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Wed, Feb. 3, 10:25 AM
- This just in: The financial sector is having a worse go it this year than energy, with the XLF lower by 13.6% YTD vs. the XLE's 9% decline.
- Leading a big reversal from this morning higher open is the XLF's 2% decline. The S&P 500 is now off 1%, and the XLE "just" 0.85%.
- Among the issues for the financials are two items: 1) Hopes for a sustained rate hike cycle have been dashed, with the 10-year yield tumbling all the way to 1.82% currently from about 2.30% when the Fed hiked in mid-December. Fed speakers are all-of-a-sudden sounding very dovish (Dudley is the latest), and short-term rate futures are now pricing in just a 50% chance of even one Fed rate increase this year; 2) For lenders specifically, there's worry over their exposure to the crashing energy sector. No doubt better capitalized today than 10 years ago, losses are still losses even if they don't threaten the viability of the bank.
- JPMorgan (JPM -2.6%), Wells Fargo (WFC -3.6%), Morgan Stanley (MS -3.5%), KeyCorp (KEY -3.1%), PNC Financial (PNC -2%), Comerica (CMA -2.7%), Schwab (SCHW -3.8%), MetLife (MET -2.5%)
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, BTO, IAT, SEF, IYG, FXO, FNCL, KBWB, FINU, QABA, KRU, KBWR, RWW, RYF, PSCF, FINZ, KRS, XLFS
Sun, Jan. 31, 8:53 AM
- Barron’s says it’s a good time to bet on the big banks after a rocky start to the year.
- The 10 biggest U.S. banks are trading for 8x-12x 2016 estimated earnings; the S&P 500 trades at 16x.
- Exposure to distressed U.S. energy companies is manageable.
- While leading Democratic presidential candidates are pushing for a breakup of the biggest banks, that possible eventuality could be a positive since many trade below their sum-of-parts.
- The following banks all have 20% upside: Bank of America (NYSE:BAC), Citigroup (NYSE:C), JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), BB&T (NYSE:BBT), PNC (NYSE:PNC), Suntrust (NYSE:STI), U.S. Bancorp (NYSE:USB).
Barron’s also mentions Citizens Financial (NYSE:CFG) and Region’s Financial (NYSE:RF) favorably.
Tue, Jan. 19, 9:36 AM
- The bank achieved a 7% return on equity in 2015 - three hundred basis points below target. The path to target? Among the steps is return of capital - Morgan Stanley's (MS +2%) CET 1 ratio of 14.1% at year-end compares to the 10% required by 2019. Its supplementary leverage ratio of 5.8% compares to 5% required in 2018.
- Also helping will be the bank's major cuts in FICC. Wanting to bring RWA to under $180B by year-end, Morgan cut it to $136B. The new target is under $110B at some point after 2017.
- Then there's expense reductions, and the next phase (2016-17) is named Project Streamline. Ex-DVA, the bank's efficiency ratio fell to 77% in 2015, and $1B in planned cuts should bring that number down to 74% by 2017 (assuming just flat revenues).
- Strategic Update
- Previously: Morgan Stanley on the move after earnings beat (Jan. 19)
Tue, Jan. 19, 7:52 AM
- Q4 net income (after DVA) of $9986M vs. a loss of $1.775B a year ago (last year's result included - among other one-time items - a $2.9B after-tax litigation charge).
- Institutional Securities pretax income (after DVA) of $672M on revenue of $3.419B (vs. $3.43B a year ago). Advisory revenue of $516M vs. $488M year ago. Equity sales and trading net revenue of $1.8B vs. $1.6B. FICC revenue of $550M down from $599M. Excluding adjustments, compensation expense of $1.2B fell from $1.5B.
- Wealth Management pretax income of $768M up from $736M a year ago. Pretax margin of 20%, or 21% excluding severance costs. Asset management fee revenue of $2.1B flat from a year ago. Transactional revenues of $861M down from $976M. Net interest income of $779M up from $625M. Loans of $64B up from $51B.
- Previously: Morgan Stanley beats by $0.10, beats on revenue (Jan. 19)
- MS +3.3% premarket
Tue, Jan. 19, 7:11 AM
Tue, Jan. 19, 7:01 AM
Mon, Jan. 18, 5:30 PM
Thu, Jan. 14, 1:35 PM
- Taking out the noise, the UBS team led by Brennan Hawken says JPMorgan earned $1.30 per share in Q4, ahead of consensus by a nickel and ahead of UBS's estimates by a full $0.11.
- That's not bad considering the negative sentiment surrounding the bulge bracket firms, and it should be enough to provide some near-term relief for names like Citigroup (C +1.2%), Bank of America (BAC +1.6%), Goldman Sachs (GS +1.5%), and Morgan Stanley (MS +1.1%).
- As for the outlook, the moderate headwind from mortgage banking was the only notable item.
- Previously: Dimon on energy provisions: "I'd put up more if I could" (Jan. 14)
- Previously: More on JPMorgan: Benign credit cycle ends (Jan. 14)
- Previously: JPMorgan higher after earnings beat (Jan. 14)
Wed, Jan. 13, 1:14 PM
- It wasn't supposed to be this way after the Fed embarked on a rate hike cycle as these yield-starved names could finally look forward to earning a better spread on their money.
- Since the Fed hiked last month, however, the long bond yield has tumbled about 20 basis points, further narrowing the yield curve.
- With today's 1.3% decline, the XLF is lower by 7.6% YTD, about 200 basis points worse than the S&P 500 (but about 250 basis points better than the energy sector).
- TBTFs: Morgan Stanley (MS -3.9%), Goldman Sachs (GS -2.3%), Citigroup (C -1.8%)
- Regionals: U.S. Bancorp (USB -2%), Regions Financial (RF -3.4%), New York Community Bancorp (NYCB -2.2%)
- Mortgage-related names like Ocwen (OCN -6.2%), Nationstar (NSM -5.3%), Walter Investment (WAC -13.9%), and New Residential (NRZ -5.3%) have come in for particular punishment this day and this year. The mortgage REITs too: Hatteras Financial (HTS -4.4%), Western Asset (WMC -3.6%), New York Mortgage (NYMT -2.3%), Five Oaks (OAKS -5.2%), PennyMac (PMT -2.6%)
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, SEF, IYG, FXO, FNCL, FINU, RWW, RYF, FINZ, XLFS
Mon, Jan. 11, 8:04 AM
- Heading into Q4 earnings season, the team at Macquarie likes the names with diversification and dividends. The challenging environment, they say, means weak results for pure investment bank results.
- On that measure, the team likes JPMorgan (NYSE:JPM) as one of the highest risk/reward opportunities. They expect the lender to generate operating leverage this year on lower expenses combined with stronger than peer group growth.
- In a pair trade, they favor UBS over Morgan Stanley (NYSE:MS) because of the former's higher exposure to FICC (Morgan Stanley slashed FICC exposure late last year).
- They're especially cautious on "pure" investment bank names, especially Credit Suisse (NYSE:CS).
Thu, Jan. 7, 12:18 PM
- Greg Fleming likely exited as the bank's head of Wealth Management because he deemed it unlikely that James Gorman was retiring from the CEO spot anytime soon, says UBS's Brennan Hawken.
- "While the departure of a capable executive should not be celebrated, it is understandable, and it is also reassuring that Mr. Gorman intends to remain CEO for many more years."
- Not necessarily pleased with the management turnover, Hawken nevertheless takes note of Morgan Stanley's (MS -3.1%) deep bench, and looks forward to the last year's big expense cuts in the FICC business as soon starting to pay dividends.
- Previously: Management shakeup at Morgan Stanley (Jan. 7)
Thu, Jan. 7, 7:41 AM
- Investment banking head Colm Kelleher is the heir apparent to current CEO James Gorman at Morgan Stanley (NYSE:MS) after his promotion to president.
- Once considered the likely successor, wealth management boss Greg Fleming has exited. Kelleher will take over Fleming's wealth management duties.
- Don't look for Kelleher to become CEO anytime soon, says Sandler O'Neill's Jeff Harte, as he believes Gorman is staying put for a long time.
- The appointment says Dick Bove is about creating a balance between banking (Kelleher's expertise) and wealth management (Gorman's background) at the top of the organization.
Wed, Jan. 6, 5:04 PM
- Morgan Stanley (MS -2.5%) is naming Colm Kelleher its new president, CEO James Gorman disclosed in a staff memo.
- That promotion, to become Gorman's top lieutenant, means that Gregory Fleming, who headed wealth management for the firm, is electing to leave the company to pursue other interests.
- Fleming, who was Morgan Stanley's president, was considered a rising star and Gorman's heir apparent by many sources.
- Kelleher reportedly passed Fleming last year as the bank's second-highest paid employee, after a $2M bonus.
Wed, Jan. 6, 12:55 PM
- Goldman Sachs' (GS -1.9%) bet on fixed-income is paying off so far, writes Lisa Abramowicz, with market share gains across the board - including its highest U.S. junk-bond underwriting rank (3rd) since 2003, and rising to the fourth-most active manager of new leveraged-loan sales. It's also making gains in debt sales in Europe, the Middle East, and Africa.
- Was it worth it? For banks like Morgan Stanley (MS -2.7%) - which late last year cut its fixed-income staff by about 25% - the answer is no. At issue for Morgan (and other banks pulling back) is whether fixed-income profitability will ever return to its old levels given new regulations and more automation.
- But there are benefits beyond fees like increased trading activity and a pole position in underwriting M&A. Also, Greenwich Associates sees a pickup in traditional debt trading now that the Fed has finally hiked and traders can stop worrying about it.
Mon, Jan. 4, 5:39 PM
Dec. 8, 2015, 10:56 AM
- Morgan Stanley (MS -1.7%) will take a $150M charge as it cuts 1.2K jobs in fixed-income trading, reports Bloomberg. The reductions amount to 25% of the bank's fixed-income trading staff, along with other cuts in infrastructure and support roles.
- Previously: The job cuts have begun at Morgan Stanley (Dec. 4)
- Previously: WSJ: Investor pressure hastened Morgan Stanley job cuts (Dec. 1)
Morgan Stanley through its subsidiaries and affiliates, provides financial products and services to a diversified group of clients and customers, including corporations, governments, financial institutions and individuals.
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