NEW YORK (
was the winner among the largest U.S. large bank holding companies on Thursday, with shares rising 1% to close at $14.90.
The broad indexes all showed 1% declines on very light trading volume, after the U.S. Labor Department announced that first-time jobless claims for the week ended Aug. 25 totaled a seasonally adjusted $374,000, which was unchanged from the previous week.
KBW Bank Index
also declined 1% to close at 47.03, with all 24 index components showing declines, except for
, with shares rising slightly to close at $8.40.
declined 1% to close at $29.65, after the
Wall Street Journal
reported that the company had agreed to pay $590 million to investors who bought the company's common stock between Feb. 26, 2007, and April 18, 2008, to
that Citi had mislead investors by hiding the extent of its underwriting of subprime mortgage-backed securities.
Citigroup denies the allegations. The company in 2010 settled similar allegations with the Securities and Exchange Commission for $75 million, also without admitting fault.
The coming payout to investors seems to be a rather paltry sum, when considering that Citigroup's shares had lost nearly 94% of their value for the five-year period through Wednesday's close, according to Thomson Reuters Bank Insight. The shares underwent a 1-for-10 reverse split in May of last year, and have now returned 13% year-to-date.
Morgan Stanley's shares have now declined 1% year-to-date, following a 44% decline during 2011.
The shares trade for just under half their reported June 30 tangible book value of $31.02, and for eight times the consensus 2013 EPS estimate of $1.94. The consensus 2012 EPS estimate is 90 cents.
The company currently owns 51% of the Morgan Stanley Smith Barney joint venture, with Citigroup holding 49%. Morgan Stanley has the option to purchase the remaining stake in the joint venture over a three year period beginning in 2012, and in May announced plans to purchase an additional 14% stake, subject to a valuation that was to be determined over a 90-day period, which on Wednesday was extended until Sept. 10.
Well Fargo analyst Matthew Burnell, who rates Morgan Stanley "Market Perform," with a valuation range of $13 to $15, said on Wednesday that the Morgan Stanley Smith Barney joint venture was being appraised by "Perella Weinberg Partners LP following valuations by the two companies that resulted in a wide difference of opinion on the value of MSSB."
The analyst went on to say that because Citigroup had previously valued its stake in the joint venture at roughly $11 billion, while Morgan Stanley had valued the stake at about $4.4 billion, "the potential pretax writedown of Citi's stake could exceed $6B if MS' valuation is accepted," Burnell believes "a more likely writedown is in the range of about $4B (before tax) based on current retail broker comps and the MSSB contribution to MS (adjusted for elevated noncore expenses in MSSB) compared to our current estimate of Citi's pretax profit of $4.2B."
Burnell also said that the delay in Citigroup's sale of the joint venture stake to Morgan Stanley "could heighten speculation that the two parties could be working on a larger sale of MSSB than the 14% called upon in the joint venture agreement."
The analyst estimates that Morgan Stanley will earn 90 cents a share for all of 2012, followed by 2013 EPS of $1.75.
Interested in more on Morgan Stanley? See TheStreet Ratings' report card for this stock.
Written by Philip van Doorn in Jupiter, Fla.
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.