Morgan Stanley posts $2.2bn loss in fourth quarter

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Morgan Stanley reported a worse-than-expected fourth-quarter loss of $2.2bn (£1.4bn) from continuing operations, prompting a downgrade in the investment bank's senior debt rating.

The bank's second quarterly loss in the last five quarters was driven by $1.7bn of write-downs on corporate loans, $800m on securities held in bank operations and $1.8bn of investment losses.The numbers would have been worse were it not for gains of $2.1bn from debt repurchases and a $2bn accounting gain from the reduced value of Morgan Stanley's own debt.

Moody's cut its senior debt rating, excluding debt guaranteed by the Federal Deposit Insurance Corporation, by one notch to A2. The ratings agency said the outlook was "negative" because lack of capital markets activity would hit revenue and profit next year and beyond.

John Mack, the chief executive, and co-presidents Walid Chammah and James Gorman will get no bonus for 2008. Compensation for the bank's 35-member management committee was down 65 per cent the overall bonus pool fell 50 per cent.