Morgan Stanley (MS) Ratings, Outlook Affirmed by Moody's

Ratings of Morgan StanleyMS and its subsidiaries have been affirmed by the Moody's Investors Service, the rating arm of Moody's Corporation MCO . The company's senior debt rating has been affirmed at A3. Further, the outlook has remained stable.

Why the Ratings Were Reiterated

The ratings affirmation is indicative of Morgan Stanley's consistent improvement in profitability in the past few years. This reflects strong growth in the company's Wealth Management segment and its efforts to strengthen efficiency through efficient cost control.

Apart from these, rebound in Morgan Stanley's fixed income sales and trading operations and robust capital markets related business performance despite low volatility across the industry support profitability. The rating agency anticipates that these factors along with lower tax rates will likely boost bottom-line growth over "the near-to-medium term."

These credit positives are marginally offset by faster pace of growth in loan (mostly tied to low risk secured loans to Morgan Stanley's wealth management clients), which is significantly "above the aggregate US bank loan growth rate or the growth rate of nominal US GDP." Also, the company shows more vulnerability to stress as it has "experienced a greater decline in its capital ratios under the Federal Reserve's severely adverse DFAST stress test than has any of its closest US peers."

Driven by this, Morgan Stanley has been gradually increasing its share repurchase authorization. But Moody's anticipates the company to return more capital to the shareholders in the coming years as its profitability continues to improve. Though this will lower the company's capital ratios, these are expected to "remain above than median of its global investment bank peers."

What Could Make Moody's Change the Ratings

Ratings of Morgan Stanley are not likely to be upgraded in absence of considerable lower dependence of its earnings to the capital markets operation. Also, improvement in capital and liquidity ratios along with lower volatility in earnings will support the ratings upgrade.

However, Morgan Stanley's ratings could be downgraded in case of deterioration in credit quality and a rise in illiquid risk assets. Further, worsening liquidity profile and any indications of control or risk management failures may lead to lowering of the company's ratings.

The company's shares have rallied 26.9% in the past year, outperforming 25.9% gain of the industry .

The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Notably, other than Morgan Stanley, the rating agency has affirmed ratings of some big banks including Goldman Sachs GS and JPMorgan JPM over the past few months.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

JPMorgan Chase & Co. (JPM): Free Stock Analysis Report

Moody's Corporation (MCO): Free Stock Analysis Report

Morgan Stanley (MS): Free Stock Analysis Report

The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

    Learn More