NEW YORK (Reuters) - Morgan Stanley (MS.N: Quote, Profile, Research), the No. 2 U.S. investment bank which also runs the second-largest commodities business in the industry, said on Wednesday failed bets on energy trading hurt second-quarter revenues.

Trading losses and a slowdown in investment banking led to a drop of more than 50 percent in Morgan Stanley's second-quarter earnings despite a pretax gain of $1.43 billion from asset sales, results for the three months to May 31 showed.

The bank's Chief Financial Officer, Colm Kelleher, told Reuters in an interview that commodity revenues fell on "contrarian" bets placed on energy trades. He did not provide numbers.

"We took contrarian bets in the energy sector," Kelleher said. "We felt it was the right trade. It didn't work. Sometimes that happens. Our core commodity business is very strong. We take risk-adjusted bets and that one didn't work out."

Morgan Stanley ranks just after Goldman Sachs (GS.N: Quote, Profile, Research) in terms of market capitalization among U.S. investment banks. Along with Goldman, it is the only other U.S.-based investment bank that runs a physical crude oil business, aside from owning other viable hard assets in commodities.

But unlike Goldman, which also saw a second-quarter drop in commodity earnings but allowed its risk in that area to double from a year ago, Morgan Stanley's commodities risk has grown relatively modestly since 2007.

Morgan Stanley's average daily trading Value-at-Risk (VaR) for commodity prices reached $39 million at the end of the second quarter, versus 38 million in the first quarter to February 29 and $34 million in the second quarter to May 31, 2007.

The VaR figure sums up the potential loss in value that Morgan Stanley's trading positions in commodities may face due to adverse market movements over a one-day time horizon.

Goldman's VaR for commodity prices reached $48 million in the second quarter to May 30, up from $38 million in the first quarter and $24 million in the quarter to May 25 last year, according to results released on Tuesday.

(Reporting by Barani Krishnan and Joseph A. Giannone; Editing by Brian Moss)