Morgan Stanley MS , in its quarterly filing yesterday, disclosed a probable loss of $292 million, which could occur in the form of a settlement related to the ongoing lawsuit with Deutsche Bank AG DB .
In Apr 2014, a complaint was filed against Morgan Stanley by Deutsche Bank National Trust Company over legacy mortgage issues. Deutsche Bank accused Morgan Stanley of misrepresenting the quality of mortgage loans.
Deutsche Bank alleged that Morgan Stanley breached the contract by violating various representations and warranties worth about $735 million of loans held in the trust. While Morgan Stanley sponsored the trust, Deutsche Bank acted as a trustee.
Per the filing, Morgan Stanley's motion to dismiss the complaint was partly denied by a federal judge in the Southern District of New York last month. This may result in the company having to shell out millions of dollars to settle the charges.
Morgan Stanley stated in the filing, "it could incur a loss in this action of up to approximately $292 million, plus pre- and post-judgment interest, fees and costs."
Last month, The Wall Street Journal had reported that Morgan Stanley is in talks to reimburse $500 million to settle an investigation by the New York Attorney General over misleading investors in buying risky mortgage bonds. Other major banks like JPMorgan Chase & Co. JPM and The Goldman Sachs Group, Inc. GS have also been under the regulatory scanner for similar risky mortgage matters.
Currently, Morgan Stanley holds a Zacks Rank #2 (Buy).
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