Keefe, Bruyette & Woods is calling the potential joint venture between Citigroup Smith Barney and Morgan Stanley’s retail brokerages a “win-win,” citing the potential for both companies to cut costs and leverage the largest-ever brokerage force that would be created. “[Morgan Stanley] benefits by diversifying its revenues and creating a bigger platform to grow its deposits base,” wrote Lauren Smith and Joel Jeffrey, brokerage analysts, in an update report on Morgan Stanley Monday.
Morgan has been trying to grow deposits through its existing brokerage force of roughly 8,400 and an initiative to grow a lending platform (WSL, 11/6). It has already raised more than $3 billion in deposits in October alone. Smith and Jeffrey called growing deposits a priority for the company and said the joint venture is likely to benefit from the fallout of competitors’ deals, such as Bank of America’s purchase of Merrill Lynch and Wells Fargo’s acquisition of Wachovia. Both of those purchases are still being digested and the combined companies are shedding redundant staff. KBW rates Morgan Stanley at “outperform,” with a 12-month price target of $24.00.