Financials Weekly Notes: BNY Mellon, Morgan Stanley And RBS

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Bank shares continued the decline they started last week over the first three days of the week, with a rather pessimistic outlook for QE3 by Federal Reserve Bank of Philadelphia President Charles Plosser primarily contributing to the loss of confidence. Plosser’s view that the third round of stimulus will not do much to boost economic growth or to improve the job situation resulted in investor’s shying away from the bank stocks. Investor confidence was already shaky from unwarranted delays in Europe’s recovery plan, a rapidly deteriorating Spanish economy and growth concerns which led the Chinese stock market to its lowest levels in three years have all added to investor woes. Things, however, started to look better towards the end of the week when Spain announced stricter budget cuts – leading bank stocks higher on Thursday.

There were notable events to report for BNY Mellon (NYSE:BK), Morgan Stanley (NYSE:MS) and RBS (NYSE:RBS) this week.

Bank of New York Mellon

Earlier this week, BNY Mellon announced the expansion of its cross-border payment offering to accommodate payments in euro (EUR), pound sterling (GBP) and Australian dollar (AUD) besides the U.S. Dollar (USD). This addition to its fully automated Payment Decision Service offering should help the world’s largest custodian bank attract more clients and grow its foreign exchange business.

This week, the bank was also named the global custodian for a new qualified domestic institutional investor (QDII) fund in China – granting it access to the nation’s growing financial market. The S&P 500 index QDII fund was launched in Q2 2012 by Bosera Asset Management and has the Industrial and Commercial Bank of China (ICBC) as its local custodian.

You can read more about this in our article: BNY Mellon Expands Cross-Border Payment Offering, Named Custodian For Chinese Fund.

See our full analysis for BNY Mellon

Morgan Stanley

Morgan Stanley rebranded the erstwhile Morgan Stanley Smith Barney brokerage business as Morgan Stanley Wealth Management this Tuesday, and has started an extensive marketing campaign to draw attention to the business. The change came within a week of the investment bank’s acquisition of an additional 14% stake in the joint venture with Citigroup (NYSE:C).

The challenge that remains on Morgan Stanley’s hands is to figure out ways to integrate the Smith Barney business to its legacy wealth management business in the most optimal manner possible so that the dismal margins the brokerage has seen in recent years can be improved over the times to come.

You can read more about this in our article Morgan Stanley Smith Barney Gives Way To Morgan Stanley Wealth Management.

See our full analysis for Morgan Stanley

RBS

RBS will begin the process of selling shares in the Direct Line Group in the near future at a valuation of £2.6 billion ($4.2 billion) for the insurance business. [1] The London-based banking group which is controlled by the U.K. government through a 82% stake is in the final phase of exiting the business – a move mandated by the government as a necessary condition towards the bank’s bailout after the economic crisis of 2008. The valuation is reportedly lower than what was arrived at by analysts, and has been set at that level to attract large institutional investors.

The share offering will be done over multiple phases, with the first phase seeing the sale of around 30% shares soon.

See our full analysis for RBS

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Notes:
  1. Direct Line to be valued at about £2.6bn, Financial Times, Sept 26 2012 []
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