The Zacks Analyst Blog Highlights:Morgan Stanley, ING Groep, HSBC Holdings, Raymond James Financial and Regions Financial
CHICAGO, Nov. 9, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Morgan Stanley (NYSE: MS), ING Groep NV (NYSE: ING), HSBC Holdings Plc. (NYSE: HBC), Raymond James Financial Inc. (NYSE: RJF) and Regions Financial Corporation (NYSE: RF).
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Here are highlights from Thursday's Analyst Blog:
Morgan Stanley to Divest Wealth Management Biz
Morgan Stanley (NYSE: MS) has initiated strategic review – a process that generally concludes with divestment– of its Indian private wealth management division. The review is a part of the company's global strategy to do away with its underperforming wealth management operations.
In 2008, Morgan Stanley launched its private wealth management services for the high net worth investors in India. At present, the division manages nearly $1 billion (including loans) of wealth. The opportunity was lucrative at that time, given the economic boom.
However, at present the market has become highly competitive. Also, high staff expenses and frail markets have badly affected the margins of companies including Morgan Stanley. Further, the stringent regulatory landscape is fencing further growth opportunities by putting a limit to product offerings.
All these abovementioned factors prompted Morgan Stanley to undertake a review of this division. Though the divestiture looks almost certain, there is no word on the possible sale price. Generally, private wealth management units are sold at 2%–3% premium on the amount of assets managed. The potential bidders for this unit are expected to be a couple of Swiss private banks that do not have presence on the Indian soil.
Presently, Morgan Stanley is not the only company withdrawing from Asia and other emerging economies. In October, Netherlands-based ING Groep NV (NYSE: ING) announced the sale of its Malaysian insurance business to Asian insurance giant AIA Group Ltd for nearly $1.7 billion (€1.3 billion).
Apart from this, ING also announced the divestiture of its insurance business, pension and financial planning divisions in Hong Kong and Macau, as well as its life insurance operations in Thailand to Pacific Century Group for a total of $2.14 billion (€1.64 billion) in cash.
Further, in March, HSBC Holdings Plc. (NYSE: HBC) announced the sale of its general insurance businesses in Asia and Latin America for $914 million. The company is divesting its general insurance units in Hong Kong, Singapore, Argentina and Mexico to Australia's QBE Insurance Group Ltd. and France-based AXA Group in two separate deals.
We believe Morgan Stanley's strategy to do away with the non-core operations will go a long way in streamlining its operations. Moreover, the Federal Reserve's new proposed financial regulations, which require banks to maintain a robust liquidity, are pressurizing banks to improve capital positions. Thus, selling off unprofitable/non-core units and focusing on main business is becoming the need of the hour.
Currently, Morgan Stanley retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term 'Neutral' recommendation on the stock.
Is Morgan Keegan Actually Relieved?
According to Reuters, a Financial Industry Regulatory Authority (FINRA) arbitration panel in Boca Raton, Florida, rescinded investors' claim against Morgan Keegan & Co., a unit of Raymond James Financial Inc. (NYSE: RJF). The arbitration claim made by the group of investors, accused Morgan Keegan of misrepresenting documents related to a series of troubled bond funds.
These troubled funds issued by Morgan Keegan, lost as much as 80% of their value in 2008. Therefore, the unit agreed to pay $200 million as regulatory fine for settlement of enforcement actions by regulators related to the funds.
Later on, in 2010, Morgan Keegan was sued by a group of investors, including two trusts and a family limited partnership related to these funds. The complaint lodged claims that Morgan Keegan distorted documents and sold inappropriate funds. They implicated this brokerage firm of issuing misleading statements and making omissions related to these funds as well as concealing the risks associated with it. Investors' demands included $1.9 million in damages for losses and other penalties.
Alongside, Morgan Keegan was accused by federal and state regulators for escalating the value of mortgage-backed securities in the funds fraudulently, at the time of the housing market bubble in 2007.
Moreover, this brokerage firm was swamped by over 1,000 cases associated with the funds. Yet, some of these cases are still pending in the FINRA arbitration process.
Though Morgan Keegan was acquired by Raymond James in 2012, but previous owner-Regions Financial Corporation
), remains responsible for paying claims, if any, as the funds disaster took place before the acquisition.
However, spokespersons of all related parties refrained from issuing any comments.
Financial regulators are proactively trying to recover losses through lawsuits against banks that were involved in malpractices related to the selling of troubled securities and bonds. The continuously increasing number of lawsuits tends to dent the institutions' reputation and financials. However, the investors, who were duped through such investments, should come up with strong evidence to recoup such losses and receive their claims.
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