The hefty loss was due to swings in the value of its debt, the Wall Street Journal reported.
Excluding these accounting charges, Morgan Stanley posted a net profit of $561 million, or 28 cents per share, which was four cents higher than analyst forecasts, according to the New York Times.
The result was more than eight times better than the $68 million net profit reported for the same period last year.
This was the figure investors were focusing on in pre-market trading. Shares in Morgan Stanley were higher before the opening bell, MarketWatch reported.
The BBC said revenue, excluding those accounting charges, rose 18 percent year-on-year to $7.5 billion, which also beat expectations.
Fixed income and commodities sales and trading revenue rose 36 percent to $1.5 billion, which Morgan Stanley chief executive James Gorman was eager to point out indicated “that clients have re-engaged after the uncertainty of the rating review in the previous quarter,” the WSJ reported.
Gorman was referring to Moody’s Investors Service’s decision over the northern summer to downgrade the credit ratings on more than a dozen banks.
More from GlobalPost: Moody's bank downgrade: It's a doozy
Wall Street banks have been having a rough time since the global financial crisis, not only because of the rating downgrades.
Investment banks have had to contend with tougher regulatory requirements which have squeezed profits, as well as lawsuits over their behavior in the lead up to the worst credit crunch since the Great Depression.
This has led to banks laying off thousands of workers around the globe.
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