Hogging the limelight, Morgan Stanley MS emerged victorious as Moody's Investors Service concluded its reviews on ratings of 13 global investment banks. The rating agency has upgraded the New York based company and its affiliates’ baseline credit assessments (BCAs) from ‘baa3’ to ‘baa2’.
Further, Morgan Stanley’s adjusted BCAs was upgraded to ‘baa1’ from ‘baa2’. The upgraded ratings came on the back of the company’s “increased business diversification and prospects for improved profitability and lower earnings volatility.” Also, the uplift in the ratings reflect several other fundamentals of the company including strong risk-based capital ratios, improved leverage ratios, liquidity management policies with a conservative approach and a lesser degree of dependency on short-term funding.
Moody’s also upgraded Morgan Stanley’s short-term deposit ratings.
The upgrades further position the company well ahead of its peers. Per a company spokesperson, “The two-notch upgrade is an important codification of all the work we have done and the consistency of our results.”
Moody’s announced the reviews in March after it updated a new methodology. In its latest release, Moody’s stated “The new methodology includes a number of elements that Moody's has developed to help accurately predict bank failures and determine how each creditor class is likely to be treated when a bank fails and enters resolution. These new elements capture insights gained from the crisis and the fundamental shift in the banking industry and its regulation.”
Moody’s largely upgraded senior unsecured debt/issuer ratings of U.S. investment banks. The upgrade reflects substantial protection availed from the holding company instruments, which translates into "very low" loss given failure. Notably, Moody upgraded The Goldman Sachs Group, Inc. GS, Citigroup Inc. C and Bank of America Corporation BAC by one level.
Morgan Stanley currently carries Zacks Rank 2 (Buy).
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