Morgan Stanley May Buy Rest Of Wealth Management JV From Citigroup

Tom Burroughes

15 March 2013

Morgan Stanley may purchase the remainder of its wealth management joint venture from Citigroup as soon as April, having been given the Federal Reserve's blessing on its capital plan, media reports have said.

The Wall Street-headquartered firm will be allowed to move ahead with its $4.7 billion purchase of Citigroup's stake in Morgan Stanley Wealth Management, reports said.

This publication contacted the US firm to elaborate on the reports, but the company had not responded at the time of going to press.

"The Federal Reserve's non-objection to our capital plan is another important step towards full ownership of our wealth management business," James Gorman, chief executive at Morgan Stanley, was quoted as saying in a statement.

"Subject to further regulatory approval, we look forward to completing the acquisition of the remaining 35 per cent stake in our wealth management joint venture," he said.

Morgan Stanley has argued it could afford the wealth management purchase even under a scenario involving extreme market stress. In January, Gorman said the firm intended to own the entire wealth management business this year, subject to Fed approval.

The Fed carried out stress test results on a number of US large firms earlier this week. The central bank said Morgan Stanley’s Tier 1 common ratio, a barometer of financial health, would fall to 5.62 per cent in a financial crisis, which is above the 5 per cent minimum that is required.

If Morgan Stanley does take 100 per cent control of the old Smith Barney business through its JV with Citi, it would complete a process started in 2009.

Meanwhile, this publication has heard a number of rumours from the wealth management industry that Morgan Stanley is looking to spin off some parts of its international wealth operations, with various banks being named, although none has commented thus far when approached.