Morgan Stanley's Exposure To French Banks Is 60% Greater Than Its Market Cap... And More Than Half Its Book Value

Tyler Durden's picture

With French banks now a daily highlight in the market's search for the next source of contagion, and big, multi-syllable words such as conservatorship and nationalization being thrown about with increasingly reckless abandon, perhaps it is time to consider the downstream effects of a French bank blow up. And we are not talking French sovereign troubles, which are about to get far worse with the country's CDS once again at record highs means the country's AAA rating is as good as gone. No: banks, as in those entities that are completely locked out from the dollar funding market, and which will be toppled following a few major redemption requests in native USD currency. Which in turn brings us to...Morgan Stanley, the little bank that everyone continues to ignore for assumptions of a pristine balance sheet and no mortgage exposure. Well, hopefully we can debunk one of these assumptions by presenting the bank's Cross-Border Outstandings, which "include cash, receivables, securities purchased under agreements to resell, securities borrowed and cash trading instruments but exclude derivative instruments and commitments. Securities purchased under agreements to resell and Securities borrowed are presented based on the domicile of the counterparty, without reduction for related securities collateral held." We'll leave it up to readers to find the relevant number.

The one thing we will highlight is that $39 billion is about 60% more than the bank's market cap and a whopping 65% (as in more than half) of its entire book (less non-controlling interests) equity value.

So if you are looking for a French bank implosion derivative play, look no more.

And naturally, it goes without saying, that adding across MS' entire European bank exposure is 3 times its market cap, and well over its entire book equity value.

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MillionDollarBonus_'s picture

Haha I know. That teaches them for being unpatriotic and not buying AMERICAN banks.

He_Who Carried The Sun's picture

How come these balance cheats are all so sound and solid?

They're all from Harvard, right?  Bright guys, really! Congrats!

falak pema's picture

You are not taught how to count at Harvard. You are taught to make Power point presentations using buzz words you don't really understand which put your audience in comfy mode and then to sell prepackaged ideas, that are compiled by others from techy backgrounds, to HF managers who are from the same alma mater or similar fraternaties. That's called business acumen. Its supposed to work in an economy where the sun never sets. Not in an economy which is in gridlock. In gridlock there is only one way out; ask RM, its called sleight of hand book keeping.

spiral_eyes's picture

Harvard bullshit has brought us another market crash. What will stop the Harvard bullshitters? According to them, the only answer is more harvard bullshit.

The central-bank-liquidity-dependent markets are heading toward turmoil without further printing, so I have no doubt Bernanke will respond to global freefall with a co-ordinated global interest-free pumping operation, causing assets to levitate, and gold to spike over $2,000. Any promises made to the Chinese central bank to stabilise the value of the dollar would go out of the window, as Bernanke’s true money-printing, aggregate-demand-boosting impulses come to the fore.

Meanwhile, gold might even turn upward before further printing. The main downward pressure is liquidation, as investors seek to gold cash to stave off losses and margin calls that accompany the downward spiral. But gold’s long-term purchasing-power stability will keep a steady stream of money flowing in. There is upward inflationary pressure (driven by food and fuel fundamentals) even without further money printing. Funds and investors will still be keen to safeguard their purchasing power. 


Harlequin001's picture

Harvard? Do me a favour.

I went to a Grammar school where we spent our time doing maths and anagrams.

Bet you didn't know that the phrase "I'm a Keynesian economist' is simply an anagram of 'thieving twats'?

iDealMeat's picture

Bet you didn't know that the phrase "I'm a Keynesian economist' is simply an anagram of 'thieving twats'?


I didn't..  Because it doesn't..  FAIL..  at least add the /sarc..


redpill's picture

Keynesian does anagram to Insane Key, which is oddly appropriate.

Oh regional Indian's picture

And appropriately enough, Troy Davis anagrams to:

Sad Ivy Rot



Troy Davis and the 33rd

Fish Gone Bad's picture

If you spell Troy Davis sideways it makes: Fuck Morgan Stanly.

Harlequin001's picture

If you need to be told when a statement like that needs a sarc annotation then you really are fuckin stupid.

or should I put an /sarc, before it, just so you understand it...

philipdybel's picture

And make sure you preface each of The Bernank's statements with "/spin", and Obozo's with "/tool".

pelican's picture

Withdrawn for being stupid.

Going Loco's picture

Great comment pelican. Would that there were more comments like yours on ZH.

jdelano's picture

+1.  Now we're talking, Falek.  Solid insight delivered in succinct, articulate, and digestible prose.  It's like Picasso--before he went all experimental he had to prove he'd mastered the fundamentals.  

falak pema's picture

lol, you lose your monocle like a prussian general in the great debacle. Welcome abroad...the ship of fools...who think they know how to reason and rationalise "rite from rong"....but what the heck, we are but humans, ours is not to wonder why but to do or die, in blogospheric reality. Lay on Macduff..and damned be he...

philipdybel's picture

I think I saw one of those presentations back at Dunder Mifflin. Michael Scott forcefully pointed at the audience and shouted, "Power POINT! Power POINT!" Finally someone told him, "That's not how you do Power point."

Guess he never went to Harvard Business...

Dingleberry's picture

Harvard, like ALL "prestigious" schools, only major in one thing: networking with present and future "elites".  Access is EVERYTHING, and the social network that these clowns belong to is what gets them ahead. NOT talent or ability.

SheepDog-One's picture

MillionDollarBonus....there ARE NO 'american' banks theyre all Crown banks.

combatsnoopy's picture

This is the same France that thinks that Palestine should be a state.  

 He called for the Palestinians to become "an observer state," similar to the status the Vatican holds at the U.N. 

When they said "Vatican", they meant THIS Vatican...,9171,951806,00.html 

Europe is so much fun.   

BrocilyBeef's picture

looks like MS has their LOL'r'skates on! PEAK PANIC!

jdelano's picture

Why on earth is the MSM so terrified to say the word "recession"?  Seriously--it's like the "Voldemort" of financial media.  Lately I watch these guys on tv and I can't stop chuckling and snickering as they squirm and blush..."I don't think we'll fall know...that which must not be named."

WTF?  I love these clowns.  When the market is going up it's like they really believe they are brilliant for turning a buck by piling into whatever trumped up piece of crap their buds on the street are hawking.  All pomp and smuggery.  Then when it goes down they look like little boys who've dropped their ice cream cones.  Completely baffled and on the verge of tears.  "What's going on?!  Why didn't the FED print?  Why doesn't Ben like us anymore?!  But...but...earnings are....and emerging markets....stocks so cheap...growth...."


I just don't feel bad for them at all anymore.  No system should reward stupid, lazy, and arrogant.  Glad that that era looks to be ending. 

EscapeKey's picture

Pledge it all as collateral with the ECB - problem solved.

falak pema's picture

How about netting it all out in a friendly swap?

Harlequin001's picture

I was thinking of using my car as collateral with the ECB...

I reckon it's got to be good for at least 2 billion euros...

falak pema's picture

unless you have all the mythical cars that every one wants to buy; like JBond's AM-DB5  , Steve Mcq's Mustng and gold plated Rolls R belonging to every sheikh who can't rattle n roll any more.

Harlequin001's picture

I was thinking that any old piece of shite might fit in there just nicely. It would certainly fit the tone of all the rest of the crap at the ECB, no sweat...


CClarity's picture

Gotta believe they have most of it hedged.  Their not Stoopid at MS.  That would be a huge (and stupid) bet on French banks if they don't have a major hedge.  That said, hedges don't work so well in whoosh market conditions.

EscapeKey's picture

Hedged - with whom? And whose hedges are on the books of Societe Generale/BN Paribas/...?

Harlequin001's picture

Why, with Morgan stanley of course...

and should we be surprised to discover that Soc Gen and BNP are also hedged with, well, Soc Gen and BNP?

fdisk's picture

Yeah, KAbooom, Silver down 10% and BAC down 4% :)))

JohnG's picture

Ohhhhhh Noooooooeeeesssss!  Silver only up over 100% in two years!  Only a double!!!!



You haven't been at this very long have you.

gmrpeabody's picture

If your money is where your mouth is, then we may not be seeing you around here for very long.

Mr Lennon Hendrix's picture

YoY silver up 100% BAC down 60%

WonderDawg's picture

So easy to say, but knowing where the bottom of the "D" is is the trick, eh?

Mr Lennon Hendrix's picture

$33.  It's the old bottom.  Might as well use it.

WonderDawg's picture

You go ahead. I'll wait a while longer.

d00daa's picture

still picking the cactus thorns out of your rectum??  "big up day today" eh???   "buy stockz bitchez"????  great, great calls.  you, iq45 and momofader should get a room.


SheepDog-One's picture

fdisk real nice call on the FOMC yesterday lol

LongSoupLine's picture

Le Boom!! White flag sales are throught the roof in France...yet again.

prains's picture

White flag sales are through the roof in France...yet again.


they should be hanging from their windows any day now. 

boom goes the dynamite's picture

you must be and cheese will do that.

scatterbrains's picture

I was gonna wait to cover  some shorts until I can see the whites of their eyes or shart stains on their pants.. but  I think I'll wait a little longer.

DCFusor's picture

Good move.  I closed a bunch yesterday afternoon before the final drop, now I feel like an idiot -- they were green, but cheesh, not like they'd be now.