Morgan Stanley Loses $2.37 Billion in Fiscal 4Q

Colm Kelleher, Morgan Stanley's chief financial officer, said in an interview with The Associated Press that it's unlikely Morgan Stanley will acquire a large retail bank, but he didn't rule out smaller acquisitions that fit in with Morgan Stanley's business mix, such as buying a private bank.

Morgan Stanley currently has about $43 billion in deposits. Kelleher said that over the next three years, Morgan Stanley will look to fund about half of its $750 billion balance sheet with long-term financing, which includes deposits.

During the quarter, Morgan Stanley moved away from some of the business lines that struggled mightily during the past year, which will further reduce the bank's risk. Morgan Stanley began to shrink its prime brokerage business, exited most of its proprietary trading strategies, reduced its principal investments division and exited the residential mortgage origination business.

Those business lines also helped provide the huge profits during the market boom earlier this decade, leaving a potential earnings hole for Wall Street firms as they look to return to profitability.

"Investment banks will still take risks, they just won't take as much risk as they did," Kelleher said. Morgan Stanley will refocus its efforts to return to profitability by investing in and growing its more traditional business lines, such as foreign exchange and commodities trading, and building on its global wealth advisory business, he added.

That global wealth advisory business will certainly be tapped as a source for new deposits and be a focus of business growth, analysts agreed. With advisers already in place working with clients, Morgan Stanley will be able to offer them products such as certificates of deposit and money market accounts, Aite's Valentine said.

"Having that staff (of advisers), they'll be able to target high net-worth individuals and attract higher balances," she added.

Valentine said the global wealth management business will also provide areas for expansion, especially outside the U.S. She said the significant growth of high net-worth individuals in areas such as the Middle East and Asia will provide Morgan Stanley with more customers and markets to build the advisory business.