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Morgan Stanley is considering a merger with Wachovia Corp. and at least one other bank as the securities firm moves to regain investor confidence after its shares plunged 42 percent this week.
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Shares of Morgan Stanley fell 4.8 percent to $20.70 on Thursday before the opening bell.
Wachovia shares rose nearly 10 percent to $10 from Wednesday's closing price of $9.12. It is the fourth largest banking chain in the U.S. based on total assets.
Wachovia approached John Mack, Morgan Stanley's chief executive, on Wednesday indicating interest to merge as the market faces its biggest drop since the Great Depression, according to the New York Times, citing unnamed people familiar with the situation.
Morgan Stanley's considering other options as well, the newspaper added, noting that other banks have also expressed interest.
Talks are preliminary and no deal may emerge, it was reported.
Bank of America changed the rules of investment banking when it agreed to buy Merrill Lynch, creating a far stronger rival to independent banks like Morgan Stanley and Goldman Sachs.
Shares of Morgan Stanley and Goldman Sachs Group Inc., the largest U.S. securities firms, plunged the most in at least a decade this week after a government rescue of American International Group Inc. failed to ease the credit crisis.
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