The second biggest US investment bank, Morgan Stanley, has reported a fall in its quarterly profits due to the credit crunch sparked by the sub-prime mortgage crisis.
Profit for the June to August period fell 17% to $1.54bn. The bank said it had $940m of losses due to writing down the value of mortgages and corporate loans.
Morgan Stanley said that excluding the performance of Discover Financial Services, which is the credit card division sold in June, profits fell 7% to $1.47bn.
Wall Street suffered its worst summer in years as a slowdown in housing markets triggered a broader credit crunch that hammered the value of mortgages, asset-backed securities and corporate loans earmarked for buyouts.
Wall Street's banks rallied Tuesday after Lehman Brothers Holdings reported better-than-expected results, though it still reported a 3% fall in quarterly profit.
Bank shares also rose on assurances that the worst of the credit crisis was over, and the Federal Reserve cut benchmark interest rates.
Morgan's net revenue rose 13% to $7.96 billion from last year. Like Lehman, weaker fixed income results were offset by surging investment banking and equities trading.
The market will now be looking to see how tomorrow's quarterly results from investment banks Bear Stearns and Goldman Sachs turn out.
