Bloomberg News

Morgan Stanley Has $2.1 Billion Net Exposure to Five EU Nations

October 19, 2011

Oct. 19 (Bloomberg) -- Morgan Stanley said risks tied to five countries at the center of Europe’s debt crisis totaled $2.11 billion including hedges against losses. The amount for France is negative $286 million.

Greece, Ireland, Italy, Portugal and Spain represented $5.69 billion in exposure before hedges, the New York-based firm said today on its website. Morgan Stanley’s risks linked to France were $1.53 billion before hedges.

Concern that Europe’s debt crisis would spark bank losses contributed to a 41 percent tumble for Morgan Stanley’s shares in the third quarter. Europe’s leaders are set to meet Oct. 23 to discuss how to stem the crisis.

The risks “seems meaningfully lower than feared,” Brennan Hawken, an analyst at UBS AG, wrote today in a note to investors.

The largest net exposure was $1.79 billion to Italy, and the firm had negative net exposure to Ireland and Portugal. The figures include obligations tied to sovereign governments, corporations, clearinghouses and financial institutions.

“The exposures have been very well managed,” Chief Financial Officer Ruth Porat said in an interview. “We’ve been looking forward to addressing this.”

Disclosures by the bank are likely to ease concern about fallout from the crisis, causing Morgan Stanley’s credit spreads to narrow relative to peers, Goldman Sachs Group Inc. analysts and strategists John Marshall, Louise Pitt and Daniel Harris said in a note earlier this month.

Comfort Level

“They need to give investors a level of comfort that they’re addressing it,” said Douglas G. Ciocca, managing director at Kavar Capital Partners LLC in Leawood, Kansas, which manages about $225 million in assets. He spoke before the figures were released. “They’ll have to be as reasonably assuring and specific as they can be.”

Gorman sent a memo to employees on Oct. 3 as the shares dropped to the lowest since December 2008, encouraging them to remain focused on their jobs and clients instead of responding to “the rumor of the day.”

“There has been an enormous amount of confusion and misinformation about Morgan Stanley and others in our peer group,” he wrote in the memo, which was obtained by Bloomberg News. “In fragile markets, where fear triumphs over common sense, these things are bound to happen.”

--Editors: Steve Dickson, William Ahearn

To contact the reporter on this story: Michael J. Moore in New York at

To contact the editor responsible for this story: David Scheer at

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