Morgan Stanley Suspends Stock Buyback, May Cut Staff
Morgan Stanley, which Wednesday announced a fourth-quarter loss and a $5 billion
capital infusion from China, will suspend stock buybacks and take a close look at its staffing worldwide, Chief Financial Officer Colm Kelleher said in an interview.
Kelleher, who said the investment bank has surplus capital by regulatory standards, said Morgan officials had been in talks with China's sovereign wealth fund since the summer.
Meanwhile, ratings agency Standard & Poor's said it may cut Morgan Stanley's AA- rating after what it said were "dismal" fourth-quarter results, while rival Fitch Ratings affirmed its assessment of the bank.
Morgan Stanley on Wednesday posted a fourth-quarter loss after recording a bigger-than-expected $9.4 billion writedown and said it sold a $5 billion stake to China Investment Corp to
bolster its capital.
"MS' dismal fourth-quarter results heighten our concern regarding its strategic direction and risk appetite. Fourth-quarter financial performance was considerably worse than we previously anticipated," S&P credit analyst Scott Sprinzen said.
The ratings agency said it would complete its rating review within 90 days, and that a cut below A+ was unlikely.
It said it continued to view Morgan Stanley's business franchise as "basically sound" and said it assumed that profitability measures would recover in 2008.
S&P said the sale of the $5 billion stake was mitigating the effect of the fourth-quarter loss.
Fitch affirmed its AA- rating on Morgan Stanley but said the ratings outlook on the second-largest U.S. investment bank remained negative, meaning the rating could move down over the
The ratings agency said it viewed "positively" the raising of $5 billion in capital through a mandatory convertible security issued to China Investment Corp, a sovereign investment
fund controlled by China.
And it said the bank might yet claw back some of the losses recorded.
"Fitch ... believes that some of the recognized losses may eventually be recovered as current marks to market result from very dire assumptions about default probabilities and severity
for U.S. based mortgages. Further declines are possible but considered unlikely," it said.
For S&P's full statement, please double click on. Fitch's full statement, please double click on. For a story on Morgan Stanley's results, please double click on.