US investment bank Morgan Stanley is to spin off the Discover credit card business in an effort to enhance shareholder value.
News of the spin-of came as Morgan Stanley reported an 11% fall in quarterly profit, with net income slipping to $2.21 billion from $2.47 billion, in the year-ago period. Net revenue rose 24 percent to $8.63 billion. The prior year's results included a $280 million tax benefit.
Discover achieved its best full-year results ever, with net revenues of $4.3 billion and income before taxes of $1.6 billion, up 72% from last year.
John Mack, Morgan Stanley chairman and CEO, says: "Given the record results and significant momentum both in our securities business and our cards and payments business, we have concluded, after our most recent strategic review, that they can best execute their growth strategies as two stand-alone, well-capitalised companies with independent boards of directors focused on creating shareholder value.
"The spin-off will allow Discover to continue building on its strong brand and significant scale. We also believe the spin-off will unlock considerable value for the shareholders of Morgan Stanley."
The move represents a complete u-turn for Mack, who in August last year reversed a previous plan by his predecessor Philip Purcell to sell off Discover.
At the time, analysts estimated the value of the business - which claims more than 50 million cardmembers and $50 billion of managed receivables - at between $8 billion and $13 billion.
Morgan Stanley says the business will be hived off in the third quarter of next year, subject to regulatory approval.