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Morgan Stanley may buy US regional banks

Morgan Stanley might buy US regional banks to build up its retail banking operations, Chief Executive John Mack told Japanese newspaper Nikkei in a recent interview.

“Now that we're a bank holding company, deposits are important to us,” Mack told Nikkei. “We are looking for potential opportunities to buy a bank that has a presence in an important market in the United States.”

Last autumn, as the financial crisis worsened, Morgan Stanley and rival Goldman Sachs Group Inc received billions from the US government under the Troubled Asset Relief Program and transformed themselves from investment banks to bank holding companies. They have sought to build up retail deposits.

Goldman Sachs has pressed the government to allow it to repay the TARP money it owes.

Mack told Nikkei that Morgan Stanley would pay back the funds it owes “as soon as regulators are comfortable that there has been some extended period of stability.”

Mack also said the US Treasury Department's public-private investment program “still needs clarity. ... We have to clarify whether Congress is going to recoup the profits made by private investors or not.”

The PPIP, announced in March, would have private investors take part in auctions run by the US government's Federal Deposit Insurance Corp in a bid to help rid banks of up to $1 trillion in toxic assets.

Morgan Stanley is also planning to build its corporate services business in Japan through a joint venture with Mitsubishi UFJ Financial Group Inc, Mack told Nikkei.

Mack told the newspaper that the US economy may have hit bottom and that discount consumer companies and commodities were potential growth areas.

“We may be at the bottom now. But being at the bottom doesn't mean we're moving up. I don't think anyone is looking for any significant growth for the next 18 months, maybe two years,” Mack said.

Mack, who said he turns 65 at year's end, suggested Morgan Stanley would need to begin looking for a successor, most likely from within the bank.

“At some point, the board needs to think about succession,” Mack said. “I think there's talent here in this firm and succession should come from the firm.” (Reuters)