Dominion Bond Rating Service has upgraded the long-term trend on the issuer rating of Morgan Stanley to Stable from Negative.
“The long-term trend change reflects Morgan Stanley’s demonstrated ability to maintain its investment banking and advisory franchises in the midst of significant senior management changes over the last 18 months. With the new management team in place, it appears that the unrest in the global institutional securities franchise has abated,” it said.
DBRS said that it maintained its Negative trend following Morgan Stanley’s decision to not spin off its Discover Financial Services arm, “as it was too early to assess the effectiveness of the new management team”. But, “Over the last year, Morgan Stanley has retained its position as one of the leaders, by market share, in a significant number of institutional securities businesses,” it notes.
For the first five months of calendar 2006, Thomson Financial ranked Morgan Stanley third in global equity and equity-related issuances, and second in both global IPO and in completed M&A, DBRS observes.
DBRS adds that it believes greater stability in the Institutional Securities business over the last five years is due to diversification, “but by-products of growing these businesses has increased both market risk and credit risk”.
“Additionally the ratings continue to be supported by Morgan Stanley’s diversified earnings base, the result of a sizeable wealth management platform, which delivers annuity-like earnings, financial advisory network, and credit card operations,” the rating agency observes.
“Nevertheless, several of these businesses have had stagnant growth over the last several years,” it notes. “Morgan Stanley has been actively implementing tactics to address some of the issues surrounding these three businesses, including improving asset performance, changing its strategy to grow its financial advisors, and increasing relationships with merchants respectively, but DBRS expects continuing challenges to these businesses in the medium-term horizon.”
The firm also says that the sale of the aircraft leasing business frees up capital for redeployment in other segments.
DBRS raises trend for Morgan Stanley
New management team has maintained firm’s leadership position
- By: James Langton
- June 28, 2006 June 28, 2006
- 07:25