Morgan Stanley is seeking Federal Reserve approval to buy the remaining 35 percent of its brokerage joint venture with Citigroup Inc. this year.
The company didn’t ask for any additional return of capital to shareholders, Chief Financial Officer Ruth Porat said today in an interview. The firm had a 9.5 percent Tier 1 common ratio under Basel III rules as of Dec. 31, above its 8.5 percent requirement under guidelines set out by Financial Stability Board last year, she said.
“There’s a time for returning capital, but given the importance of the wealth management joint venture, that’s our first priority,” said Porat, 55. “Longer-term, we are focused on returning capital to shareholders, whether in the form of share repurchases or dividends.”
Chief Executive Officer James Gorman, 54, has already set a price with Citigroup to purchase the remainder of the brokerage venture, which was created in 2009. Morgan Stanley will pay $4.7 billion for the last piece, and that stake will use an additional $400 million of capital, the firm said in a presentation today.
Morgan Stanley will earn about $400 million in 2013 from buying the rest of the brokerage, as the company eliminates non-controlling interest payments to Citigroup and benefits from more retail orders and deposits, it said.
The bank’s wealth-management business had a pretax margin of 17 percent in the fourth quarter, the highest since the joint venture was formed and ahead of its goal of mid-teens by the middle of this year. The unit, which had $3.46 billion in revenue, benefited from lower integration expenses and a lower-than-normal compensation rate, Porat said.
Morgan Stanley had $460 billion of Basel III risk-weighted assets, Porat said. That’s down from $500 billion at the end of June. The firm today accelerated its goals for cutting RWAs in its fixed-income business, saying it already reached $280 billion, its previous target for the end of 2013.