In order to further boost shareholders' value, Morgan Stanley ( MS ) is expected to seek an increase in share repurchase authorization when it submits the new capital plan with the Federal Reserve in 2014. As per a report in The Wall Street Journal, the news has been confirmed by internal sources well versed with the matter.
Earlier, in July, Morgan Stanley received the Fed's approval for share buybacks of up to $500 million through Mar 31, 2014. Subsequently, in third quarter 2013, the company repurchased nearly 4.5 million shares worth $123 million.
The aforementioned buybacks were the first of their kind since the financial crisis. During the financial meltdown Morgan Stanley reduced its quarterly dividend by nearly 81.5% to 5 cents and suspended its share buyback program. The current move therefore reinforces shareholders' confidence in the stock and depicts Morgan Stanley's improved capital position as well.
As per the provisions of the Dodd-Frank financial-services law, banks (with consolidated assets of $50 billion or more) are required to submit their capital plans with the Fed for approval every year. Most of the banks including The Goldman Sachs Group, Inc. ( GS ), JPMorgan Chase & Co. ( JPM ), SunTrust Banks, Inc., Capital One Financial Corp. and Zions Bancorp. have been enhancing shareholders' value since 2011.
However, given its priority to purchase the remaining stake in its joint venture (JV) with Citigroup Inc. ( C ) - Morgan Stanley Wealth Management (MSWM) - the company did not ask for any additional capital deployment. In Jun 2013, the company purchased the remaining 35% stake in MSWM JV, which positively impacted its third-quarter 2013 results.
Morgan Stanley has been generating positive earnings surprise in the trailing four quarters with an average beat of 25.95%. This looks impressive as increased profitability enhances the possibility of dividend hikes in the future, provided the company receives the Fed's consent for the same.
Morgan Stanley currently carries a Zacks Rank #3 (Hold).