Morgan Stanley Just Got a $6.8 Billion Headache
The firm also said that the acknowledgement by Moody's of Morgan Stanley's "long-term partnership with
Credit Agricole analyst Mike Mayo said on Wednesday that the downgrades by Moody's seemed "inevitable given the correlation of banking with sovereigns and the weaker geopolitical outlook given the macro slowdown, problems in Europe, and less government backstops (or at least this intention by governments)," but that "most of these expectations are likely already in the stock prices."
Mayo -- who rates Morgan Stanley "Underperform" -- also said that "a multi-notch downgrade, almost by definition, seems like a move that is well behind the market," and that "the banks arguably have excess funding given the deposit surge, and these excess deposits will only increase as Europe and its banks look more vulnerable."
Before the announcement by Moody's, Morgan Stanley's shares pulled back 2% to close at $13.96. The shares have now declined 7% year-to-date, after dropping 44% during 2011.