Morgan Stanley Smith Barney Gives Way To Morgan Stanley Wealth Management

September 25th, 2012 by Trefis Team
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The Morgan Stanley Smith Barney (MSSB) joint venture between Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C) has now been renamed Morgan Stanley Wealth Management. [1] The decision by the investment bank to go ahead with the rebranding came within a week after it acquired an additional 14% stake in the country’s largest brokerage business. Morgan Stanley shelled out just under $1.9 billion to raise its share in the business to 65% after settling the contentious valuation issue with Citigroup earlier this month (see Morgan Stanley Agrees To New Price For Smith Barney Unit After Third Party Valuation).

We have a $19 price estimate for Morgan Stanley’s stock, which is less than 10% above the current market price.

See our full analysis of Morgan Stanley | Citigroup

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Rumors of an impending name change for MSSB were doing the rounds for well over six months. Morgan Stanley has faced considerable difficulty in integrating its legacy wealth management business with Smith Barney over the recent years, and we believe that the rebranding is an essential first step toward the integration and an eventual improvement in margins for the combined business. Morgan Stanley is rightly looking to realign the affiliation of original Smith Barney brokers to the cause of the integrated business.

As seen above, margins for MSSB have been dismal since the joint venture was formed in January 2009. And Morgan Stanley will need to put quite some effort to raise the margin figure to even the conservative ‘mid-teens’ target it set for the business.

After all, the original Smith Barney tagline boasted – “They make money the old-fashioned way. They earn it.” With opportunities slowing down due to a soft economy and with competitors like Bank of America-Merrill Lynch (NYSE:BAC) and Wells Fargo (NYSE:WFC) hard on its heels, the new Morgan Stanley Wealth Management business sure will just have to work hard to continue earning.

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Notes:
  1. Goodbye, Smith Barney: Morgan Stanley Wealth Management Starts Tues., The Wall Street Journal Blog, Sept 24 2012 [↩]