suspend buybacks as it reviews its capital levels and investment plans. Mergers and leveraged buyout activity also is expected to slow.

"The near-term outlook is challenging," Mack said. "The mortgage business is going to be dramatically reduced. Credit and leveraged lending will be on a lower basis as well."

The slowdown in some businesses means Morgan Stanley, which announced 900 layoffs in recent weeks, may cut more jobs and shift resources to other, faster-growing areas, Kelleher said.

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