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Morgan Stanley remains wary of volatile markets, reducing trading risk as it waits for opportunities for a rebound from recent mortgage and leverage lending losses, Chief Financial Officer Colm Kelleher told Reuters on Wednesday.

“This has been an unusually stressed quarter. You only have to see how other people performed to realize you can swing the bat or retreat into your shell. I think we have done the prudent thing here,” Kelleher said, shortly after the firm announced a 57 percent drop in second-quarter earnings.

Fixed-income sales and trading revenue plunged 85 percent to $414 million, driven by declines from its interest rate, credit and currency businesses. Kelleher attributed much of the decline to lower client activity, although losses from wrong-way bets on mortgages and energy commodities further dragged on results.

“We took contrarian bets in the energy sector. We felt it was the right trade. It didn’t work. Sometimes that happens,” Kelleher said.

Morgan Stanley has been hard-hit by the breakdown across a number of financial markets, notably massive losses on mortgage securities no teletrak payday loans. Since the end of last year, the second-largest U.S. investment bank has told investors it would “stay close to shore” until the market environment improved.

Average daily value-at-risk from trading rose to $99 million from $97 billion, but that rise mostly reflects the extreme volatility in a period that drove Bear Stearns out of business in March.

“We just did not think this was a quarter to take risk bets,” Kelleher said. “The opportunities have not been there on a risk-adjusted basis.”

Morgan Stanley instead has been shoring up its balance sheet and boosting cash balances. Total liquidity rose to $135 billion, while the firm issued $22.9 billion of debt this year. During the quarter, Morgan realized $1.43 billion of pretax gains from asset and stake sales. 

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