Morgan Stanley (MS) reported net income Thursday morning of $536 million, or $0.28 a share, in the latest quarter. Excluding accounting gains the firm made on an adjustment for its debt, earnings per share were $0.16. Analysts had been predicting the company would earn $0.40 a share. Sales, adjusting for the debt gains, were also lower than expected, at $6.6 billion, or about $1 billion less than analysts were expecting.

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A year ago, the company lost $530 million. But that quarter included a one-time loss of $1.7 billion related to an investment in the firm from Mitsubishi UFJ Financial Group.

Morgan Stanley’s shares were down 4.5% shortly after the market opened to $13.40.

The firm said it plans to continue to cut staff amid the weak environment on Wall Street. Morgan Stanley has already reduced its headcount by 3,272 employees since the beginning of the year. CEO James Gorman on Thursday told analysts he expects his firm to eliminate another 1,000 positions by the end of the year. The firm said compensation expenses had fallen $1 billion from a year ago. “We are doing what everyone else is doing,” says Gorman. “We are controlling what we spend very closely.”

Sales in the firm’s investment banking division fell by about 50% from the first quarter and a year ago. Earnings were down by more than 90%. The drops came despite the fact that Morgan was the lead underwriter of Facebook’s IPO, which happened in the quarter and was this year’s most sought after deal.

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The poor earnings caps off what has to be considered one of Morgan Stanley’s worst three month periods since the financial crisis, when many thought the firm might fail. It is widely believed that the firm botched the Facebook IPO. On the day of the IPO, the stock took much longer than expected to begin trading. When it did, shares of the social networking company almost immediately began to fall. At a recent $29, Facebook’s stock is still trading well below its $38 offering price. Morgan Stanley officials have blamed some of the problems of the IPO on the Nasdaq stock exchange. Nonetheless, the bank appeared to rake in big trading profits on the deal, even as it hurt its reputation. It wasn’t immediately clear how Facebook’s offering impacted Morgan’s earnings.

Also in the quarter, Morgan Stanley, along with other banks, was hit by a ratings downgrade by Moody’s. Because of the downgrade, Morgan Stanley said it had to post additional trading capital of $2.9 billion in the quarter.

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Some observers believe CEO Gorman may be running out of time to turn around the firm. Gorman pushed the firm to purchase a majority stake in Citigroup’s Smith Barney, creating the largest brokerage house on Wall Street. But the merger has yet to pay off. Morgan Stanley’s profit rebound has lagged rivals, and the company’s shares have fallen 30% in the past year.