The credit crunch has endured for more than a year, and the Wall Street investment banks still are trying to dig out from under the wreckage. Deal Journal combed through some analyst reports to get a sense of how they are doing.First, the progress. The four big, publicly traded, stand-alone U.S. investment banks -- Goldman Sachs Group, Morgan Stanley, Merrill Lynch and Lehman Brothers Holdings -- have about $60 billion of leveraged-buyout-related loans still on their books, having cut their exposure 30% in the second quarter, according to Banc of America Securities analyst Michael Hecht.
As to where these four stand now, the leader in total gross corporate loans and commitments is Merrill, which has $94.7 billion of exposure, according to Mr. Hecht.
Then comes Morgan Stanley at $76.7 billion, Goldman at $73.9 billion and Lehman at $37.1 billion.
On a net-exposure basis, which includes the effects of hedging and other activities, Merrill is still the leader at $79.9 billion, followed by Morgan Stanley at $40 billion and Lehman at $29.49 billion, according to Mr. Hecht.
(Mr. Hecht says Goldman doesn't provide enough information for such a comparison).
Who still has the most leveraged loans? Goldman Sachs has the highest gross percentage of non-investment-grade loans in its loan book, at 49%, and Morgan Stanley has the smallest, at 23%. (Merrill is at 30% and Lehman at 24%.)
And the banks still have far to go: Citigroup analyst Prashant Bhatia estimates Goldman has $22 billion of leveraged loans left to sell, followed by Morgan Stanley with $12.7 billion, Lehman with $11.5 billion and Merrill with $7.5 billion.
By: Heidi Moore
Wall Street Journal; August 26, 2008
