Morgan Stanley CEO says no bank deals imminent

By Joseph A. Giannone

PURCHASE, New York (Reuters) - Morgan Stanley (MS.N) is not likely to pursue a retail bank acquisition while it scrambles to complete its joint venture with Citigroup Inc (C.N) brokerage unit Smith Barney, Morgan Chief Executive John Mack said.

Mack, speaking at the investment banking giant's annual meeting Wednesday, said the Smith Barney deal, which will give Morgan Stanley a controlling stake in what is by some measures the country's largest brokerage, is a top priority. The transaction is expected to close by the third quarter if not sooner, executives said.

"Our hands are full with Smith Barney. That's our No. 1 focus," Mack told reporters after the meeting. "For us to go out and think about acquiring anything right now just makes no sense."

A press report from Japan's Nikkei service recently fanned speculation that Morgan Stanley, which wants to expand its retail financial services and expand deposit funding, was hunting for a bank acquisition.

"Maybe something was lost in translation," Mack joked.

Since becoming a bank holding company in September, Morgan Stanley has laid out plans to expand its retail financial services, namely wealth management. Consumer banking was deemed a key business that would help bring in more deposits and reduce the firm's reliance on financial markets for funding.

Comments from Chief Financial Officer Colm Kelleher last week played down the firm's interest in acquiring bank branches, deposits and assets.

Beyond its capacity for pursuing bank deals, Morgan Stanley has its hands full with several other challenges.