Investment bank Morgan Stanley on Wednesday announced its USD 2.6 billion settlement deal with the US government for resolving the potential claims cropping from the sale of residential mortgage-backed securities or bonds before the financial crisis, which lowered its profit by more than half in the year 2014.
Under the settlement agreement, the bank has agreed to pay the whopping amount to the US Department of Justice and the Attorney’s Office for the Northern District of California.
Morgan Stanley surged its legal reserves by nearly USD 2.8 billion, which affected its income coming from continuing operations in 2014 by USD 2.7 billion, or USD 1.35 per share, according to a regulatory US Securities and Exchange filing by the bank.
In 2014, the earnings of USD 5.83 billion, or USD 2.96 per share, had been reported by the bank from its continuing operations.
The shares of Morgan Stanley closed at USD 36.59 on the New York Stock Exchange (NYSE) on Wednesday.
In another development, Goldman Sachs Group Inc on Monday stated that possibility of a federal civil lawsuit against it is looming larger as a government investigation has held the bank accused of violating laws associate with the residential mortgage-backed securities sale ahead of the financial crisis.
Goldman had also underlined the top end of its “reasonably possible” estimate of legal losses to nearly USD 3 billion from USD 2.5 billion.