New York-based Morgan Stanley (MS) reported a $159m quarterly loss, or $1.37 per share, after TARP capital repayments. Morgan Stanley closed its deal with Citigroup for controlling interest in Smith Barney on May 31, a transaction worth $11.1bn, according to Citi’s Q209 report, issued last week. The deal closed earlier than expected. Additional expenses this quarter include $850m to repurchase preferred stock investments the US government made in the firm through its Troubled Asset Relief Program (TARP). Morgan Stanley chairman and CEO John Mack noted the firm’s improvements in credit default spreads and the TARP repurchase came at a cost to the bottom line. “Morgan Stanley would have been solidly profitable this quarter if not for these two positive developments,” Mack said in the report. He added the firm must improve performance in fixed income trading and asset management. “Morgan Stanley delivered improved performance across many of our businesses this quarter — including in investment banking, where we were the No. 1 adviser in global announced [mergers and acquisitions], and saw strong gains in both equity and debt underwriting,” Mack said in the report. “But we are 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.” Morgan Stanley reported the company’s Tier 1 capital ratio is approximately 15.8%. Write to Austin Kilgore.

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