Banking giant Morgan Stanley reported Wednesday a net first-quarter loss of 177 million dollars, swinging to the red on real estate investments and an unfavorable mix of interest rates.

The Wall Street investment banking group that became a commercial bank last year to help weather the financial crisis saw a sharp turnaround from a profit of 1.4 billion dollars a year ago.

The loss amounted to 57 cents per share, far worse than the Wall Street expectation of a deficit of eight cents per share.

Morgan Stanley also posted a net loss of 1.3 billion dollars in December 2008, a transition month as it changed the dates of its fiscal year.

"While challenging markets continued to impact our results this quarter, we saw improved performance across most of our businesses during the past three months," said chairman and chief executive John Mack.

"The firm delivered strong results in investment banking, commodities, interest rates and credit products as well as solid performance in global wealth management.

"In fact, Morgan Stanley would have been profitable this quarter if not for the dramatic improvement in our credit spreads -- which is a significant positive development, but had a near-term negative impact on our revenues."

Overall revenues in the quarter fell 62 percent from a year ago to 3.04 billion dollars.

But the bank suffered net losses of 1.0 billion dollars on investments in real estate in the quarter, citing the industry-wide decline in this market.

The Wall Street group shifted its fiscal year end from November 30 to December 31, leaving a one-month transition period in which it posted a net loss of 1.3 billion dollars.

The bank, which has received 10 billion dollars in US government capital under the program to shore up the ailing banking system, did not offer a forecast for the coming months.

"In this volatile environment, we have focused on prudent stewardship of our balance sheet, capital and risk profiles," Mack said.

"Although the near-term environment remains challenging, we remain confident about the value we can deliver to our clients and shareholders over the long term."

The bank said its plan to cut costs by two billion dollars annually was in progress. It has cut staff levels by five percent since the start of the year and reduced its dividend, while cutting pay for top executives.

It has also gotten fresh capital from Japan's Mitsubishi UFJ Financial Group, and moved to start a joint brokerage venture with Citigroup's Smith Barney unit.

Morgan Stanley shares fell 4.9 percent in afternoon trade to 23.44 dollars.

Standard & Poor's said in a research note that most of Morgan Stanley's losses were from real estate and "mark-to-market losses on leveraged lending loans and commitments."

"Excluding these factors, trading results were relatively strong -- albeit not as good as peers,'" S&P said.