Morgan Stanley's plan to buy Citigroup's stake in the Smith Barney brokerage joint venture remains unchanged, and would not be affected by the firm's conversion agreement with Mitsubishi UFJ Financial Group Inc.  Morgan Stanley CEO James Gorman, speaking with reporters after the firm's annual shareholder meeting, said the agreement "makes no difference."

Morgan Stanley posted a Q1 pretax loss of $655 million related to the Mitsubishi joint venture.  Shortly thereafter, Mitsubishi agreed to convert $7.8 billion in preferred stock for 385 million common shares of the company.  That conversion boosted M. Stanley's Tier 1 ratio and presumably will give it added capital for the planned buyout of Citigroup's stake in the Smith Barney venture.  The buyout can begin next year under its agreement with Citigroup.  Mr. Gorman said reports of Morgan Stanley asking Citi to alter the terms of that deal weren't true.

When asked about NY Attorney General Eric Schneiderman's investigation into banks' packaging mortgage loans into securities, Mr. Gorman said he believes further probes would be "very firm-specific."  The Wall Street Journal, citing people familiar with the situation, said earlier this week that Mr. Schneiderman plans to meet with executives of major banks, including Morgan Stanley, about their role in securitizing mortgage loans and other mortgage-related practices.   [WSJournal, 5/20/11]