Morgan Stanley (MS), whose shares dropped yesterday on concern French losses will mount, faces less than $2 billion of risks linked to the country, according to Brad Hintz, a Sanford C. Bernstein & Co. analyst.
“There is solid evidence that shows Morgan Stanley has been taking action to limit risk in preparation for potentially difficult market conditions ahead,” Hintz, who is based in New York, wrote in a note to clients today. “We estimate that total risk to France and its banks is less than $2 billion net of collateral and hedges.”
Morgan Stanley said in a filing last year that its exposure was about $39 billion to French lenders, which are falling on concern Europe’s sovereign-debt crisis will spur losses. That figure exaggerates the value of the New York-based bank’s actual risks because it includes all funds in French accounts, such as client holdings, and excludes collateral posted to Morgan Stanley, Hintz wrote.
Morgan Stanley management has increased capital and boosted its liquidity pool to contend with Europe’s crisis, Hintz wrote.
Shares of the company dropped 52 percent this year through yesterday as global equities fell into a bear market this week for the first time in more than two years. Morgan Stanley climbed 33 cents, or 2.5 percent, to $13.39 in composite trading on the New York Stock Exchange at 9:39 a.m.
Mark Lake, a company spokesman, declined to comment on Hintz’s report.
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