Morgan Stanley (NYSE:MS) to focus on returns and new investments
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Morgan Stanley (NYSE:MS) spent the last couple of years getting rid of the superfluous things from its fixed income trading portfolio. The money that will be saved from these cuts will be invested in new projects. JP Morgan (NYSE: JPM) will reinvest money into sectors like municipal bonds, security sector. These sectors are capable enough to generate huge profits for the bank.
After the jolt of financial crisis, banks have been quite choosy about which trades to get into. Reinvesting capital into small trades is clear evidence that Morgan Stanley (NYSE:MS) is shrinking down to focus on smaller businesses. Trading has become quite expensive. Morgan Stanley (NYSE:MS) is focus more on the return it gets on equity rather than entering into different sectors.
Morgan Stanley (NYSE:MS)’s bond trading business is waning currently, well behind other banks like JP Morgan (NYSE: JP) and Goldman Sachs (NYSE: GS). These groups are quite profitable in the bond trading area, whereas Morgan Stanley (NYSE:MS) hasn’t been the same since the new regulations.
Morgan Stanley (NYSE:MS) is closing in on its target of $180 billion, when it comes to fixed income trading assets. They’ll be looking to reinvest that money into sectors where the profit has been dwindling excessively. Executives working at the bank are uncertain about where the bank might be heading. But for now, the goal is to regain what has been lost.
Some time ago, it was being said that the bank was committed to grow the revenue in the range of fixed-income trading businesses. They said the market would increase by 2 percent. The other ‘pledge’ was to grow in interest driven projects such as treasuries, where the return is enormous.
As the times changed and financial hits came upon them, Morgan Stanley (NYSE:MS) started scraping off its ‘pledges’ and started work on covering up their losses and have not been quite successful at that. Improving returns has become the main priority for Morgan Stanley (NYSE:MS). Initially the goal was to reach average $1.75 billion quarterly revenue.
The third quarter result of 1 billion dollars in adjusted fixing was better than what analysts had predicted. This means that their current strategy of covering up their losses and making profits has started to work. Besides, it’s not wise to be working at multiple things, because financially such projects can get blown out of proportion.
Morgan Stanley (NYSE:MS) is a veteran bank that is well versed when it comes to finances. The bank realizes that there can be no expansion without initial profits, and there can’t be any investors if there is no profit. Hence to lose the profits is to lose the whole ball game. It’s better to live today so that you can fight tomorrow. Perhaps that’s what Morgan Stanley (NYSE:MS) employed when they adopted the strategy of focusing only on improving returns. Of course it is not something they’ll only be focusing at, but it is something that they will always be keeping an eye at.