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
(NYSE:
RF
), 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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