Morgan Stanley to Keep Discover Card Unit

By Michael J. Martinez, AP

Morgan Stanley Chief Executive John Mack made his first major move to revamp the Wall Street firm by announcing that the company will not spin off its Discover Financial Services credit card arm, as was considered under former CEO Phil Purcell.

Critics have claimed the credit card division has been only modestly profitable and unrelated to the company’s high-end financial services. Discover has generated strong cash flow and consistent earnings for the company, however, giving Morgan Stanley liquidity for its other investment banking, asset management and brokerage divisions.

“Discover is a unique and successful franchise,” Mack said. “It is a reliable stream of high quality earnings and a broad capital base, and it generates a large amount of free cash flow. Discover is a viable asset for the firm, and has the potential to grow and create value for our shareholders.”

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