Is Stan the man?
After Morgan Stanley shares took a thrashing on Thursday on the heels of a Zero Hedge report highlighting the bank’s sizeable exposure to French banks, Credit Suisse issued a report providing their thoughts. The brokerage saw Thursday’s share weakness as overdone. They view peripheral Morgan Stanley’s European exposures as manageable given their size (both gross and net) and the firm’s strong capital base (14.6% Tier 1 Common on a Basel I basis, 7% on a Basel III basis).
Equally as important, they take some comfort in the important changes to collateral and risk management by Morgan Stanley and financial peers since the 2007-08 crisis and believe any Eurozone concerns should not be a new or incremental surprise.
From the company’s Q2 earnings call, Morgan Stanley’s net-European exposure to Italy, Portugal, Ireland, Greece and Spain stood at $2 billion as of June 30 with gross exposure at $5 billion. Credit Suisse estimates that as of today, the bank’s net exposure to France is not material and would not meaningfully change that $2 billion net exposure figure. The brokerage continues to be bullish on Morgan Stanley shares, seeing limited downside to shares here and believing measured progress in franchise restoration, healthier market conditions and the absence of new negatives from here should act as catalysts for share price outperformance.
Morgan Stanley (MS : NYSE : US$13.72), Net Change: 0.66, % Change: 5.05%, Volume: 36,788,116
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