Morgan Stanley Looking at U.S. Regional Banks: Report

Morgan Stanley (MS) is looking at the acquisition of various regional U.S. banks as part of a strategy to boost deposits, ostensibly driving future lending at the financial firm, according to published media reports citing an exclusive interview in the Nikkei newspaper Tuesday. “We are looking for potential opportunities to buy a bank that has a presence in an important market in the United States,” CEO John Mack said in the interview, according to a MarketWatch report. Morgan Stanley had acquired Citigroup Inc.’s (C) Smith Barney retail brokerage operations earlier this year, but remains a smaller bank in terms of traditional retail banking operations. Sources in the mortgage banking industry have suggested to HousingWire in recent weeks that the expect to see at least one regional bank acquired, as well as seeing the firm more aggressively pursue whole loans and/or mortgage servicing rights for its Saxon Mortgage Service, Inc. platform. A recent rebound in the firm’s bond prices are expected to have a strongly negative affect on Morgan Stanley’s first quarter 2009 results, according to an Apr. 9 report in the Wall Street Journal. An “accounting treatment” used on certain bonds issued before the financial crisis escalated allegedly would cause the firm to take a hit anywhere from $1.2 billion to $1.7 billion on its quarterly earnings, which are due out later this month. The firm posted a substantial Q4 2009 net loss of $2.19 billion, or $2.24 per share, driven by “unprecedented market turmoil” and mortgage-related write-downs. Fixed income sales and trading — which include its mortgage business — registered net losses of $1.2 billion. See earlier report. Write to Paul Jackson at paul.jackson@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.