By Joseph A. Giannone
PURCHASE, New York (Reuters) - Morgan Stanley
Mack, speaking at the investment banking giant's annual meeting here, said the Smith Barney deal, which will give Morgan Stanley a controlling stake in what is by some measures the country's largest brokerage, is a top priority. The transaction is expected to close by the third quarter if not sooner, executives said.
"Our hands are full with Smith Barney," Mack told reporters after the meeting. "We're not in a position to go out and think about acquiring things."
Press reports in recent weeks fanned speculation that Morgan Stanley, which wants to expand its retail financial services and expand deposit funding, was hunting for a bank acquisition.
Mack also told shareholders that Morgan Stanley is pushing ahead with plans to reduce holdings in hard-to-trade assets and pull back from high-risk or capital intensive businesses.
On the so-called reduce list are proprietary trading, principal investing and retail mortgage loan origination.
By comparison, the bank will devote more resources into lower risk "flow trading," or client-driven trading, Mack said. Other growth areas include equity derivatives, foreign exchange, commodities and interest-rates trading.
Mack said the firm's asset management division, while struggling in some regards, remains a "critical component" of the company.
Mack also assured shareholders that market conditions, which sank Lehman Brothers last fall and have slammed banking shares, may be improving.
"We're seeing signs of light in the capital markets," Mack said. He noted Morgan's role in underwriting the first major initial public offering this year and a sole-managed junk bond deal as evidence of brighter prospects.
(Editing by Brian Moss)
