Morgan Stanley Reports Jump in Substandard Corporate Loans

Morgan Stanley said the amount of its corporate loans that were substandard or impaired more than quintupled in the first quarter.

Substandard loans, which the bank defines as those where the borrower “has a well-defined weakness that jeopardizes the repayment of the debt,” jumped to $676 million at March 31 from $127 million three months earlier, New York-based Morgan Stanley said Monday in a regulatory filing. Impaired loans climbed to $25 million, from $2 million.

Even with the increase, the two categories represented 3 percent of corporate loans that were held for investment. Morgan Stanley boosted its reserve for corporate loan losses by $15 million to $133 million in the quarter.

While the filing didn’t provide a reason for the increase, banks have anticipated higher loan losses from energy companies hit by lower oil prices. Energy companies were Morgan Stanley’s largest corporate lending exposure by industry.

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