- "Given our bias for some dislocation in credit markets near term, further meaningful upside in bank stocks seems less likely. As a result, we are getting more defensive for now," says Deutsche analyst Matt O'Connor, downgrading Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) to Hold amid the coming taper and then end of QE.
- While P/E expansion for the banks in 2014 is probable should economic growth pick up and rates remain low (on a relative basis), says O'Conner, "we worry about the potential combination of widening credit spreads and rising interest rates."
- Citi is off 1% and Morgan 1.2% AH.
- This morning: Goldman removes Citi from its Conviction Buy list.