Investments

Morgan Stanley profits hit by mortgage lawsuits

Investment bank sets aside $1.2 billion to pay court costs

For investment bank Morgan Stanley (MS), the credit crisis is still a huge problem.

The fourth-quarter results include $1.2 billion of "additions to legal reserves for mortgage-related matters, specifically litigation and investigations related to residential mortgage-backed securities and the credit crisis."

"Our fourth-quarter results demonstrated the consistency embedded in our business model, as revenues increased year-over-year in all three of our business segments," CEO James Gorman said in a statement. "Importantly, we are continuing to address many of the legal issues from the financial crisis."

Morgan Stanley reported fourth-quarter profits of $192 million, seven cents a share, down from $661 million, or 33 cents, from the same time last year.

Huge legal costs are becoming a theme in Wall Street fourth-quarter earnings reports. Just yesterday, Goldman Sachs (GS) set aside plenty of cash to go toward court costs.

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