New York, December 11, 2019 -- Moody's Investors Service has affirmed Morgan Stanley's ratings
(A3 senior) and the ratings and assessments of subsidiaries Morgan Stanley
Bank, N.A. (MSBNA, A1 deposits), Morgan
Stanley Private Bank, N.A. (MSPBNA, A1 deposits),
Morgan Stanley Europe SE (MSESE, A1 issuer), Morgan Stanley
Bank AG (MSBAG, A1 deposits), Morgan Stanley Capital Group
Inc. (MSCGI, A1 issuer), Morgan Stanley Capital Services
LLC (MSCS, A1 issuer), Morgan Stanley Bank International Limited
(MSBIL, A1 deposits), Morgan Stanley & Co. International
plc (MSIP, A1 issuer), and Morgan Stanley Finance LLC (MSFL,
A3 issuer).
Moody's has changed to positive from stable its outlooks on Morgan
Stanley and its subsidiaries and the outlooks on their relevant ratings.
Issuer: Morgan Stanley
..Affirmations:
....Issuer Rating, Affirmed A3,
POS from STA
....Senior Unsecured Regular Bond/Debenture,
Affirmed A3, POS from STA
....Subordinate Regular Bond/Debenture,
Affirmed Baa2
....Non-cumulative Preferred Stock,
Affirmed Ba1(hyb)
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)A3
....Other Short Term, Affirmed (P)P-2
....Subordinate Medium-Term Note Program,
Affirmed (P)Baa2
....Senior Unsecured Shelf, Affirmed
(P)A3
....Subordinate Shelf, Affirmed (P)Baa2
....Non-cumulative Preferred Stock
Shelf, Affirmed (P)Ba1
....Backed Commercial Paper, Affirmed
P-2
....Commercial Paper, Affirmed P-2
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
Issuer: Morgan Stanley Bank, N.A.
..Affirmations:
....Long Term Deposit Rating, Affirmed
A1, POS from STA
....Short Term Deposit Rating, Affirmed
P-1
....Long Term Issuer Rating, Affirmed
A1, POS from STA
....Short Term Issuer Rating, Affirmed
P-1
....Baseline Credit Assessment, Affirmed
baa2
....Adjusted Baseline Credit Assessment,
Affirmed baa1
....Long Term Counterparty Risk Assessment,
Affirmed Aa3(cr)
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Long Term Counterparty Risk Rating,
Affirmed Aa3
....Short Term Counterparty Risk Rating,
Affirmed P-1
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
Issuer: Morgan Stanley & Co. International plc
..Affirmations:
....Long Term Issuer Rating, Affirmed
A1
....Short Term Issuer Rating, Affirmed
P-1
....Long Term Counterparty Risk Assessment,
Affirmed Aa3(cr)
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Senior Secured Regular Bond/Debenture,
Affirmed A1
....Senior Unsecured Regular Bond/Debenture,
Affirmed A1
....Other Short Term, Affirmed (P)P-1
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)A1
....Backed Senior Unsecured Medium-Term
Note Program, Affirmed (P)A1
....Senior Secured Medium-Term Note
Program, Affirmed (P)A1
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
Issuer: Morgan Stanley Bank International Limited
..Affirmations:
....Long Term Deposit Rating, Affirmed
A1, POS from STA
....Short Term Deposit Rating, Affirmed
P-1
....Issuer Rating, Affirmed A1,
POS from STA
....Baseline Credit Assessment, Affirmed
baa2
....Adjusted Baseline Credit Assessment,
Affirmed baa1
....Long Term Counterparty Risk Assessment,
Affirmed Aa3(cr)
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Long Term Counterparty Risk Rating,
Affirmed Aa3
....Short Term Counterparty Risk Rating,
Affirmed P-1
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
Issuer: Morgan Stanley Capital Group Inc.
..Affirmations:
....Long Term Issuer Rating, Affirmed
A1
....Short Term Issuer Rating, Affirmed
P-1
....Long Term Counterparty Risk Assessment,
Affirmed Aa3(cr)
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
Issuer: Morgan Stanley Capital Services LLC
..Affirmations:
....Long Term Issuer Rating, Affirmed
A1
....Short Term Issuer Rating, Affirmed
P-1
....Long Term Counterparty Risk Assessment,
Affirmed Aa3(cr)
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
Issuer: Morgan Stanley Europe SE
..Affirmations:
....Long Term Issuer Rating, Affirmed
A1
....Short Term Issuer Rating, Affirmed
P-1
....Long Term Counterparty Risk Assessment,
Affirmed Aa3(cr)
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
Issuer: Morgan Stanley Bank AG
..Affirmations:
....Long Term Deposit Rating, Affirmed
A1, POS from STA
....Short Term Deposit Rating, Affirmed
P-1
....Issuer Rating, Affirmed A1,
POS from STA
....Baseline Credit Assessment, Affirmed
baa2
....Adjusted Baseline Credit Assessment,
Affirmed baa1
....Long Term Counterparty Risk Assessment,
Affirmed Aa3(cr)
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Long Term Counterparty Risk Rating,
Affirmed Aa3
....Short Term Counterparty Risk Rating,
Affirmed P-1
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
Issuer: Morgan Stanley Finance LLC
..Affirmations:
....Backed Issuer Rating, Affirmed A3,
POS from STA
....Backed Senior Unsecured Medium Term Note
Program, Affirmed (P)A3
....Backed Senior Unsecured Shelf, Affirmed
(P)A3
....Backed Senior Unsecured Regular Bond/Debenture,
Affirmed A3, POS from STA
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
Issuer: Morgan Stanley Private Bank, N.A.
..Affirmations:
....Long Term Deposit Rating, Affirmed
A1, POS from STA
....Short Term Deposit Rating, Affirmed
P-1
....Long Term Issuer Rating, Affirmed
A1, POS from STA
....Short Term Issuer Rating, Affirmed
P-1
....Baseline Credit Assessment, Affirmed
baa2
....Adjusted Baseline Credit Assessment,
Affirmed baa1
....Long Term Counterparty Risk Assessment,
Affirmed Aa3(cr)
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Long Term Counterparty Risk Rating,
Affirmed Aa3
....Short Term Counterparty Risk Rating,
Affirmed P-1
..Outlook Actions:
....Outlook, Changed to Positive from
Stable
RATINGS RATIONALE
Moody's said Morgan Stanley's A3 senior unsecured debt and
issuer ratings are derived from its lead bank's (MSBNA) baa2 Baseline
Credit Assessment (BCA) and a notch of affiliate support from its largest
shareholder and strategic partner Mitsubishi UFJ Financial Group,
Inc. (A1 senior with stable outlook, a3 BCA at MUFG Bank,
Ltd.), resulting in a baa1 Adjusted BCA. The application
of Moody's Advanced Loss Given Failure (LGF) analysis results in
an assumption of a low loss-given failure resulting in a further
notch of uplift to arrive at the A3 ratings, reflecting the benefit
senior debt holders are likely to achieve from the substantial amount
of holding company senior debt outstanding as well as the amount of debt
subordinated to it.
Moody's said the change to a positive outlook reflects Morgan Stanley's
broadly consistent strategy and strong financial performance, including
its trend of improved profitability and favorable capital and liquidity
positions.
Moody's said Morgan Stanley's credit profile is supported
by its adherence to broadly consistent strategic objectives and financial
goals during the past several years under the stewardship of a long-tenured
senior leadership team. It has maintained its competitive strength
among the leaders in global capital markets activities and has enlarged
and strengthened its wealth management business, notably by improving
this unit's pretax margin to 28% in the nine months ended
September 2019 from 20% in 2014. These factors have contributed
to an overall improvement in the firms profitability, with Moody's-adjusted
net income reaching 1.0% of tangible assets in 2018 and
year-to-date through September 2019. Firm-wide
pretax earnings volatility has also improved, and now closely matches
peers.'
In addition, the firm has significant positive structural liquidity
and comprehensive liquidity management that substantially offset challenges
posed by its heavy reliance on market funding, said Moody's.
Morgan Stanley continues to maintain a peer-leading risk-based
capital position, with 16.3% standardized and 16.6%
advanced-approach Basel III Common Equity Tier 1 ratios at September
2019. Although Morgan Stanley had a greater decline in capital
than its closest peer under the severely adverse scenario of the Federal
Reserve's 2019 Dodd-Frank Act stress test (DFAST), this worse
outcome appears to be the result of stress assumptions pertaining to cost
management and, possibly, operational losses, rather
than revenue- or market risk-related stresses that could
be harder to control. Moody's said one of MS's core
strengths since the financial crisis has been its willingness and ability
to engage in and effectively manage periodic cost reductions.
Moody's said that Morgan Stanley's loan growth remains a key
ongoing credit risk, especially for its more volatile Institutional
Securities business, a trend that the rating agency will continue
to monitor.
Moody's said that corporate governance is highly relevant for Morgan
Stanley, as it is for all banks. Morgan Stanley's BCA
incorporates a one-notch downward adjustment to reflect the credit
risk associated with the opacity and complexity of its global operations.
Like its global investment bank peers, it has a complex legal structure,
and its global footprint and extensive capital market activities increases
management and governance challenges. However, Morgan Stanley's
governance frameworks and related controls and processes have materially
improved since the financial crisis. Nonetheless, corporate
governance remains a key credit consideration given new emerging risks
and continues to be a subject of Moody's ongoing monitoring.
Moody's said Morgan Stanley's Baa2 subordinated holding company
debt and Ba1 (hyb) non-cumulative preferred shelf ratings reflect
the juniority of these obligations, with a high loss-given-failure,
given the small volume of securities outstanding and the limited protection
from more subordinated instruments and residual equity.
Morgan Stanley's Prime-2 short-term ratings,
and the various types of Prime-1 short-term ratings and
assessments assigned to its relevant subsidiaries, are based on
Moody's approach for determining short-term ratings on its
Global Short-Term Rating Scale, said Moody's.
US banks:
MSBNA and MSPBNA are US-based FDIC-insured indirect wholly
owned subsidiaries of Morgan Stanley. Moody's said it considers
MSBNA's and MSPBNA's credit profiles to be aligned,
and accordingly they each have the same ratings' profile,
derived from their baa1 Adjusted BCA's.
The banks' A1 deposit and issuer ratings benefit from three notches
of uplift from the baa1 Adjusted BCAs in Moody's Advanced Loss Given
Failure (LGF) analysis, because their deposits and senior unsecured
obligations are likely to face extremely low loss-given-failure,
due to the loss absorption provided by holding company obligations.
MSBNA's and MSPBNA's Aa3 counterparty risk ratings (CRR) and
Aa3(cr) counterparty risk assessments (CRA) each incorporate one notch
of incremental uplift for US government support. This reflects
Moody's view that Morgan Stanley's systemic importance primarily derives
from its high degree of interconnectedness with other global systemically
important banks and its role as a significant derivatives counterparty.
As such, there is a moderate likelihood that in resolution,
the US government could take action to support the operational liabilities
of Morgan Stanley's systemically important subsidiaries (but not
their debt or deposits), including MSBNA's and MSPBNA's,
in order to limit systemic risk and contagion and facilitate an orderly
unwind of such obligations.
Highly integrated and harmonized entities:
Moody's considers the standalone credit profiles of MSESE,
MSBAG, MSCGI, MSCS and MSBIL to be highly integrated and harmonized
with the rest of Morgan Stanley. Their management, operations
and financial affairs are highly integrated with those of the group,
they have extensive transactions and balances with other group companies,
and they rely on other group entities to provide important treasury,
risk management and other services. Moody's believes that US regulators
would likely use the group's total loss-absorbing capacity (TLAC)
to support these entities, and their ratings and assessments are
aligned with those of MSBNA.
Morgan Stanley & Co. International plc (MSIP):
MSIP is one of Morgan Stanley's largest operating subsidiaries and
its primary European broker-dealer. MSIP's ratings reflect
its stable liquidity, improved funding profile, weak and volatile
earnings, and controlled risk appetite. Its ratings also
reflect Moody's expectation that there is a very high likelihood
that Morgan Stanley would support MSIP, and in the event of a failure
of the group, creditors at MSIP would benefit from the bail-in
of Morgan Stanley's holding company debt. The combination
of a very high likelihood of support from the group and the benefit of
a significantly lower loss-given-failure for MSIP creditors
in the event of failure results in seven notches of uplift from MSIP's
Ba2 Standalone Assessment to its A1 senior unsecured debt rating.
Morgan Stanley Finance LLC (MSFL):
MSFL is a finance subsidiary and Morgan Stanley fully and unconditionally
guarantees its securities. Its creditors are in effect pari passu
with Morgan Stanley's senior unsecured creditors, and accordingly
its A3 senior rating is at the same level as Morgan Stanley's.
FACTORS THAT COULD LEAD TO AN UPGRADE
Morgan Stanley's long- and short-term ratings,
and its subsidiaries long-term ratings and assessments, could
be upgraded should Morgan Stanley maintain its trend of improving the
quality and stability of its profitability, and favorable capital
and liquidity, with a continued absence of control or risk management
failures. Additionally, an upgrade will depend on improved
stress resilience via the demonstration of strong risk management controls
in Institutional Securities' lending and improved results in regulatory
stress testing.
FACTORS THAT COULD LEAD TO A DOWNGRADE
Morgan Stanley's ratings, and its subsidiaries ratings and
assessments, could be downgraded with evidence of a significant
deterioration in loan credit quality or loan underwriting standards,
an increase in portfolio concentrations, a deterioration in the
firm's liquidity profile, a general increase in risk appetite,
or a significant controls, risk management or governance failure.
The principal methodology used in rating Morgan Stanley, Morgan
Stanley Bank, N.A., Morgan Stanley Private Bank,
N.A., Morgan Stanley Bank International Limited,
Morgan Stanley Bank AG and Morgan Stanley Finance LLC was Banks Methodology
published in November 2019. The principal methodologies used in
rating Morgan Stanley & Co. International plc, Morgan
Stanley Europe SE, Morgan Stanley Capital Services LLC and Morgan
Stanley Capital Group Inc. were Securities Industry Market Makers
Methodology published in November 2019 and Banks Methodology published
in November 2019. Please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Donald Robertson
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
