Two analysts expect Morgan Stanley will take a fourth quarter write-down of between $3 billion and $6 billion related to asset-backed securities and collateralized debt obligations.
For Morgan Stanley (NYSE:MS), as well as various other major banks and brokerages, declining values for the complex financial instruments are seen as the culprits.
Once-safe tranches of ABS and CDOs have seen values declining sharply lately, following multilevel (credit) ratings downgrades, Trone said in a client note on Tuesday, admitting his views were just educated guesses. He expects between $4 billion to $6 billion in write-downs.
He suggested that investors stay clear of the company's shares until more information is released by Morgan Stanley or the company takes the write-downs.
Morgan Stanley, along with rivals such as Citigroup, Bear Stearns, and Bank of America are expected to further write-down their losses, Deutsche Bank analyst Mike Mayo said. He expects write-downs of $3 billion to $4 billion.
We estimate that there's over $US10 billion of write downs in the fourth quarter for the industry for banks and brokers, Mayo said.
Shares of Morgan Stanley fell $1.08, or 1.94 percent to close at $54.51 on the New York Stock Exchange.