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Jul 26, 2012

Dealtalk – Citi could get burned by its sunny brokerage appraisal

NEW YORK (Reuters) – Citigroup Inc’s (C.N: Quote, Profile, Research) $22 billion (14 billion pounds) valuation of its brokerage joint venture with Morgan Stanley (MS.N: Quote, Profile, Research) reflects an extremely optimistic view of the future of Wall Street profits, making a multi-billion-dollar loss on the business more likely for Citi.

Sources familiar with the situation said Citi’s appraisal works out to 50 times current one-year earnings for the joint venture, Morgan Stanley Smith Barney. The long-term average price-to-earnings ratio for retail brokers is only about 18 times.

Jul 26, 2012

Citi could get burned by its sunny brokerage appraisal

NEW YORK (Reuters) – Citigroup Inc’s (C.N: Quote, Profile, Research, Stock Buzz) $22 billion valuation of its brokerage joint venture with Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) reflects an extremely optimistic view of the future of Wall Street profits, making a multi-billion-dollar loss on the business more likely for Citi.

Sources familiar with the situation said Citi’s appraisal works out to 50 times current one-year earnings for the joint venture, Morgan Stanley Smith Barney. The long-term average price-to-earnings ratio for retail brokers is only about 18 times.

Jul 26, 2012

DEALTALK: Citi could get burned by its sunny brokerage appraisal

NEW YORK, July 26 (Reuters) – Citigroup Inc’s $22
billion valuation of its brokerage joint venture with Morgan
Stanley reflects an extremely optimistic view of the
future of Wall Street profits, making a multi-billion-dollar
loss on the business more likely for Citi.

Sources familiar with the situation said Citi’s appraisal
works out to 50 times current one-year earnings for the joint
venture, Morgan Stanley Smith Barney. The long-term average
price-to-earnings ratio for retail brokers is only about 18
times.

Jul 19, 2012

Citigroup, Morgan Stanley far apart on joint-venture value

July 19 (Reuters) – Morgan Stanley reckons the retail
brokerage business it jointly owns with Citigroup Inc is
worth less than half as much as Citigroup believes, Citi said in
a filing on Thursday with the Securities and Exchange
Commission.

Citigroup and Morgan Stanley exchanged appraisals of the
joint venture because Morgan Stanley plans to buy an additional
14 percent share of the brokerage. Morgan Stanley currently owns
51 percent of the business known as Morgan Stanley Smith Barney,
by some measures the largest U.S. retail brokerage.

Jul 19, 2012

Morgan Stanley plans further staff cuts on weak outlook

July 19 (Reuters) – Morgan Stanley became the latest
bank to announce more layoffs to shrink expenses as Wall Street
prepares for an extended period of weak global economic growth
and low trading and dealmaking volumes.

The investment bank, which posted a sharp drop in
second-quarter revenue, expects its payroll to decline by about
another 1,000 workers this year to meet a broader target of
reducing staff levels by 7 percent from December 2011 levels,
Chief Executive James Gorman said on Thursday.

Jul 19, 2012

Exclusive: Ex-Goldman mortgage chief plans foreclosed home fund

NEW YORK (Reuters) – Former Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research) executive Donald Mullen, one of the architects of the subprime mortgage trade, is trying to raise at least $500 million for a fund that will buy foreclosed homes with an eye toward renting them out.

Mullen, who until January was head of the credit and mortgage business inside Goldman’s securities division, began marketing his Fundamental REO Access fund in earnest about a month ago, said seven people familiar with the matter, but who did not want to be identified because they do not work for the upstart fund.

Jul 19, 2012

Ex-Goldman mortgage chief plans foreclosed home fund

NEW YORK, July 19 (Reuters) – Former Goldman Sachs Group
Inc. (GS.N: Quote, Profile, Research) executive Donald Mullen, one of the architects of
the subprime mortgage trade, is trying to raise at least $500
million for a fund that will buy foreclosed homes with an eye
toward renting them out.

Mullen, who until January was head of the credit and
mortgage business inside Goldman’s securities division, began
marketing his Fundamental REO Access fund in earnest about a
month ago, said seven people familiar with the matter, but who
did not want to be identified because they do not work for the
upstart fund.

Jul 19, 2012

Morgan Stanley expects 7 percent staff cut on weak outlook

By Lauren Tara LaCapra

(Reuters) – Morgan Stanley plans to cut more staff this year and expects headcount to fall by 7 percent, or 4,100, as it prepares for weak economic growth globally and low trading volume, the investment bank said on Thursday.

Morgan Stanley, reporting a 24 percent decline in second-quarter revenue, is the latest bank to sound gloomy notes about the economy. Banks have had to cope with companies’ reluctance to issue debt and equity, the European debt crisis, and slow stock and bond trading.

Jul 19, 2012

Morgan Stanley bond business hurt by Moody’s rating cut

July 19 (Reuters) – Morgan Stanley’s bond-trading
business suffered during the second quarter as clients fretted
that its credit ratings could be cut to just two steps above
junk, but that cloud has since lifted, the investment bank’s CFO
said on Thursday.

The downgrade came in late June and was not as bad as many
investors had feared – Moody’s Investors Service cut the bank’s
main rating to “Baa1,” three steps above junk.

Jul 19, 2012

Morgan Stanley posts $3.7 billion collateral since downgrade

By Lauren Tara LaCapra

(Reuters) – Morgan Stanley has posted $3.7 billion in collateral and other payments since Moody’s downgraded the investment bank’s credit ratings, though the pace of collateral calls has slowed, Chief Financial Officer Ruth Porat said in an interview.

Morgan Stanley said in its earnings report on Thursday that it posted $2.9 billion in collateral and other payments during the second quarter, out of a possible $6.3 billion.