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Morgan Stanley’s Mitsubishi UFJ Link Limited Cut, Moody’s Says

June 21, 2012

Morgan Stanley’s Mitsubishi UFJ Link Limited Cut, Moody’s Says

Mitsubishi UFJ acquired its Morgan Stanley stake when it invested $9 billion in the company in October 2008, as the New York-based firm’s stock price tumbled in the wake of Lehman Brothers Holdings Inc.’s collapse. Photographer: Brent Lewin/Bloomberg

Morgan Stanley (MS:US) avoided the biggest potential downgrade by Moody’s Investors Service because of possible support from Mitsubishi UFJ Financial Group Inc., one of the ratings company’s analysts said.

There’s a “moderate probability” that Mitsubishi UFJ, Japan’s biggest lender and Morgan Stanley’s biggest shareholder, would support the New York-based investment bank in a crisis, Bob Young, Moody’s managing director of North American banking, said in a telephone interview.

Moody’s downgraded 15 banks today after U.S. stock exchanges closed as part of a review of global banks with capital-markets operations that was announced in February. Morgan Stanley, which the firm warned might be cut three levels, was downgraded by two after lobbying by Chief Executive Officer James Gorman. Credit Suisse Group AG was lowered three grades.

“Management teams will always present as strong a case as they can,” Young said. “We undertake a very thorough, very thoughtful, very deliberate analysis of each individual institution.”

Morgan Stanley’s long-term deposit rating was reduced to A3 from A1 with a stable outlook, and its short-term rating was cut to P-2 from P-1, Moody’s said in a statement.

Moody’s said when it announced the review that it was seeking to reflect the banks’ reliance on fragile confidence in funding markets and increased pressures from regulation and a difficult market environment. JPMorgan Chase & Co. (JPM:US)’s more than $2 billion trading loss demonstrated the difficulty of managing risk for banks that depend on trading, Young said.

“That exemplified some of the issues,” Young said.

Young also said that Moody’s would lower some banks’ ratings were the probability of U.S. government bailouts to decline.

Mitsubishi UFJ acquired its Morgan Stanley stake when it invested $9 billion in the company in October 2008, as the New York-based firm’s stock price tumbled in the wake of Lehman Brothers Holdings Inc.’s collapse.

To contact the reporters on this story: Zeke Faux in New York at zfaux@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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Companies Mentioned

  • MS
    (Morgan Stanley)
    • $32.01 USD
    • 0.26
    • 0.81%
  • JPM
    (JPMorgan Chase & Co)
    • $56.02 USD
    • 0.26
    • 0.46%
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