In light of the continuing degredation of the US credit market and the recent collapse of Lehman Brothers and AIG (not to mention the Merrill Lynch sale) Morgan Stanley is considering whether it will need to merge with a deposit-taking bank to remain afloat. Many analysts fear that the AIG government bailout is a sure sign that credit is nearly impossible to obtain. Even the most stable companies like Goldman may not be able to remain independent and weather the credit storm.
While there are no official merger talks yet between Morgan and any parties the company has hinted at the possibility of a merger if the stock continues to get hammered by the market.
From the AP:
“But senior people at Morgan concede that further zig-zags in the company’s stock price could and possibly will force the company to change course and seek a merger partner, probably a well capitalized bank,” CNBC reported on its Website.
Morgan Stanley shares closed down 10.8 percent at $28.70 on Tuesday, having fallen 46 percent so far this year.
“The U.S. government’s rescue of AIG helped the markets to avoid the worst case scenario, but the fact that only the government was willing to help indicated the gravity of U.S. credit problems,” said Choi Seong-lak, an analyst at SK Securities in Seoul.
“Reports that Morgan Stanley is considering a merger with a commercial bank confirmed such fears, and market participants are now wondering if even Goldman Sachs (GS.N) is safe. Sentiment is extremely fragile.
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