UPDATE 1-RESEARCH ALERT-Citigroup cuts Morgan Stanley target

jueves 20 de diciembre de 2007 16:28 CET

 (Adds background, more analyst comments)
 Dec 20 (Reuters) - Citigroup cut its price target on Morgan
Stanley's (MS.N: Cotización) stock to $75 from $80, to reflect lower
earnings estimates driven by dislocation in credit markets.
 In a research note dated Dec. 19, the brokerage lowered its
2008 estimates on the company to $7.25 from $7.80, while 2009
estimated were cut to $8.00 from $8.25.
 On Wednesday, the investment bank had reported a staggering
fourth-quarter loss fueled by $9.4 billion of losses in
subprime mortgages and other assets.
 However, Citigroup reiterated its "buy" rating on the
stock, saying core earnings power at the investment bank has
been underestimated.
 Every major institutional business outside of mortgage
produced excellent results, and the mortgage overhang is behind
the company, analyst Prashant Bhatia wrote in the note.
 He also noted that subprime mortgage exposure declined more
than 80 percent, driven by aggressive write-downs.
 China has agreed to pump $5 billion into the bank, making
it the latest capital infusion by a sovereign wealth fund into
a major investment bank hurt by this year's credit crunch.
 Bhatia said while a capital raise is not optimal from an
earnings dilution view, it positions the franchise well and
enables the firm to put the mortgage issues behind it and to
focus on growth.
 (Reporting by Purwa Khandelwal in Bangalore; Editing by
Pratish Narayanan)