Morgan Stanley (MS) Could Return More to Shareholders, But...
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Looks like Morgan Stanley (NYSE: MS) is trying to steal some of the limelight from rival Bank of America (NYSE: BAC) over capital ratio concerns.
According to reports Tuesday, Morgan Stanley's ability to explore new paths with its capital is still fairly flexible, but some suggest CEO James Gorman and his crew shouldn't get too carried away...not just yet anyway.
Morgan Stanley is currently focused on acquiring the remaining 49 percent of the Morgan Stanley-Smith Barney (MSSB) joint venture it doesn't own from Citigroup (NYSE: C). Next May, Morgan Stanley will have an opportunity to exercise a call option for an additional 14 percent of the joint venture.
Recently Morgan Stanley settled with MBIA (NYSE: MBI) over CDS protection, and despite a $1.8 billion pre-tax charge, the firm will have its key Tier 1 capital ratio at about 10 percent.
This level of Tier 1 capital may allow Morgan Stanley to get a blessing from the Fed on returning more capital to shareholders, all while while exercising that call option for MSSB. Recent comments from Gorman, however, suggest the exec could be focusing instead on shoring up the bank's books.
But investors aren't biting, not just yet. Volatility in the stock has increased since August as many mulled overall financial markets as well as European sovereign debt issues. Further, the WSJ reports the cost to insure $10 million of Morgan Stanley debt for 5-years fell from a recent high of $584,000 in October to $415,000 last week. Despite the drop, the cost rose 160 percent since the start of the year, and is still one of the most expensive rates in comparison to other large financials. This means Morgan Stanley still remains one of the weaker links on the Street, despite improvements in capital.
With the market currently pricing Morgan Stanley shares in the mid-$15 range -- about half the bank's reported book value of $31.30 per share -- the time might also be right to buy. It seems like any positive news would provide a nice boost in the stock (shares moved to the upside initially following the MBIA announcement, though shares ended flat on that session).
Tuesday, Morgan Stanley shares are trading slightly in negative territory, though off of the day's lows. The stock last traded at $15.64.
According to reports Tuesday, Morgan Stanley's ability to explore new paths with its capital is still fairly flexible, but some suggest CEO James Gorman and his crew shouldn't get too carried away...not just yet anyway.
Morgan Stanley is currently focused on acquiring the remaining 49 percent of the Morgan Stanley-Smith Barney (MSSB) joint venture it doesn't own from Citigroup (NYSE: C). Next May, Morgan Stanley will have an opportunity to exercise a call option for an additional 14 percent of the joint venture.
Recently Morgan Stanley settled with MBIA (NYSE: MBI) over CDS protection, and despite a $1.8 billion pre-tax charge, the firm will have its key Tier 1 capital ratio at about 10 percent.
This level of Tier 1 capital may allow Morgan Stanley to get a blessing from the Fed on returning more capital to shareholders, all while while exercising that call option for MSSB. Recent comments from Gorman, however, suggest the exec could be focusing instead on shoring up the bank's books.
But investors aren't biting, not just yet. Volatility in the stock has increased since August as many mulled overall financial markets as well as European sovereign debt issues. Further, the WSJ reports the cost to insure $10 million of Morgan Stanley debt for 5-years fell from a recent high of $584,000 in October to $415,000 last week. Despite the drop, the cost rose 160 percent since the start of the year, and is still one of the most expensive rates in comparison to other large financials. This means Morgan Stanley still remains one of the weaker links on the Street, despite improvements in capital.
With the market currently pricing Morgan Stanley shares in the mid-$15 range -- about half the bank's reported book value of $31.30 per share -- the time might also be right to buy. It seems like any positive news would provide a nice boost in the stock (shares moved to the upside initially following the MBIA announcement, though shares ended flat on that session).
Tuesday, Morgan Stanley shares are trading slightly in negative territory, though off of the day's lows. The stock last traded at $15.64.
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