Fitch puts Morgan Stanley on watch

Fitch Ratings said it placed the long- and short-term debt ratings of both Morgan Stanley and Discover Bank on Rating Watch negative while affirming the individual ratings of both entities.

Ratings placed on negative watch include Morgan Stanley's senior rating of AA-, subordinated rating of A+ and preferred rating of A as well as Discover Bank's long-term AA- rating and short-term F1+ rating. Other units of the issuers are affected as well.

Fitch said a number of events surrounding Morgan Stanley serve to pressure its credit ratings and those of its subsidiaries. Management changes accompanied by senior executive departures, changes in board composition, litigation and shareholder pressures have culminated in an announced spinoff of its Credit Services business. Fitch anticipates the spinoff to be 100%. This will eliminate about 17% of stable revenues.

The remaining business lines of institutional, retail brokerage and asset management are expected to maintain current quality and profitability.

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