INSTANT VIEW: Morgan Stanley reports wider than forecast loss

NEW YORK (Reuters) - Morgan Stanley posted its second straight quarterly loss on Wednesday, and slashed its dividend, as real estate investment losses and a charge from the improving value of it own debt wiped out gains in its trading businesses.

The investment bank and brokerage giant reported a loss applicable to common shareholders of $578 million, or 57 cents a share, in the quarter ended March 31.

Analysts had forecast a loss of 9 cents a share, according to Reuters Estimates.

These are the first results Morgan has released since it became a bank holding company to help survive the stormiest weeks of the financial crisis last fall.

The company said that in the year-ago quarter it earned $1.31 billion, or $1.26 per common share.

Morgan Stanley debt protection costs climbed 15 basis points after the results were released, while its shares slid 7.3 percent in premarket electronic trading.

The following is reaction from industry analysts and investors:

MANOJ LADWA, SENIOR TRADER, ETX CAPITAL, LONDON

"In the past week, U.S. banks have reported at opposite ends of the spectrum and while we have had the good and the bad, we now have the ugly! While Goldman Sachs et al have posted figures that have impressed the market, Morgan Stanley does not seem to be performing so well. With revenues down across all areas of the business and earnings for the first quarter a lot lower than analysts expected, investors are likely to question whether Morgan Stanley will fall by the wayside like many others."

"What is also of concern is if it were not for a tax benefit, the numbers would have been a lot worse!"

DAVID SCOTT, CHIEF INVESTMENT OFFICER, CHASE INVESTMENT COUNSEL, CHARLOTTESVILLE, VIRGINIA

"It surprised the street. When Goldman came out and reported better-than-expected numbers, I think the Street expected Morgan Stanley would report pretty good numbers.

"It's a setback here...apparently the commercial real estate hurt them a little more than expected. Of course they cut the dividend too, that's certainly probably unexpected.

"Some people are going to go back this morning and reassess that end of the market. Those two companies had been the strongest of the stocks among the banks, the quasi banks.

"This is a little bit of a setback here, caught the Street by surprise, and I think it will cause a bit of a reassessment, put the brakes on this financial rally at least for a few days, until people assess what this really means."

GARY TOWNSEND, CHIEF EXECUTIVE OF HILL-TOWNSEND CAPITAL, CHEVY CHASE, MD

"Overall the results were disappointing."

"The loss was probably an indication of an improving market assessment of Morgan Stanley. According to (Chief Executive John) Mack, the loss itself was caused by a repricing of its liabilities on a mark-to-market basis as credit spreads narrowed and the narrowing of credit spreads is of course a good thing...So there is nothing life threatening going on. The stock is off from where it was yesterday but it may provide a good buying opportunity today."

"The dividend cut will probably have more of an impact on where the stock goes today. To me it's a bit surprising in that they certainly have plenty of capital so they don't really need to cut the dividend to rebuild capital. It's an indication of how murky the immediate future is for investment banks like Morgan Stanley."

CARL BIRKELBACH, HEAD OF BIRKELBACH MANAGEMENT IN CHICAGO

"We have had a bit of optimism here and it's been quelched I guess, particularly by this news today."

"It is a reality check. We thought that fourth quarter earnings were going to be where the chief executives throw in the kitchen sink to get everything out of the way. It now appears we have got one more quarter of it and I think that will effect stock prices, at least on a short-term bases."

"That's a reality check that things have not turned around yet. Expectations are bottoming but not yet.

"You could see a set back (in the stock market), whether its a test of the lows or not; I doubt it's going to break into low ground but it could come back here a little bit and be a reality check that things haven't turned yet."

MICHAEL HOLLAND, FOUNDER, HOLLAND & CO, NEW YORK:

"People were looking for some pleasant surprise versus expectations because that's what we've been getting in the last several reports, and the fact that they came in the opposite direction was a double shock.

"People had expected the credit desk trading profits to be a pleasant surprise, and I think they were OK, but they were just overwhelmed by the negative surprises in the writedowns."

DAVID DIETZE, PRESIDENT AND CHIEF INVESTMENT STRATEGIST AT POINT VIEW FINANCIAL SERVICES IN SUMMIT, NJ

"Dividend cuts make sense in this environment...Everyone else is doing it and you want to be safe rather than sorry."

"Given the uncertainty going forward, given that you're not quite sure of the outcome of the stress test, it's only prudent to bolster the capital cushion."

"What saved Goldman Sachs' backside was their superior trading revenues...I guess one question for investors is how did Morgan Stanley's trading organization perform given what we have seen coming out of Goldman Sachs. It seems like the execution was not done as well."

"What's been saving these financial institutions is trading and mortgage origination. If you are not strong in those two areas it's still very tough going."

(Reporting by Elinor Comlay, Herb Lash, Juan Lagorio and Ed Krudy in New York and Tenzin Pema in Bangalore)