Bloomberg News

Morgan Stanley Seeks Fed Approval for Buying Rest of Brokerage

January 18, 2013

Morgan Stanley (MS:US) is seeking Federal Reserve approval to buy the remaining 35 percent of its brokerage joint venture with Citigroup Inc. (C:US) this year.

The company didn’t ask for any additional return of capital to shareholders, Chief Financial Officer Ruth Porat said today in an interview. The firm had a 9.5 percent Tier 1 common ratio under Basel III rules as of Dec. 31, above its 8.5 percent requirement under guidelines set out by Financial Stability Board last year, she said.

“There’s a time for returning capital, but given the importance of the wealth management joint venture, that’s our first priority,” said Porat, 55. “Longer-term, we are focused on returning capital to shareholders, whether in the form of share repurchases or dividends.”

Chief Executive Officer James Gorman, 54, has already set a price with Citigroup to purchase the remainder of the brokerage venture, which was created in 2009. Morgan Stanley will pay $4.7 billion for the last piece, and that stake will use an additional $400 million of capital, the firm said in a presentation today.

Morgan Stanley will earn about $400 million in 2013 from buying the rest of the brokerage, as the company eliminates non- controlling interest payments to Citigroup and benefits from more retail orders and deposits, it said.

The bank’s wealth-management business had a pretax margin of 17 percent in the fourth quarter, the highest since the joint venture was formed and ahead of its goal of mid-teens by the middle of this year. The unit, which had $3.46 billion in revenue, benefited from lower integration expenses and a lower- than-normal compensation rate, Porat said.

Morgan Stanley had $460 billion of Basel III risk-weighted assets, Porat said. That’s down from $500 billion at the end of June. The firm today accelerated its goals for cutting RWAs in its fixed-income business, saying it already reached $280 billion, its previous target for the end of 2013.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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Companies Mentioned

  • MS
    (Morgan Stanley)
    • $35.76 USD
    • -0.37
    • -1.03%
  • C
    (Citigroup Inc)
    • $53.48 USD
    • -0.18
    • -0.34%
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