Morgan Stanley (MS)

Former CFO Colm Kelleher sold 50,000 shares of MS's stock on Feb 17, 2010 for $1.4 million, decreasing his direct holdings of the investment bank by 15%. He had previously sold $544,000 worth of stock in March 2008 before shares rose in the spring and then plummeted in the fall with the rest of the market. His sale suggests the possibility of the stock dropping in the future especially taking into account the MS's weak 4th quarter earnings and sales and trading results.

New financial regulations could cut big bank earnings by 13%, with Citigroup Inc., Bank of America and Morgan Stanley among the hardest hit, as reported by Goldman Sachs analysts.

According to Jason Goldberg, a banking analyst at Barclays Capital, there could be a 14% hit to industry net income in 2013 from the legislation. Parts of the legislation that could have the biggest impact include derivatives reform, limits on proprietary trading and a potentially potent, new consumer-finance watchdog.

Banks will most likely pass on some of the new regulatory burden to customers in the form of higher annual fees and higher spreads on lending.

New financial regulations could cut big bank earnings by 13%, with Citigroup Inc., Bank of America and Morgan Stanley among the hardest hit, as reported by Goldman Sachs analysts.

According to Jason Goldberg, a banking analyst at Barclays Capital, there could be a 14% hit to industry net income in 2013 from the legislation. Parts of the legislation that could have the biggest impact include derivatives reform, limits on proprietary trading and a potentially potent, new consumer-finance watchdog.

Banks will most likely pass on some of the new regulatory burden to customers in the form of higher annual fees and higher spreads on lending.

Morgan Stanley is also estimated to pay about 247 million for its share of the $19 billion assessment on financial institutions with more than $50 billion in assets and hedge funds with over $10 billion in assets.

President Obama's plan to restrict the activities of commercial banks, specifically outlawing proprietary trading and preventing commercial banks and institutions that own banks from owning, investing in or sponsoring private equity and hedge funds as well as limiting the size of banks could greatly reduce future revenues and growth potential for US and foreign banks.

Morgan Stanley's asset management division has posted decent returns, but lags consistently behind its peers.

MS announced that it would pursue an aggressive and risky trading strategy, as well as hire additional traders. Research analyst Richard Bove believes that MS' strategy could be "too much, too little, or too late" based on disastrous past decisions, such as its inability to predict the end of the dot-com boom, its entry into the housing market at the wrong time, and entering alternative investing at again, the wrong time.^[1]

Morgan Stanley posted a net loss of $578 million, or 57 cents a share, compared with a $1.4 billion profit in the first quarter of last year. Revenue came in at $3 billion, a 62% decline from a year ago.

Analysts surveyed by Reuters estimated the investment bank would post $4.9 billion in revenue and a loss of 9 cents a share.

“People had expected the credit desk trading profits to be a pleasant surprise, and I think they were OK, but they were just overwhelmed by the negative surprises in the write-downs,” Michael Holland, founder of New York money management firm Holland & Co., told Reuters.

Real estate accounted for $1 billion of Morgan’s net losses, and a $1.5 billion more was tied to changes in the value of the bank’s liabilities.

The carnage caused Morgan to slash its quarterly dividend 81% to 5 cents a share, a move the company said will save it $1 billion a year.

Chief Executive John Mack said last month in a conference that he didn’t think now is the time to begin paying back the $10 billion it borrowed from the U.S. Treasury under the Troubled Asset Relief Program (TARP).

Since the onset of the credit crisis one year ago, Morgan Stanley's financial performance and risk management has been inconsistent, and below the levels expected of a Aa3-rated financial institution," Moody's analysts Robert Young and Peter Nerby said a press release.

The review will look at, "Morgan Stanley's ability to control risk and generate higher levels of profitability over the next one to two years," the release said. The ratings agency said "the more likely" result of its review would be a downgrade of Morgan Stanley's long-term debt to A1.