Financial Winners and Losers: Morgan

Updated from 2:07 p.m. EDT

Financial stocks finished mixed Tuesday, with Morgan Stanley (MS Quote) among the handful of losers despite word it would begin the repayment of government bailout funds Wednesday.

CNBC, citing a person familiar with the situation, reported that Morgan Stanley will start repaying billions of dollars in funds received from the Troubled Asset Relief Program. Morgan Stanley received $10 billion from the Treasury and was told it needed to raise $1.8 billion in capital by the government's stress tests.

However, the firm has raised more than $10 billion through equity, debt and asset sales. After spending most of the session in positive territory, shares shed 1.1% to finish at $28.10.

Morgan Stanley was one of 10 financial firms to receive approval to repay TARP funds this quarter. Goldman Sachs (GS Quote), JPMorgan Chase (JPM Quote), American Express (AXP Quote), BB&T (BBT Quote) and U.S. Bancorp (USB Quote) were among the other approved names.

Rochdale Securities analyst Dick Bove said these repayments will be substantial and they will result in a "meaningful, below the line, charge" to the companies involved. Bove provided a methodology for calculating the impacts, finding that the "cost of buying these preferreds back will be quite high."

In a research note, Bove said that once the TARP preferred shares are paid off, banks will still be encumbered by warrants. He argues that it is difficult to fathom how much it will cost the banks to rid themselves of these instruments.

"The warrants are believed to have a 10 year life," Bove wrote. "Therefore, it is incumbent on these companies to redeem the warrants as quickly as they can. The TARP funds provided insurance when it was needed. However, in retrospect this insurance came at a high price."