Wednesday, 29 October 2008

Morgan Stanley gathering deposits, eyes bank deals

Morgan Stanley, eager to secure more stable sources of funding in volatile times, said on Wednesday its brokerage division sold $3 billion in certificates of deposit during the past week as part of its broader plan to build up deposits.

In addition to offering services more common at neighborhood bank branches, Morgan Stanley said it would "explore both organic and acquisition opportunities" to accelerate deposit growth.

Following the bankruptcy of Lehman Brothers last month, Morgan Stanley converted from an investment bank to a Federal Reserve-regulated bank holding company and said it would deploy its 8,500 advisers and brokerage offices to amass deposits.

The firm reported $36 billion in deposits as of August 31, but that is not nearly enough to support a company with nearly $1 trillion in assets.

Morgan Stanley said it will introduce new savings accounts and global currency accounts, increase international banking through a Swiss bank unit, and expand banking services for smaller businesses. It already offers checking accounts, ATMs and credit cards for broker clients.

Morgan shares have been punished by investors who worried it did not have enough capital and cash to survive a worsening financial crisis. Converting to a bank, selling a 21 percent stake to Mitsubishi UFJ Financial Group and scooping up deposits were supposed to allay those fears.

The shares continue to come under pressure -- down 71 percent for the year -- and the price of its default insurance remains lofty at $415,000 for every $10 million of debt.

Source: EconomicTimes

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