Is Morgan Stanley Taking a Step Back From Energy Assets?
Morgan Stanley (NYSE:MS) is looking to get out of the energy business, and after big one-time sale of its energy assets didn’t work out, the banking company is looking to rid itself of assets piece by piece — according to Reuters. At present, it is looking to sell its stake in the American oil business, TransMontaigne, according to information from four sources to Reuters.
Morgan Stanley and Goldman Sachs (NYSE:GS) alike are facing regulatory heat for their energy industry investments — especially those involving potential liabilities. Both banks have tried to use a 1999 exemption to the law for their benefits in the past — hoping to retain ownership of their oil assets. However, things do not seem to be going their way, judging by recent events.
Craig Pirrong, finance professor, told Reuters that the two “see the handwriting on the wall,” possibly what’s spurred Morgan Stanley to action. “Oil logistics is something that gives the Fed major concern. ‘What if there’s an oil spill at a bank-owned storage facility or from a bank-chartered tanker?’ is the favorite doomsday scenario used to suggest that banks shouldn’t be in physical commodities,” said Stanley.
Morgan Stanley had previously been highly resistant to regulatory efforts, now some believe this newest move indicates something has changed. Goldman Sachs has also been making changes, opening up discussions for selling is metal warehouses and uranium desk — according to Reuters. Previously Goldman Sachs had stubbornly defended its commodity division.
Pirrong reported to Reuters that TransMontaigne is Morgan Stanley’s “crown jewel.” Its importance is a result of the oil market instability that followed the shale oil production boom. Ruth Porat, chief financial officer at Morgan Stanley, told Reuters in October that the bank wants “to be smart about what we do” in terms of its assets.