Flush with $9 billion of cash from Japan’s Mitsubishi UFJ, John Mack sent out a celebratory memo to the troops today. He attacked “rumormongers,” which is standard for Wall Street CEOs these days, and explained that “out of control” market sentiment forced them to close the deal a day earlier. Most surprisingly, however, he said that Morgan Stanley was looking to acquire a larger deposit base by acquiring banks.
“As you know, we already have two deposit taking institutions with total deposits of $36 billion – and the Firm will be looking to grow those deposits over time,” he writes in the memo. “We also will be looking at acquisitions that might make sense for the Firm and help us ramp up our deposit base.”
Mack also gave some details about how the deal brings down the firm’s leverage ratio to under 20x.
Today’s investment further bolsters Morgan Stanley’s strong capital position – and boosts our Tier 1 Capital Ratio to more than 15.5 per cent, on a pro-forma basis as of August 31. This is more than double the 6 per cent required by the Federal Reserve to be treated as well-capitalised and is one of the highest Tier 1 Capital Ratios among bank holding company peers. This investment also will reduce Morgan Stanley’s leverage ratio to under 20x and its adjusted leverage ratio to just over 10x, on a pro-forma basis at August 31.
You can bet that the August 31st date may raise some eyebrows. That’s weeks before the collapse of Lehman, which means that any writedowns in assets arising from Lehman’s collapse aren’t getting counted into the ratio.
Our friends at DealJournal have the entire Mack memo.