After having won the Federal Reserve’s (Fed) approval in the regulator’s annual stress test, Morgan Stanley may be set to buy the remaining 35% of its wealth-management venture with Citigroup Inc (Citi).
However, the purchase is subject to other regulatory approvals, and, even after the purchase of the stake, Morgan Stanley would have a 5.62% Tier 1 common ratio in the most adverse economic scenario, being above the 5% minimum.
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Morgan Stanley CEO, James Gorman, has already, reportedly, set a price with Citi to purchase the rest of the brokerage venture, which was created in 2009. It was in January 2013 that Morgan Stanley said it will pay $4.7bn for the last piece, which will place demands on an additional $400m of capital.
"The Federal Reserve’s non-objection to our capital plan is another important step towards full ownership of our wealth- management business, which has been one of the Firm’s key strategic priorities since 2009. We look forward to completing the acquisition of the remaining 35 percent stake in our wealth-management joint venture," Gorman said in a statement.
Gorman has staked his strategy in large part on buying all of the brokerage and increasing profitability at the unit and Morgan Stanley has said it will earn about $400m in 2013 from buying the rest of the venture as the company eliminates non-controlling interest payments to Citi and benefits from more retail orders and deposits.
The Fed began annual stress tests in 2009 to evaluate the health of the US banking system.
