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Financial Stocks Roundup: Morgan Stanley Braces for Downgrades


Morgan Stanley is going to be downgraded soon. The question is, by how much?

MINYANVILLE ORIGINAL After getting a bounce yesterday, which was possibly fuelled by positive comments from Warren Buffett, US financial stocks took a beating today.

Morgan Stanley (MS) was among the hardest hit, declining 2.48%. According to an SEC filing, the bank's counterparties might demand as much as $7.21 billion in collateral if Moody's makes good on its promise to downgrade it by two notches. Morgan Stanley might see its rating fall by as much as three notches, which would place it just two steps above junk.

The bank also revealed a $1 billion lawsuit from Prudential Insurance (PRU) over misrepresentation in the sales of mortgage-backed securities.

Bank of America (BAC) will start to contact 200,000 distressed homeowners to offer mortgage reductions as part of the $25 billion settlement that the big lenders reached with the government. Bank of America accounts for $11 billion of that settlement.

HSBC (HBC) said today that its emerging markets and investment banking operations helped mitigate high costs in the first quarter. The British bank's profits fell to $2.58 billion from $4.15 billion a year earlier. Costs remain high, as salaries continue to rise. CEO Stuart Gulliver plans on sacking 30,000 employees by 2013.

Wells Fargo (WFC) awarded a five-year, $500,000 grant to the UC Davis Energy Efficiency Center to develop clean energy.

The financial sector is a sea of red today, underperforming the S&P 500 (SPY). The KBW Bank Index (^BKX) declined 1.11% and the SPDR Financial Sector Select ETF (XLF) slipped 0.92%.

Twitter: @vincent_trivett
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