Morgan Stanley is trading around $13.50 right now, which indicates that the market does not believe the firm’s estimate on how much it’s worth is accurate anymore.
In order to explain the discrepancy between the firm’s book value (which as of June 30th 2011 would have Morgan Stanley trading around $24.35, according to SNL Financial, which bases its calculation off MS’s 2nd quarter 10Q) and the market’s estimate, most people are pointing to an increase in its liabilities, particularly, Morgan Stanley’s French bank exposure, which the firm said was $39 billion at the end of last year. Now Morgan’s exposure to the French banks is more like $21.6 billion, according to an analyst note.
And below is a chart that shows how much each countries’ banks are exposed to the countries that are peripherally exposed to the Greek crisis. As you’ll notice, French banks have significant exposure to Italy. Italy is the next domino to fall should Greece default, by general consensus.
Banks start declaring third quarter earnings this month, so we’ll get the latest from Morgan Stanley soon, when it files its latest 10Q.