Morgan Stanley to move retail bank to Charlotte?

[cltbwimob]

Be patient. You will hear more shortly.

Is it it safe to assume based on your post that you are "a source familiar with the situation" [as the O would put it] and that we may be hearing some good news shortly?

[Commoner]

Is it time to give up on the MS retail bank? After the august article that said the operations will be grown organically I have seen no sign of hiring locally (although I am not in the business so I may have missed it) and there are only two jobs posted on the MS site in Charlotte (both titled "Retail Banking - Portfolio" but both descriptions are focused on wealth management product development -- isn't this what Smith Barney already does?).

I guess I am just puzzled, puzzled that they made some high profile hires last year and have done nothing (from my vantage point) with them. Puzzled that they have chosen to sit out a period of extraordinarily cheap acquisitions (see BB&T and Colonial). And puzzled that their meager efforts in Charlotte appear to duplicate their existing expertise.

Does their BHC status require them to develop any business lines? Have they made any noises about abandoning this status (like Goldman)?

Can anyone with better information (altrvr and commoner among others) offer any information?

A couple of thoughts...

The wealth management product development positions you see posted are similar to what Morgan Stanley's Smith Barney (JV with C) does; however, I don't think those overlap with existing Morgan Stanley or Smith Barney positions in Charlotte. I think they're more on the marketing or product side (probably cross-selling a more mass-market product to customers). That's only an educated guess.

As for the BHC status question... Adopting the BHC designation doesn't require any company to devlop any particular product line(s). All it does is impose certain capitalization requirements and other regulatory regimes on the BHC itself, and certain financial services subsidiaries. It also settles upon which of the myriad of depository regulators is responsible for keeping tabs on the capital adequacy of any (in this case, eventual) depository subsidiary of the BHC.

As opposed to Goldman, I haven't heard any noise about Morgan Stanley wanting to abandon the BHC or FHC idea; to the contrary, I've heard John Mack reiterate his preference for it. His pending retirement (assuming he doesn't remain as chairman) could change that course of action.

[qcnative2469]

Is it it safe to assume based on your post that you are "a source familiar with the situation" [as the O would put it] and that we may be hearing some good news shortly?

i think they MS will begin to hire and move into space downtown or else where in charlotte in 2010 or early 2011

[Commoner]

A lot of this discussion has consisted of educated guesses, so here's another $0.02 from me.

As many probably know, yesterday (Jan, 21) the Obama administration announced a framework of regulatory reforms that it hopes Congress will start with. http://www.ft.com/cms/s/0/44f593ee-06a7-11df-b426-00144feabdc0.html?nclick_check=1

Whether (a) Congress does that, (b) the final product looks anything like what's described in the FT link or © the final product doesn't end up with enormous loopholes* remains to be seen; however, if all of the above contingencies are met, and the President gets his way, I think this would have enormous implications on Morgan Stanley's desire to proceed with a depository institution.

The crux of the proposal is that companies that either are or own subsidiaries which depository institutions may not engage in proprietary trading or maintain ownership interests in hedge or private equity funds (unless such ownership is for the benefit of customers). That's obviously subject to tweaking by the White House and by whichever incarnation it receives in Congress. I'll spare the main board my thoughts on whether or not that would be effective to prevent something similar to what has happened the past two-and-a-half years, but many people think that it would cause GS and MS to rescind their bank holding company election, which would likely cause MS to back away from the direction it has been headed w/r/t building a deposit capital base. After that, there's not much of a reason to keep Cece and the rest of any depository infrastructure in Charlotte or elsewhere.

*http://www.scotusblog.com/2010/01/citizens-united-v-fec-round-up/ ... The Citizens United v. FEC decision is the wild card, now. Coincidentally, yesterday the USSC struck down limits on corporate expenditures on behalf of campaigns. IT's basically a green light to well-funded "corporate" (I mean that in the technical term, but implications are obvious when taken in the pejorative, too) campaign finance interests.

[kermit]

A lot of this discussion has consisted of educated guesses, so here's another $0.02 from me.

As many probably know, yesterday (Jan, 21) the Obama administration announced a framework of regulatory reforms that it hopes Congress will start with. http://www.ft.com/cm...?nclick_check=1

Thanks for that, I had not connected those dots. I had been thinking about the flip side of this potential reform for Charlotte. Much of the recent angst about the BoA headquarters was a product of the 'New Yorkiness' of Merrill and the geographic shift of its primary revenue centers away from Charlotte. I doubt many folks would disagree that investment banking is far easier in New York than in any other location (including Charlotte). On the other hand, retail banking is much more cost sensitive than investment banking and all the necessary infrastructure (and talent) is here already. Perhaps, once stripped of Merrill, BoA would have much less reason to continue the diffusion of its executive activity away from Charlotte?

[peaceloveunderstanding]

How would the banks be split up? By line of business, by geography, or by both?

Is it possible they could split Wells Fargo and Wachovia be independent again?

[cltbwimob]

How would the banks be split up? By line of business, by geography, or by both?

Is it possible they could split Wells Fargo and Wachovia be independent again?

I think they are looking to split services. I could be wrong, but I think they are looking to split investment banks and traditional banks. As such Merrill would no longer be owned by BofA. Someone said before this might put to rest the recent move the bank to NYC scare, and would probably really concentrate executive power in Charlotte.

As for Wachovia, I have wondered the same thing myself. I think its possible that investment arms and other business units of Wellschovia could become independent and might be based in Charlotte. Under the plan hatched by CITI when they were looking to take over Wachovia, some of the business units of Wachovia would have remained independent as Wachovia and would have been based in Charlotte. IIRC, the asset total of those units was something on the order of $100 million. That is roughly the size of someone like a Regions in terms of assets, which would have probably gven the scaled down Wachovia the revenue needed to maintain it's Fortune 500 status. So who knows, a Wachovia spinoff may give Charlotte one of it's Fortune 500 HQs back.

[Commoner]

How would the banks be split up? By line of business, by geography, or by both?

Is it possible they could split Wells Fargo and Wachovia be independent again?

I don't think an actual divestiture of anything more than a small business unit is possible under the most ambitious White House plan. Originating debt and equity (MER business), arranging hedging transactions for customers (MER and BAC businesses), asset management (in the form of MER and BlackRock), advisory services ... are all permitted under the most ambitious plan. It's my understanding that BAC has backed out of a lot of prop trading functions (since mid-to-late 07).

BAC wanted MER for asset management, advisory and capital markets market share, in my opinion. I think there are lines that they would happily divest, but I think chances are slim and if it ever happened, it wouldn't drastically change their profile.

There's no way WFC divests anything under this -- if anything, the plan plays to its strengths.

In sum (and for emphasis sake)... they're not splitting banks up.

... Perhaps, once stripped of Merrill, BoA would have much less reason to continue the diffusion of its executive activity away from Charlotte?

There is some amusing chatter about parts of legacy MER "going private" (i.e. private investors buying business units from BAC) but nobody particularly credible is reporting it. It wouldn't look a lot like the old MER. If anything, BAC is making too much off of legacy MER units, and they've cross-sold too much to let go of anything significant, at this point.

[kermit]

The crux of the proposal is that companies that either are or own subsidiaries which depository institutions may not engage in proprietary trading or maintain ownership interests in hedge or private equity funds (unless such ownership is for the benefit of customers). That's obviously subject to tweaking by the White House and by whichever incarnation it receives in Congress. I'll spare the main board my thoughts on whether or not that would be effective to prevent something similar to what has happened the past two-and-a-half years, but many people think that it would cause GS and MS to rescind their bank holding company election, which would likely cause MS to back away from the direction it has been headed w/r/t building a deposit capital base. After that, there's not much of a reason to keep Cece and the rest of any depository infrastructure in Charlotte or elsewhere.

The latest descriptions of federal finance regulatory reform have included the following statement:

Another key provision would prevent large bank holding companies, such as Morgan Stanley and Goldman Sachs Group Inc., from shedding their charter to elude the Fed's scrutiny. The bill is expected to include this provision to prevent banks from trying to game the regulatory architecture.

http://online.wsj.co...eTabs%3Darticle

While lots can happen before passage, in the context of Commonor's above remarks this suggests (to me) that MS will need to decide on its retail banking future soon.

[kermit]

While still trivial MS is currently searching for a VP of commercial lending, a senior underwriter for commercial lending and a "Retail Private Bank Architect" in Charlotte. There are also a handfull (less than 20) of other jobs in Charlotte that were posted back in April.

EDIT: This does not represent a significant uptick in hiring in Charlotte, but I did think the positions were worth noting.

[Vitamin_N]

While still trivial MS is currently searching for a VP of commercial lending, a senior underwriter for commercial lending and a "Retail Private Bank Architect" in Charlotte. There are also a handfull (less than 20) of other jobs in Charlotte that were posted back in April.

I got a call from an M-S recruiter in April. They do seem to be ramping up here.

[HopHead]

According to the Observer, Morgan Stanley is indeed ramping up their hiring in Charlotte for their private banking ops. 50 new jobs headed here...

Morgan Stanley plans to hire 50 in Charlotte

[phil-king]

Times article on new bill

Its my understanding, from this article and posts on this forum, that financial institutions like morgan stanley started private banks in order to get access to cheap capital. Does this mean that the latest version of financial overhaul and the "Volcker Rule" could spell the end for Morgan Stanley's private banking operations?

[Urbanity]

Its my understanding, from this article and posts on this forum, that financial institutions like morgan stanley started private banks in order to get access to cheap capital. Does this mean that the latest version of financial overhaul and the "Volcker Rule" could spell the end for Morgan Stanley's private banking operations?

Not necessarily. If I am understanding the regulations correctly and the below FT blurb which I bolded the Morgan Stanley reference - there is still some requirement to separate an amount of their capital. I think the $3bn number is a smaller amount than originally anticipated by the unmodified Volker rule though. Hopefully someone else can clarify or provide better insight.

Banks won important victories, including the right to continue owning hedge funds and private equity arms, into which they can invest up to 3 per cent of core capital. Shares of most large US banks rose sharply.

But the provision could require Goldman, whose successful proprietary investments lifted the bank to record profits, to pull more than $10bn from its in-house funds in coming years. Morgan Stanley may have to pull $3bn from its funds.

Banks won concessions allowing them to continue trading most derivatives, but they will face a one-time $19bn tax to help cover the cost of the bill.

The legislation bans banks from placing trading bets with their own money, a move championed by Paul Volcker, former Federal Reserve chairman.

http://www.ft.com/cm...144feabdc0.html

[HopHead]

The New York Fed today approved Morgan Stanley's application to become a private bank. It was also announced that MS plans to hire about 500 bankers by next year. No word on how many of these jobs may be headed to Charlotte.

[kermit]

a brief mention of the MS bank in today's observer:

Morgan Stanley hired 100 bankers to offer loans and deposit products to brokerage clients. The unit will be run by former Wachovia Corp. executive Cece Stewart, 52, and may quintuple its ranks by the end of 2011

The article also refers to this operation as a "private bank" (as opposed to a retail bank) that is based in Charlotte and New York.

Observer article on Merrill vs Morgan

(apologies for repeating dbulls news from June, I didn't read before posting -- the Observer has never been speedy with new business news)

[kermit]

I guess we can put this dream to bed now: http://www.charlotteobserver.com/2010/09/13/1690244/wachovia-vet-leaves-morgan-stanley.html

Former Wachovia Corp. executive Cece Stewart is leaving Morgan Stanley to become Citigroup Inc.’s president of U.S. consumer and commercial banking.

[kermit]

and now its official...

Morgan Stanley closing Charlotte private banking operation

[HopHead]

Wow, that didn't last very long...

[SmellyCat]

Morgan Stanley is a joke I-bank anyway. It lost so much top talent in the past two years, considerably more than most of its competitors. To compound the problems, the bank brass thought it would be a good idea to be shedding risk while the smart money has been adding it for the past 18 months.

No one noticed when they came to Charlotte and no one will when they leave. Good riddance, give me more energy companies.

[kermit]

This thread can be locked I think.