Morgan Stanley Says Deal With Russia’s Rosneft on Track

Morgan Stanley still expects to complete the sale of a physical oil business to OAO Rosneft amid U.S. sanctions of Russian leaders, Chief Financial Officer Ruth Porat said.

“We’re still looking at closing in the second half of this year, and that’s of course subject to all necessary regulatory approvals,” Porat said in a telephone interview today. Of communications with regulators, she said, “We haven’t heard anything at this point.”

Morgan Stanley agreed last year to sell a unit that stores, trades and transports oil products to a subsidiary of Russia’s OAO Rosneft. The firm has also said it’s exploring strategic options for its stake in TransMontaigne Inc., the Denver-based petroleum and chemical transportation and storage company.

Regulators and lawmakers have questioned banks’ involvement in the physical commodities businesses, saying the operations could pose catastrophic risks to the firms and potentially lead to their collapse and public bailouts.

The White House has discussed including Rosneft Chief Executive Officer Igor Sechin on an updated list of sanctioned Russian individuals, the New York Times reported this week, citing people familiar with the matter. Sechin, an ally of Russian President Vladimir Putin, said last month that he didn’t expect the existing U.S. sanctions to affect the deal.

Porat, 56, has said that the unit Morgan Stanley is selling to Rosneft broke even last year on a pretax basis.

Morgan Stanley’s first-quarter fixed-income and commodities revenue climbed 9 percent to $1.65 billion, driven by strength in commodities trading. Excluding the oil business its selling and the TransMontaigne unit, the fixed-income division’s revenue rose “slightly” versus a year earlier, Porat said on a conference call today.

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