Morgan Stanley explores new structures for commods unit: CEO
Morgan Stanley is exploring "different structures" for its commodities business, the CEO of the investment bank said on Thursday, in the company's first public comments that hint at a possible sale of its multi-billion dollar oil and metals trading arm.
The investment bank has been in discussions with OPEC member Qatar for more than a year over the sale of at least a majority stake in its energy-focused trading business, according to bankers.
Morgan Stanley CEO James Gorman, speaking on a conference call to analysts after the firm reported better-than-expected quarterly results, said changes under the Dodd-Frank financial reform law restricted the kind of trading the firm's could now do in commodities.
"There are potential limits to some of the activities that we can pursue in that business," Gorman said.
"So it is incumbent upon us to explore all forms of different structures, appropriate structures, that can take us forward where we can get the benefits of the business but also meet the regulatory constraints that we operate under.
On Monday, Qatar's Prime Minister Sheikh Hamad bin Jassim al-Thani said they were seriously "studying the proposal," but needed a few more weeks to "review the details," without elaborating on the terms of the investment.
Morgan Stanley's commodities trading revenues have dropped sharply since 2008, partly because of the Volcker rule that bans banks from proprietary trading and partly because of capital constraints.
Based on Reuters calculations, revenues peaked at around $3 billion in 2008, declining to some $1.3 billion last year, the lowest since 2005.
Selling the capital-intensive commodities business would raise much-needed funds for Morgan, and allow the divested unit to maintain ownership of physical assets in the United States and resume proprietary trading.
Earlier this month, banking sources said the talks between Morgan Stanley had run into difficulty and the deal might need to be reworked if it were to go ahead.
Qatar Holding, the investment arm of the Gulf state's sovereign wealth fund Qatar Investment Authority, has led most foreign acquisitions but has focused on minority holdings including stakes in Barclays , Credit Suisse , Volkswagen and Porsche . It has full ownership of retailer Harrods.
Morgan Stanley's adjusted earnings rose sharply in the third quarter compared with last year as it boosted revenue from trading bonds, long a sore spot for the investment bank. Income from continuing operations totaled $561 million compared with $64 million a year earlier.
(Reporting by Lauren Tara LaCapra, writing by David Sheppard; Editing by Marguerita Choy)