Analysts says that there is the possibility of Morgan Stanley being bought over. The buyer could be Barclays PLC or other non-US banks but not US commercial banks. Analysts believe that in US there are no other big banks that have the capability to buy over Morgan Stanley. Wells Fargo & Co. and US Bancorp may have the capability to buy 1 investment bank but the both so far has not shown any signs of going forward with such a big deal. NBA Research banking analyst Nancy Bush says that Morgan Stanley may have the possibility to merge with Goldman Sachs. If so Wall Street will only be left with 1 big investment bank.
In fact, the only US company that has the capability to buy over Morgan Stanley is Goldman Sachs. In 2007 Morgan Stanley has made some wrong judgments on mortgage loans. But the performance from then has been rather satisfying to its investors and it has lowered its risks exposure. Goldmans Sachs recently has successfully predicted that the sub-prime crisis will make a turn for the worse and thus able to avoid the crisis.
Goldman Sachs and Morgan Stanley will release their financial reports this week. Analysts estimate that the results will not be that bad as compared to last year same period. If they are able to show they are still profitable then there will be no immediate danger to both.
Latest Updates
22 September 2008
- Goldman Sachs, Morgan Stanley aim to restore market confidence
(Channel NewsAsia) SINGAPORE : The move by investment banking giants Goldman Sachs and Morgan Stanley to change their legal status to bank holding companies is unlikely to affect the organisational structure of the companies.
But market watchers said the move could restore confidence in the market.
By changing their status, the banks are subjecting themselves to tighter controls and scrutiny from national bank regulators, but it also gives them access to direct lending from the US Federal Reserve.
With this in place, confidence in the institutions may return along with money inflows.
Under US regulations, becoming a bank holding company means that both former investment banks will be directly regulated by the Federal Reserve.
They will be required to meet basic liquidity requirements.
Goldman and Morgan Stanley will also have access to a lifeline of federal funds with which to shore themselves up in difficult times.
Observers said the banks are aiming to restore investors' confidence .
Ho Yew Kee, Vice Dean and Associate Professor, Finance, National University of Singapore, said: "It basically says that 'we are going to open our books, and embrace the regulations'. They are saying that they are having the same type of scrutiny and governance as any other bank under the Federal Reserve"
There has been speculation that the banks undertook the status change in order to raise funds by opening commercial outlets, something their new status would allow them to do.
But experts said this is unlikely to happen, and that boosting faith in the market is the priority for now.
Associate Professor Ho said: "Whenever there is no trust or no confidence in the market, the money does not flow. And when money does not flow, the entire machinery of the economy breaks down, and this is something we must prevent from happening or getting worse in the current situation."
Looking ahead, market watchers expect to see Goldman Sachs and Morgan Stanley becoming better run and better supported investment banks, rather than opening branches to take deposits. - Goldman Sachs and Morgan Stanley to be holding companies
(AFP )WASHINGTON: US investment banks Goldman Sachs and Morgan Stanley will become bank holding companies and will receive new US government credit, the Federal Reserve announced late Sunday.
In a statement, the Federal Reserve said its board had approved "the applications of Goldman Sachs and Morgan Stanley to become bank holding companies" and authorised the Federal Reserve Bank of New York "to extend credit" to the two firms.
The Fed also made these collateral arrangements available to the broker-dealer subsidiary of investment firm Merrill Lynch.
Goldman Sachs and Morgan Stanley are the only independent investment banks remaining in the United States following a meltdown on Wall Street that saw the collapse of investment bank Lehman Brothers last Monday and the government bailout of insurance giant AIG.
- Goldman and Morgan Stanley rule out deal
(The Independent) -- Goldman Sachs and Morgan Stanley, the last two remaining independent investment banks, insisted they would remain independent, even as analysts and traders in the credit markets questioned the viability of their business model.
The cost of insuring the two companies' debt against a default has ballooned since rival Lehman Brothers collapsed at the weekend and Merrill Lynch sold itself to avoid a similar fate, and that cost hit a record yesterday.
Last night, Morgan Stanley brought forward the publication of its latest results to try to calm nerves in the debt markets, saying it had significantly outperformed Wall Street's expectations in the last quarter and had access to $179bn (£100bn) in cash and easily saleable assets.
"I felt it was appropriate given circumstances and turmoil in the market," the company's chief financial officer, Colm Kelleher, said, explaining the decision to bring the results forward. "The market's acting irrationally." He said he had been contacted by other Wall Street executives concerned that traders were playing "games" with financial sector stocks.
Morgan Stanley's profit for the three months to 31 August fell 3 per cent to $1.43bn.
The number of major investment banks has been cut from five to two in the past six months, and analysts have begun debating whether they can survive without bolting their volatile business in the capital markets on to a commercial bank that has a large depositor base for security.
Mr Kelleher said depository institutions "may bring with them their own set of complications" and that he was confident in the existing business model. His comment echoed one from Goldman Sachs' chief financial officer David Viniar earlier in the day, who said a merger was off the table. The difficulties Lehman and others have got into stem from poor business decisions, not a flawed business model, Mr Viniar said.
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