Bloomberg News

Morgan Stanley Sees $1.2 Billion Charge in MBIA Settlement

December 14, 2011

(Updates with comment from Gorman in fourth paragraph.)

Dec. 13 (Bloomberg) -- Morgan Stanley, owner of the world’s largest brokerage, reached a settlement with MBIA Inc. that terminates credit-default swap deals and resolves pending litigation.

Morgan Stanley will take a $1.8 billion pretax loss this quarter, or about $1.2 billion after taxes, the New York-based bank said today in a statement. Shares of Morgan Stanley rose to $15.70 at 8:53 a.m. in New York from $15.38 at the close yesterday. MBIA jumped 8 percent to $12.34.

Morgan Stanley’s exposure to MBIA, and its attempts to hedge those risks, have resulted in losses of about $3 billion since the start of 2008. The settlement will increase Morgan Stanley’s Tier 1 common ratio under new capital rules by about 75 basis points, according to the statement.

“It’s critical that we reposition for the new regulatory environment and do so quickly,” Morgan Stanley Chief Executive Officer James Gorman said in the statement. “A top priority for 2011 was to address this large outstanding legacy exposure and this settlement is consistent with our efforts to build capital and de-risk the balance sheet.”

--Editors: Steve Dickson, David Scheer

To contact the reporter on this story: Michael J. Moore in New York at

To contact the editor responsible for this story: David Scheer at

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