According to a Reuters report,
) Indian private wealth management division has attracted
potential bidders. In Nov 2012, the company had initiated
strategic review - a process that generally concludes with
divestment - of the unit.
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Among the potential bidders are a few Indian financial services
firms such as L&T Finance Holdings along with foreign firms
Standard Chartered Plc
). Yet, the formal bidding process is expected to start very
soon. Moreover, private wealth management units are generally
sold at 2%-3% premium on the amount of assets managed.
In 2008, Morgan Stanley launched its private wealth management
services for the high net worth investors in India. At present,
the division manages nearly $1 billion (including loans) of
wealth. The opportunity was lucrative at that time, given the
However, at present, the market has become highly competitive.
Also, high staff expenses and frail markets have badly affected
the margins of companies including Morgan Stanley. Further, the
stringent regulatory landscape is fencing further growth
opportunities by putting a limit to product offerings. All these
abovementioned factors have prompted Morgan Stanley to divest
Morgan Stanley is not the only company withdrawing from Asia and
other emerging economies. Last year, many financial firms,
ING Groep NV
) and UK-based
HSBC Holdings Plc
) have announced divestitures of respective divisions from these
We believe that Morgan Stanley's strategy to do away with the
non-core operations will go a long way in improving its
efficiency. Moreover, the Federal Reserve's new proposed
financial regulations, which require banks to maintain a robust
liquidity, are pressurizing banks to improve capital positions.
Thus, selling off unprofitable/non-core units and focusing on
main business is becoming the need of the hour.
Currently, Morgan Stanley retains a Zacks Rank #3 (Hold).