Morgan Stanley said internal stress tests show the firm can weather a severe economic crisis with a profit while it sustains $7bn in trading and counterparty losses.
Bloomberg reports that Morgan Stanley would maintain a Tier 1 common capital ratio of at least 9.5% during a hypothetical shock scenario, above the 5% minimum, the New York-based firm said in a summary of its company-run test.
It assumed the Standard & Poor’s 500 Index would drop 41% while the U.S. and euro-zone economies shrink 5% within the first year.
The company estimated it would generate a total pretax profit of $600m from the second quarter of 2013 through the middle of 2015, while suffering $1.5bn in loan losses.
To access the complete Bloomberg article hit the link below