Unlike Wall Street rivals Goldman Sachs (GS) and JPMorgan Chase (JPM), where huge trading gains and investment banking revenue delivered big profits, Morgan Stanley (MS) said it lost $159 million, or $1.37 a share, from continuing operations in the second quarter, falling short of analysts' estimates.

For the second straight quarter, accounting rules governing how Morgan Stanley must record the rising value of its bonds hurt results. Morgan said that following the rules cost the company $2.3 billion. That offset income from underwriting stock and bond issues and gains on trades made with the firm's own money, which climbed from the first quarter but fell short of results from a year ago.
Income plunged 87 percent from a year ago, contributing to the third-straight quarterly loss for Morgan Stanley. And it's the second time this year that Morgan has badly underperformed Wall Street's expectations. Analysts had expected a loss of 54 cents a share, according to Bloomberg News.

All told, Morgan Stanley said it lost $1.2 billion in the quarter.

Also contributing to the lackluster results was an $850 million dividend payment connected to Morgan Stanley's repayment of the capital infusion it received under the Treasury's Troubled Asset Repurchase Program, or TARP.

Despite the losses, Morgan Stanley said its compensation expenses rose to $3.9 billion, 25 percent higher than a year earlier, when the company had a $1.1 billion profit. It's also nearly double its compensation costs from the first quarter of this year, according to figures released by the company.

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