Tags: morgan stanley | smith barney | bank

Morgan Stanley: Fed Doesn't Oppose Smith Barney Purchase

Tuesday, 13 March 2012 04:46 PM

Morgan Stanley said Tuesday that the Federal Reserve didn’t object to the firm’s capital plan, including its potential purchase of an additional piece of the Smith Barney retail brokerage joint venture with Citigroup Inc.

The Fed also didn’t object to the payment of current common and preferred dividends, New York-based Morgan Stanley said in a statement. The firm didn’t say whether it was raising dividends or buying back stock.

The Fed is requiring the nation’s largest lenders to show they have credible plans for maintaining capital and continuing lending in an economic downturn. Morgan Stanley didn’t disclose its performance on the Fed’s stress test.

Morgan Stanley has the option to buy a 14 percent stake in Morgan Stanley Smith Barney in May, increasing its ownership to 65 percent, and can buy the business outright over the next two years. In 2009, the firm bought a controlling stake in the joint venture, which has more than 17,000 advisers and $1.65 trillion in client assets.

The additional stake will probably cost about $2.7 billion, Goldman Sachs Group Inc. analysts said in a note to investors in January. Chief Executive Officer James Gorman said on a January conference call that while immediately purchasing the next stake will depend on price, buying the rest of the brokerage is a “core plank” in his strategy.

Morgan Stanley cut its dividend in 2009 to 5 cents from 27 cents and has maintained the 5-cent payout since then. The firm hasn’t bought back any stock in the past three years under its share repurchase program, which was approved in 2006 and has $1.56 billion remaining.

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Tuesday, 13 March 2012 04:46 PM
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