May estimates that Morgan Stanley will earn 90 cents a share for 2012, followed by earnings of $1.90 a share in 2013.
Morgan Stanley currently holds 51% of the Morgan Stanley Smith Barney Joint Venture, with Citigroup (C) holding the remaining 49%. Morgan Stanley has the option to purchase the remaining stake in the joint venture over a three year period beginning this year, and in May announced plans to purchase an additional 14% stake, subject to a valuation that will be determined by Perella Weinberg Partners LP, with an extended deadline of Sept. 10.
The formation of the joint venture benefited Citigroup immensely during the second quarter of 2009, when the company sold its Smith Barney subsidiary to the joint venture and booked a gain of $11.1 billion, shoring up its capital, while the company was still suffering tremendous credit losses.
Analysts are expecting Citigroup and Morgan Stanley to compromise on the joint venture's valuation, leading to a third-quarter write-down for Citi, likely ranging between $3 billion and $4 billion.
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