Egan-Jones Downgrades Morgan Stanley From A+ To A, Negative Outlook
It never rains, but it pours. From Egan-Jones:
Morgan Stanley: EJR lowered A+ to A (Neg.) (S&P: A) (MS)
Synopsis: Questions about MS's French bank exposure and level of derivatives exposure. While June results were good, MS' French bank exposure (all asset and off balance sheet classes except derivatives) is estimated at $39B (57% of equity of $68B and 150% of market cap of $26B) of which interbank placements is believed to be a small component. These exposures are significant and unusually large as a percentage of capital. Of equal concern is the estimated $1.78T in notional value of CDS' on MS' books although EJR does acknowledge the netting effect (the net estimated exposure is $457M). The US is likely to provide MS additional support if needed, despite wind-down procedures contained in Dodd Frank. We are downgrading with a neg outlook.
Next stop for Morgan Stanley (after a failed promotional media campaign including Dick Bove, Jim Cramer, Wells Fargo, Credit Suisse, Alliance Bernstein and Mistubishi UFJ): Discount Window?
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