JPMorgan, Stanley May Merge, Analyst Says

JPMorgan Chase & Co. and Morgan Stanley may reunite, 70 years after being forced to split, one of Wall Street’s top-rated bank analysts speculated Thursday.

“We are raising the possibility of a merger between JPMorgan and Morgan Stanley,” Prudential Equity Group’s Michael Mayo wrote in a note to clients. He cited “our view that both managements are willing to pursue acquisitions ... to achieve longer-term goals.”

A merger of JPMorgan, the No. 3 U.S. bank, and Morgan Stanley, the world’s No. 1 securities firm, would bring together companies with a combined market value of more than $175 billion.

The so-called House of Morgan dominated American finance in the early 20th century, bailing out the U.S. Treasury, creating the nation’s steel monopoly and advising chief executives and presidents alike.

Congress, in passing the Glass-Steagall Act of 1933 and related legislation, banned J.P. Morgan & Co. from selling securities. Several of its partners left to form a separate investment bank, called Morgan Stanley. J.P. Morgan was acquired by Chase Manhattan Corp. in 2000.

The act was repealed in 1999. JPMorgan has since competed with Morgan Stanley to provide investment banking services such as stock underwriting and merger advice. Both companies declined to comment.

Mayo, whom investors ranked third among bank analysts in last year’s survey by Institutional Investor magazine, said the modern-day JPMorgan might pursue acquisitions to counter shrinking profit at its investment banking and credit card arms.

Meanwhile, Morgan Stanley wants to expand its services and increase assets to compete more effectively with larger companies, he wrote.