Morgan Stanley takes new £4.7bn hit

Morgan Stanley today reported a further $9.4 billion (£4.7 billion) of subprime-related losses as it became the latest Wall Street bank to be bailed out by a foreign investor.

The investment bank said the $9.4 billion of fourth-quarter writedowns included $5.7 billion in November as last month fast became the most disastrous for the industry since the start of the credit crunch. The latest hits took the total losses from Morgan Stanley's investments in subprime mortgages to $10.6 billion and saw chief executive John Mack forgo his bonus for the year.

Mack said: "Ultimately, accountability for our results rests with me, and I believe in pay for performance so I've told our compensation committee that I will not accept a bonus for 2007."

The developments came as China Investment Corp ploughed $5 billion of funding into the bank, making it the third major Wall Street institution to be bailed out by an Asian benefactor. Morgan Stanley said the funds from China would help "bolster the firm's strong capital position and enhance growth opportunities globally".

Citigroup took a $7.5 billion bailout from Abu Dhabi while UBS took $10 billion from Singapore. The Morgan Stanley deal gives the Chinese a 9.9% stake.

The bank reported fourth-quarter losses of $3.56 billion, reducing full-year profits by 60%, from $6.3 billion to $2.6 billion.

Mack said: "The writedown Morgan Stanley took this quarter is deeply disappointing - to me, to our colleagues, to our board and to our shareholders. While market conditions are likely to be challenging, we are moving forward with an intense focus on continuing to build our global platform and delivering value for our clients and our shareholders."

The dismal performance was in sharp contrast to record results at rival Goldman Sachs, where chief executive Lloyd Blankfein enjoyed a bonus of $70 million. Like Mack, UBS chairman Marcel Ospel has said he does not expect a bonus this year. Morgan Stanley still raised its bonus pot for staff by 18% to $16.5 billion.

Meanwhile, struggling rival Dresdner Kleinwort looked poised to write off a further e500 million (£357 million) and report full-year losses of e200 million. Chief executive Stefan Jentzsch yesterday told staff at its City headquarters that 2007 had been a difficult year for the bank as the credit crunch took its toll on business. It has already written off e575 million in relation to the credit crisis for the third quarter. Dresdner is paying its bankers maximum bonuses of e500,000 in cash with anything above that paid in shares.

Today's cash injection from the Chinese comes as the latest major chunk of stakebuilding in Western giants by the fast growing economies of Asia and the Middle East

Citigroup, Abu Dhabi $7.5 billion 4.9%

Morgan Stanley, China $5 billion 9.9%

UBS, Singapore $10 billion 9%

Bear Stearns, China $1 billion undisclosed stake

HSBC, Dubai undisclosed

London Stock Exchange, Qatar £780 million 15%
Dubai £1.8 billion 20%

Barclays, China £500 million 1.8%

Standard Chartered, Singapore £4.3 billion 17%