Morgan Stanley is to pay $950m to sever yet another link to the US government's bail-out plan, buying back warrants it gave the authorities as part of a $10bn capital injection at the height of the crisis last year.

The bank said the redemption of the warrants, which gave the government the right to buy shares at a fixed price for 10 years, would give taxpayers a 20 per cent annualised return on their investment.