Morgan ‘looking at division stake sale’

Morgan Stanley is considering selling a stake in its commodities unit, according to a report that, if true, could signal the extent to which regulatory pressures are weighing on the outlook for the business.

The investment bank has been exploring a partial sale since at least last year and has talked to several parties, including private equity firm Blackstone Group, it was reported yesterday.

Spokespeople for Morgan Stanley and Blackstone declined to comment.

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Morgan Stanley’s commodities unit trades in financial contracts, like oil futures, and ships and stores physical assets through subsidiaries TransMontaigne and Heidmar. Sale of a stake could help bolster the bank’s capital base as it faces a potential credit downgrade.

Selling a stake also could cut into Morgan Stanley’s income from the profitable commodities unit.

Word of a potential sale of Morgan Stanley’s unit, which has long been one of the most dominant and profitable commodities trading operations on Wall Street, caught some traders by surprise.

“They made a mint at it for a long time,” said Dan Dicker, a longtime oil trader who is president of MercBloc. “The business is changing, they’re not making as much money as they used to.”

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While the business has generated billions of dollars in revenue for Morgan Stanley through the years, it has come under pressure from weaker trading volumes as well as new regulations that will limit US banks’ trading, risk taking and ability to own physical commodity assets.