As per a recent Bloomberg report, Morgan Stanley (MS) is planning to sell its global oil business to Russia’s largest oil company, OAO Rosneft. The negotiation is in the preliminary stage, according to an internal source.
Morgan Stanley might divest TransMontaigne Inc., a Denver-based petroleum and chemical transportation and storage company along with its 49% stake in Heidmar Inc., based in Norwalk, Connecticut.
Morgan Stanley, however, did not mention plans of disposing its commodity business as a whole. Moreover, the bank is expected to retain a part of its oil derivative business even if the latest talks materialize.
The following is our rough coverage of the 2021 Sohn Investment Conference, which is being held virtually and features Brad Gerstner, Bill Gurley, Octahedron's Ram Parameswaran, Glenernie's Andrew Nunneley, and Lux's Josh Wolfe. Q1 2021 hedge fund letters, conferences and more Keep checking back as we will be updating this post as the conference goes Read More
At present, Morgan Stanley is primarily focusing on its core business and is, therefore, vending units generating lower revenues. Moreover, with improving investor sentiment, the equity segment appears to be a lucrative option. Hence, the anticipated deal is a strategic move to divert capital from the fixed income and commodity division to a comparatively promising equity segment.
Presently commodity trading businesses of large financial institutions are under scrutiny as the Federal Reserve is reconsidering its decision to allow the banks to trade in physical commodity market. Banks have allegedly been misusing their trading platforms, thereby manipulating prices of the commodities.
In such a scenario, the latest move by Morgan Stanley seems to be a strategic decision to evade regulatory surveillance. The commodity businesses of other Wall Street biggies undergoing similar review include JPMorgan Chase & Co. (JPM), Citigroup, Inc. (C) and The Goldman Sachs Group, Inc. (GS).
Currently, Morgan Stanley carries a Zacks Rank #3 (Hold).