A $1.2 billion charge for legal reserves dragged Morgan Stanley’s institutional securities unit to a pre-tax loss in the fourth quarter, leaving the division’s full-year underlying profits down 37% on 2012.

Full-year pre-tax profits from institutional securities totalled $1.7 billion in 2013, down from $2.7 billion in 2012, after stripping out the effect of debt valuation adjustments driven by swings in the value of the bank's own credit.