Bucking the trend among big financial firms lately, Morgan Stanley reported a loss for its second quarter.

The firm recorded a loss from continuing operations of US$159 million for the second quarter ended June 30, compared with income of US$689 million in the period a year ago.

The results include a number of significant items, including: negative revenue of US$2.3 billion due to tightening credit spreads on some of its long-term debt, and the accelerated amortization of US$850 million on preferred stock issuance.

Net revenues for the quarter were US$5.4 billion, compared with US$6.1 billion in last year’s second quarter. Non-interest expenses were US$6.0 billion, compared with US$5.2 billion a year ago. Compensation expenses were US$3.9 billion, compared with US$3.1 billion a year ago. Non-compensation expenses also increased slightly from a year ago.

For the first six months of 2009, the loss was US$345 million, compared with income of US$2.1 billion a year ago. Net revenues decreased 40% to US$8.4 billion and non-interest expenses decreased 10% to US$9.9 billion.

John Mack, chairman and CEO of Morgan Stanley noted that it managed improved performance across many of its businesses in the quarter, including in investment banking, and both equity and debt underwriting. Several other businesses also improved, but Mack conceded that it is “not satisfied with our performance in other key areas of fixed income trading and in asset management, and we are taking steps to deliver better results in those businesses. These initiatives include hiring to add key trading and investment management talent, expanding our client flow business, increasing capital commitments in a disciplined way and rationalizing costs in targeted areas.”

IE