SINGAPORE (Reuters) – U.S. investment bank Morgan Stanley is weighing whether it should remain independent or merge with a bank, given the recent turbulence in the company’s share price, broadcaster CNBC reported on Wednesday.

Morgan Stanley officials were not in merger talks as of late Tuesday, CNBC said, citing unnamed people close to the matter.

“But senior people at Morgan concede that further zig-zags in the company’s stock price could and possibly will force the company to change course and seek a merger partner, probably a well capitalized bank,” CNBC reported on its Website.

Morgan Stanley shares closed down 10.8 percent at $28.70 on Tuesday, having fallen 46 percent so far this year.

Morgan Stanley officials in Hong Kong declined to comment on the report.

In an interview with Reuters on Tuesday, Morgan Stanley’s Chief Financial Officer Colm Kelleher said the No. 2 U.S. investment bank remains confident in its broker-dealer model and dismissed the need to merge with a deposit-taking bank, even as he maintained a cautious stance about the markets.

(Reporting by Lincoln Feast; Editing by Jean Yoon)

>News reported by Interactive Investor

US investment bank Goldman Sachs has reported a 70% fall in third-quarter earnings as financial markets continue to be hit by the credit crunch.

The Wall Street giant revealed net income of $845m (£473m), down from $2.85bn a year before. Net revenue fell to $6.04bn from $12.3bn.

Boss Lloyd Blankfein said Goldman had seen a decrease in client activity “and declining asset valuations”.

The results were slightly better than analysts had expected.

Goldman Sachs saw its shares close $2.49 lower to $133.01.

While its business has slowed, Goldman has avoided the massive losses the credit crisis that brought Lehman Brothers to its knees.

Unlike many investment banks, Goldman bet correctly that the value of mortgage bonds would go down, helping it avoid the fallout from the collapse in the US sub-prime mortgage market.

However, the credit crunch triggered by the sub-prime meltdown has resulted in fewer of the buyouts and share flotations that are the mainstay of investment banking.

News reported by The BBC

British bank Barclays is in talks to buy the core assets of Lehman Brothers – the US broker-dealer business and the mergers-and-acquisitions team.

Lehman – the fourth-largest investment bank in the US – filed for bankruptcy protection on Monday.

BBC Business Editor Robert Peston says Barclays does not want Lehman’s “toxic investments in the residential and commercial property markets”.

Nor, he says, does it want Lehman’s surviving, unsettled transactions.

However, our correspondent adds that Barclays does want the 8,000 to 10,000 US employees of Lehman – which it sees as formidable profit generators. But for the 5,000 Lehman staff in London, the outlook remains uncertain.

Market turmoil

In a statement, Barclays confirmed that it was discussing with Lehman Brothers the possible acquisition of certain assets “on terms that would be attractive to Barclays shareholders”.

“There can be no assurance that the discussions will result in an agreement. A further announcement will be made in due course,” Barclays added.

The collapse of Lehman, which had incurred billions of dollars of losses from the failing US mortgage market, has led to big falls on the global equity markets, with banking shares especially hard hit on worries that there could more victims.

There have also been fears that AIG, once the world’s largest insurer, could face collapse. On Monday, the State of New York announced a “multi-billion dollar financing plan” to help stabilise AIG’s finances.

In August, Barclays reported a 33% drop in pre-tax profits for the first half of 2008 following more credit crunch related write-downs.

The bank made £2.75bn, down from £4.1bn, which it said at the time was “acutely disappointing”.

Barclays said last month it had taken charges of £2.45bn for bad debts, including exposure to US sub-prime mortgages and other credit market problems.

News reported by The BBC

Wall Street bank Lehman Brothers has filed for chapter 11 bankruptcy protection after emergency talks to find a buyer failed.

Confidence in the 150-year-old investment bank – the fourth largest in the US – crumbled last week amid growing concerns that its large portfolio of mortgage-backed assets was worth far less than it was originally valued.

During the past year Lehman reported billion-dollar losses and saw its share price plummet more than 95%.

Why did Lehman fail?

Lehman Brothers is considered one of Wall Street’s biggest dealers in fixed interest trading and was heavily invested in securities linked to the US sub-prime mortgage market.

With these investments now shunned as high risk, analysts say it was inevitable that confidence in Lehman Brothers would likely be hit – particularly after the collapse of Bear Stearns earlier this year.

In its June to August period last year, the bank said it would make write downs of $700m as it adjusted the value of its investments in residential mortgages and commercial property.

One year on this figure soared to $7.8bn, which last week resulted in Lehman reporting the largest net loss in its history. The bank also admitted that it still had $54bn of exposure to hard-to-value mortgage-backed securities.

Despite having access to cash reserves, worried investors pummelled the firm’s shares last week after talks to raise billions of dollars from outside investors ran into a brick wall.

How does it affect me?

Nobody has a Lehman Brothers cheque book or current account. The company is an investment bank that specialises in big and complex deals and investments.

Despite this, Lehman’s collapse will probably be felt by millions of people around the world – at least indirectly.

Most of our banks and pension funds have dealings with Lehman, or with firms like hedge funds that traded extensively with Lehman.

Unwinding Lehman’s complex deals could take weeks or months. During that time the global financial system will be snarled up. Many banks won’t know for sure how much they are exposed to Lehman, and will have difficulty freeing up the money in those deals.

This in turn is likely to intensify the credit crunch, with potentially dire consequences for businesses and consumers.

And the dramatic collapse of Lehman Brothers has also shaken the financial markets, with share prices slumping around the world.

Are any other firms in trouble?

Well, for starters there is Merrill Lynch, another large US investment bank. In a surprise move, Bank of America agreed on Sunday to buy Merrill Lynch.

The fear was that investors would have started a witch hunt for the next bank with heavy exposure to debt linked to mortgages, the value of which continues to tumble, and Merrill Lynch would have been the likely suspect.

The biggest worry, though, is insurance giant AIG. Reports suggest that AIG has asked the US central bank for a $40bn bridging loan.

If AIG is in trouble, it would directly affect millions of consumers and companies around the world. It would also hurt the whole financial system.

And compared to AIG, the crisis surrounding Bear Sterns and Lehman is small beer.

Why didn’t the US Treasury save Lehman Brothers?

When Bear Stearns ran into trouble, the US Treasury made the terms favourable for JP Morgan Chase to buy it.

And just last week, the US government effectively nationalised Fannie Mae and Freddie Mac, which between them own or guarantee about half of the $12 trillion US mortgage market.

So already the US tax payer has been put at risk of shouldering the burden of billions of dollars of losses, and it is becoming politically less acceptable for the government to keep bailing out private companies.

By not giving UK bank Barclays a guarantee for Lehman’s trading obligations as part of a deal to buy the business, analysts say the US Treasury has put a line under its willingness to use public money to rescue banks which have made wrong decisions.

Instead, government officials have focused on supporting the financial system in other ways, announcing measures to ease access to emergency credit for struggling financial companies.

How big is Lehman Brothers?

Founded in 1850 by three immigrants from Germany, Lehman Brothers has been a prominent investment bank in Wall Street for decades.

It operates at a wholesale level, dealing with governments, companies and other financial institutions, employing 25,000 people worldwide, including 5,000 in the UK.

Its core business includes buying and selling shares and fixed income assets, trading and research, investment banking, investment management and private equity.

As the crisis in financial markets has gathered momentum, it has seen its share price collapse from $82 to less than $4 – a fall of 95%.

News reported by The BBC

The fourth-largest investment bank in the US, Lehman Brothers, has said it will file for bankruptcy protection, amid a growing global financial crisis.

Lehman had incurred losses of billions of dollars in the US mortgage market.

The move threatens to deal a further blow to the global financial system, as banks unwind their deals with Lehman.

Merrill Lynch, also stung by the credit crunch, has agreed to be taken over by Bank of America in a dramatic weekend of events for Wall Street.

Stock markets in Europe and Asia dropped sharply and the dollar tumbled against the euro and the yen as Lehman’s failure raised fears about the strength of the global financial system.

“The global financial economy has never in recent years been tested by quite such a combination of accidents and jolts to confidence” Robert Peston, BBC business editor

The FTSE 100 index of leading UK shares was down 160 points, almost 3%, at 5256.50 in early exchanges.

Wall Street is also expected to open lower in what is likely to be a tense day of trading.

The Bank of England and the European Central Bank said they were monitoring money markets and stood ready to intervene if necessary.

Talks collapse

The chance that Lehman Brothers could collapse increased sharply after the strongest potential buyers pulled out at the weekend.

Barclays and Bank of America had been in talks to rescue the bank but negotiations faltered when it became clear that the US Treasury was strongly opposed to using government money to help clinch a deal.

Greg Wood, the BBC’s North America business correspondent, said that police had cordoned off the bank’s headquarters in New York and staff were leaving with cardboard boxes as onlookers gathered to watch the bank’s demise.

“I think the whole history – 150 years of effort and hard work – that’s the most saddening part for me,” said one Lehman employee as she left the building.

The bank, which employs about 25,000 staff worldwide, including 5,000 in the UK, was founded in 1850 by three brothers.

‘Extraordinary 24 hours’

Lehman Brothers said it intended to file for Chapter 11 bankruptcy protection, which allows a company time to reorganise and devise a plan to pay creditors over time.

It said that its broker-dealer division and asset management division Neuberger Berman Holdings would not be included in the filing.

The accounting firm PriceWaterhouseCoopers said the UK operations of Lehman Brothers have been placed under administration, and the business would be wound down in an orderly fashion.

Bank of America said it had agreed to buy investment bank Merrill Lynch for $50bn (£28bn), in a deal that will create the world’s largest financial services company.

Three of the top five US investment banks have now fallen victim to the credit crunch. Lehman and Merrill join Bear Stearns, which was sold to JP Morgan for a knockdown price in March.

The BBC’s business editor, Robert Peston, said that it had been Wall Street’s most extraordinary 24 hours since the late 1920s.

He said that Merrill’s sale was almost as shocking as Lehman’s demise.

“The global financial economy has never in recent years been tested by quite such a combination of accidents and jolts to confidence,” he said.

Insurer in trouble

In addition to Lehman and Merrill Lynch, problems at AIG, once the world’s largest insurer, are also mounting.

Reeling from losses on its exposure to real estate, AIG has sought $40bn from the Federal Reserve to shore up its finances, the New York Times has reported.

To help prevent panic on financial markets, the Federal Reserve said for the first time it will accept stocks owned by banks as collateral for short-term cash loans, broadening its emergency lending programme.

Also 10 of the world’s biggest banks on Sunday agreed to establish a $70bn emergency fund, with any one of the banks able to able to tap up to a third of it should they face any liquidity problems.

News reported by The BBC

Panmure Gordon, the British stockbroker and investment bank, has announced a large Egyptian bank will buy a share in its business for £3.2m.

EFG-Hermes, Egypt’s largest investment bank by market value, has agreed to acquire 9.97% of Panmure.

EFG-Hermes will pay £3.2m cash for some 6.7 million new shares at 47p each.

Panmure chairman Tony Caplin said the move was a good opportunity for each company to access the other’s customer base and create new business streams.

“The markets we operate in are becoming more international and the opportunities available through a business relationship with EFG-Hermes are compelling,” added Mr Caplin.

EFG-Hermes’ chairman, Hassan Heikel, said the purchase would strengthen its strategy to service its Middle Eastern client base.

Panmure Gordon has been in operation as a corporate and institutional stockbroker and investment bank for 130 years.

It has a US subsidiary, ThinkPanmure, and about 280 employees in eight cities in the UK and the US.

EFG-Hermes’ clients include governments, corporations and individual investors. In June 2008, it had a market capitalisation of more than $3.5bn (£1.9bn).

It employs 700 people and services clients from 13 offices in the Middle East and North Africa.

News reported by The BBC

NEW YORK (Reuters) – If investors thought Morgan Stanley had turned things around in asset management, a jarring second-quarter loss revealed the investment bank still has a ways to go.

Yet the unit, which has posted two straight quarterly pretax losses totaling $388 million (170 million pounds), has not been able to stop funds flowing from Morgan Stanley and Van Kampen mutual funds. Morgan Stanley co-President James Gorman has vowed to increase the focus on this problem.

“We’re going to turn the Bunsen burner up several degrees,” Gorman, credited with reviving the brokerage arms of Merrill Lynch and Morgan Stanley, said at a recent conference.

Managing mutual funds, hedge funds and real estate investments is a lucrative business on Wall Street, one that can deliver steady returns over time. Yet it’s been a largely untapped opportunity at Morgan Stanley, which had a laggard funds business until John Mack took over as chief executive three years ago.

The firm saw asset growth flat-line after the tech stock bubble burst in 2000. Meanwhile, regulators put a stop to Wall Street brokers promoting in-house funds to clients. Suddenly, funds forced to compete on performance saw customers flee.

Since then, Morgan Stanley (MS.N: Quote, Profile, Research) has stemmed outflows, offered new products and bought stakes in some fast-growing hedge funds. During the second quarter, a net $15.5 billion flowed into the division, the seventh straight quarter of in-flows.

However the retail mutual fund business has continued to struggle. During the latest quarter, about $600 million left Morgan Stanley-branded funds while $2.1 billion flowed out of Van Kampen funds.

“They have made some progress, but they haven’t quite turned things around on the fund flow front,” said Karen Dolan, head of funds analysis at Morningstar.

HEAT IS ON

One man feeling the heat is Stuart Bohart, who in February was named one of three co-heads of investment management and charged with fixing the $550 billion core fund business.

Bohart, a prime brokerage star at Goldman Sachs and Morgan Stanley, told Reuters the bank is making progress boosting returns, defining its fund brands and expanding offerings across asset classes and investment strategy.

“What we were doing in the past wasn’t good enough. We intend to be a much better firm, with much better performance and serve more clients,” Bohart said in an interview. “That requires a willingness to change, to get the right people in and the wrong people out. We’re very serious about it.”

Among other efforts, the bank wants to better define its two retail fund families. The Morgan Stanley brand, better known among institutions and overseas, will offer “edgier” investment strategies, such as long-short and commodity funds.

The $138 billion Van Kampen family, sold through brokers, offers more traditional equity and fixed-income funds.

Yet fund analysts say the mutual fund business is still flawed, hurt by manager turnover and poor performance.

“They have an identity crisis. What is Morgan Stanley, what is Van Kampen and how are we going to position these funds?” Morningstar’s Dolan said. “It seems they are more focused on sales than performance.”

Meanwhile, the division is suffering from decisions made before credit markets locked up. Losses on structured investment vehicles (SIVs) held in the firm’s money market funds, as well as its purchase of Crescent Real Estate last August, fueled a second-quarter loss.

“They made a strategic decision to place money in these SIVs as a reach for yield,” said Portales Partners analyst Charles Peabody, who notes the bank had $3.6 billion of exposure to the illiquid instruments. “This is not the end.”

MORE DEALS AHEAD

Other moves worked out. Stakes in U.K. hedge fund firm Lansdowne Partners and distressed investor Avenue Capital Group and the takeover of FrontPoint Partners helped jump start Morgan’s hedge fund business. Assets at the three firms nearly doubled in 18 months, growing by $20 billion in total.

Bohart said the firm would continue looking for hedge fund stakes and “bolt-on deals,” hiring management teams and developing new funds.

“We continue to look for partnerships where there are unique products we can’t create ourselves,” he said.

The bank also wants to bulk up existing businesses. Bohart says Morgan’s money market funds, currently $125 billion, and fixed-income funds, which manage about $100 billion, are too small.

As to the bigger question of performance, Bohart said in-flows and margins are improving, excluding SIV and real estate losses. Yet he cautioned that the weak returns of prior years cannot be offset overnight.

“In 2007 we made all this money and people said, ‘Gee, it’s fixed,’ but you don’t fix a business in a year,” Bohart said. “We’re not out of the woods yet, but I know they end at some point.”

News reported by Reuters