Rating Action: Moody’s upgrades E*TRADE’s notes to A1Global Credit Research – 04 Jan 2022New York, January 04, 2022 — Moody’s Investors Service (Moody’s) today upgraded to A1 from A3 the ratings on three senior unsecured notes issued by E*TRADE Financial Holdings, LLC (E*TRADE) and assigned a stable outlook to the notes’ ratings. Moody’s also withdrew all of E*TRADE Bank’s ratings and assessments. The rating action followed the merger on 1 January 2022 of E*TRADE with and into Morgan Stanley Domestic Holdings, Inc. (MSDHI), a financial holding company subsidiary of Morgan Stanley (MS, A1 stable), with MSDHI as the surviving entity, and the merger of E*TRADE Bank into Morgan Stanley Private Bank, N.A (MSPBNA, a3 adjusted baseline credit assessment, Aa3 deposits), with MSPBNA as the surviving entity.Moody’s said MS’s ratings and outlooks and its other subsidiaries’ ratings and outlooks were unaffected by today’s rating action. A complete list of affected ratings can be found at the end of this press release.RATINGS RATIONALEMoody’s said it upgraded the ratings on E*TRADE’s three senior unsecured notes ($600 million 2.95% due in 2022, $400 million 3.80% due in 2027 and $420 million 4.50% due in 2028) because the notes are now fully and unconditionally guaranteed by MS. In Moody’s view, given implicit support along with the guarantee which reflects the attributes of credit substitution, the E*TRADE notes are now rated at the same level as the senior unsecured debt issued directly by MS and have the same stable rating outlook.MS’s A1 senior unsecured debt rating is two notches above the a3 adjusted baseline credit assessment (BCA) of Morgan Stanley Bank, N.A. (MSBNA, a3 adjusted BCA, Aa3 deposits), MS’s lead bank subsidiary. The two notches of uplift reflect Moody’s view that senior debt holders at the holding company level are likely to benefit from a low loss-given-failure, given the substantial amount of MS holding company senior debt outstanding as well as the amount of debt subordinated to it. As a result of the guarantee from MS, Moody’s expects that the loss given failure for the E*TRADE notes is likely to be no worse than the expected loss given failure on the senior unsecured debt instruments issued directly by MS.MS’s ratings reflect the benefits from its shift in business mix towards recurring, profitable revenue-streams in wealth and investment management, that generally are more stable and of lower risk than the activities and exposures in MS’s institutional securities’ business segment.MS and its rated subsidiaries’ stable outlooks reflect Moody’s expectation that MS will retain a strong liquidity profile, maintain its improved funding profile, may suffer temporary pressure on profitability due to the current environment, and will over time return increasing amounts of capital and moderately reduce its regulatory capital ratios.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSMS’s and its rated subsidiaries’ long-term ratings could be upgraded should there be an improvement in MSBNA’s BCA and an upgrade of support-provider Mitsubishi UFJ Financial Group, Inc. (MUFG, A1 senior with stable outlook, a3 BCA at MUFG Bank, Ltd.). MSBNA’s BCA could be improved should MS drive and sustain a fundamental shift in business mix towards recurring revenue streams with a continued trend of improved and more stable profitability, accompanied by the maintenance of robust capital and liquidity.An improvement in MSBNA’s BCA without an improvement in the creditworthiness of MUFG is less likely to result in MS’s ratings being upgraded. Were MSBNA’s BCA to be upgraded by one notch, the BCA would be at the same level as MUFG’s lead bank’s BCA, at which point it would be unlikely that MS’s ratings would continue to benefit from a notch of affiliate support under Moody’s joint default analysis, and accordingly MSBNA’s Adjusted BCA would remain unchanged.MS’s ratings could be downgraded if prolonged weakening of results, a significant deterioration in loan credit quality or loan underwriting standards, an increase in portfolio concentrations, a deterioration in the firm’s liquidity profile, a general increase in risk appetite, or if there are any indications of control or risk management failures. Also, MS’s ratings would likely be downgraded should support-provider MUFG be downgraded, or should there be a weakening in MSs and MUFG’s operational and strategic relationship.Moody’s has decided to withdraw the ratings for its own business reasons. Please refer to the Moody’s Investors Service Policy for Withdrawal of Credit Ratings, available on its website, www.moodys.com.The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Upgrades:..Issuer: E*Trade Financial Holdings, LLC (Assunmed by Morgan Stanley Domestic Holdings, Inc.)….Backed Senior Unsecured Regular Bond/Debenture (Local Currency), Upgraded to A1 from A3, Outlook assigned StableWithdrawals:..Issuer: E*TRADE Bank…. Adjusted Baseline Credit Assessment, Withdrawn , previously rated a3…. Baseline Credit Assessment, Withdrawn , previously rated baa1…. LT Counterparty Risk Assessment, Withdrawn , previously rated Aa2(cr)…. ST Counterparty Risk Assessment, Withdrawn , previously rated P-1(cr)…. LT Counterparty Risk Rating (Foreign Currency), Withdrawn , previously rated Aa2…. ST Counterparty Risk Rating (Foreign Currency), Withdrawn , previously rated P-1…. LT Counterparty Risk Rating (Local Currency), Withdrawn , previously rated Aa2…. ST Counterparty Risk Rating (Local Currency), Withdrawn , previously rated P-1…. LT Issuer Rating, Withdrawn , previously rated Aa3, Ratings Withdrawn from Stable…. ST Deposit Rating (Local Currency), Withdrawn , previously rated P-1…. LT Deposit Rating (Local Currency), Withdrawn , previously rated Aa3, Ratings Withdrawn from StableOutlook Actions:..Issuer: E*Trade Financial Holdings, LLC….Outlook, Changed To No Outlook From Stable..Issuer: E*TRADE Bank….Outlook, Changed To Rating Withdrawn From StableREGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Fadi Abdel Massih Vice President – Senior Analyst Financial Institutions Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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