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Dec. 5, 2015, 9:23 AM
- Key to the issues are the computer models the central bank uses to simulate how banks might perform during a recession. The results spewed out by these programs effectively determine the level of dividends and buybacks of the nation's large banks (not to mention the career path of bank managers).
- Source: WSJ
- Internal reviews found shortcomings in the Fed's system for double-checking the models - too few staff, too heavy reliance on certain key personnel, and lacking clear procedures and policies about certain aspects of the validation process. “Similar findings identified at institutions supervised by the Federal Reserve have typically been characterized as matters requiring immediate attention," according to the report.
- In response, the Fed has done what most bureaucracies do - hired more staff and created a supervisory committee. Nevertheless, the findings of the reviews are likely to add fuel to calls from bankers and lawmakers for the central bank to open up the "black box" of its stress-testing models.
- Among the interested parties are Citigroup (NYSE:C), which failed a stress test, and Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and JPMorgan (NYSE:JPM) - all of whom have had their issues.
Dec. 4, 2015, 7:12 AM| Dec. 4, 2015, 7:12 AM | 1 Comment
Dec. 3, 2015, 2:24 AM
- Eight of the biggest U.S. banks have been downgraded by Standard & Poor's, following a rule approved by the Fed in October that will require large institutions to hold a stockpile of debt that can be converted into equity if they falter.
- "We now consider the likelihood that the U.S. government would provide extraordinary support to its banking system to be uncertain," S&P said in the statement.
- Firms affected include JPMorgan (NYSE:JPM), BofA (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), BNY Mellon (NYSE:BK) and State Street (NYSE:STT).
Dec. 1, 2015, 9:36 PM
- Over the course of a number of meeting with investors, Morgan Stanley (NYSE:MS) management was hit with a barrage of questions as to why it hadn't moved to aggressively cut expenses in the face of lame fixed-income business, reports the WSJ. The shareholders were concerned that not only was the bank planning to stay the course, but even potentially expand.
- “It’s OK for investors to be frustrated with the progress in fixed income,” says Evercore ISI's Glenn Schorr. “Everything else at Morgan Stanley has been going well. At the end of the day, if fixed income was less bad, the company’s [stock price] and returns would be better.”
- Previously: Morgan Stanley to cut fixed income staff by 25%, reports say (Nov. 30)
Nov. 30, 2015, 6:30 PM
- Morgan Stanley (NYSE:MS) reportedly plans to cut up to a quarter of its fixed income jobs over the next two weeks, resulting in the loss of hundreds of jobs, in reaction to the recent slump in bond trading activity.
- The cuts are expected to occur across all of the division’s offices, and in each of the firm’s trading desks, though London may bear a slightly bigger brunt than New York.
- MS last month reported a 42% Y/Y drop in bond trading revenue in what CEO James Gorman called its worst quarter for fixed income, currencies and commodities since he took over in 2010.
Nov. 12, 2015, 2:43 AM
- Morgan Stanley (NYSE:MS) plans to offer savings accounts and certificates of deposits next year to wring more profit from its wealth management clients.
- "You shouldn't have to deal with two or three financial institutions," said Eric Heaton, president of Morgan Stanley U.S Banks. "Just deal with us."
- The bank has offered checking accounts and credit cards for years, but is launching more consumer banking products and giving brokers bonuses if clients use them.
Oct. 27, 2015, 12:29 PM
- Morgan Stanley (NYSE:MS) this summer completed raising money ($1.7B) for its first higher-risk real estate fund since before the property bust in 2007.
- With cap rates low and Sam Zell hitting the bid on some of his holdings, one could be forgiven for questioning the bank's timing.
- "The market is insanely competitive right now,” says John Klopp, co-chief of the real estate unit at Morgan Stanley. "There’s a ton of capital chasing real estate in every market in every nook and cranny.”
- The unit in recent post-bust years has been putting money to work in conservative assets - fully leased buildings in prime locations - but of late investors are interested in "opportunity funds." These invest in new developments, raw land, and fixer-uppers, and target returns of 20% or more. These sorts of funds have raised a post-bust record $47.7B this year, still well below $74.2B in 2008.
- The new Morgan Stanley fund has committed about one-third of its equity, with ten closed deals and another seven in the pipeline.
- Source: WSJ
Oct. 19, 2015, 9:48 AM
- "We've said what we want to say about this," says a becoming-irritated Morgan Stanley (MS -5.7%) CEO James Gorman, taking yet another earnings call question about the bank's lame trading revenue results in Q3. "It is what it is."
- Morgan earlier reported a 41% Y/Y decline in FICC revenue, helping the bank to a big earnings miss. Goldman Sachs, by comparison, posted a 33% decline, and while a sizable gain in equities trading revenue helped offset at Goldman, Morgan Stanley reported a flat result there.
- It's been Morgan Stanley's strategy to lean on wealth management as a source of stability, and that unit produced income of $824M vs. $800M a year earlier (though revenue slipped $200M to $3.6B).
- Webcast and financial supplement
- Previously: Morgan Stanley tumbles premarket after big earnings miss (Oct. 19)
- Previously: Morgan Stanley misses by $0.29, misses on revenue (Oct. 19)
Oct. 19, 2015, 9:13 AM
Oct. 19, 2015, 7:24 AM
- Excluding DVA, net income of $740M or $0.34 per share compared to $1.3B and $0.64 one year ago. Revenue of $7.3B dropped from $8.7B. Both numbers missed consensus by a mile. Annualized ROE of 3.9%.
- Institutional Securities pretax income of $688M vs. $1.2B a year ago. Advisory levels rose - to $557M from $392M, but FICC revenue plunged to $583M from $997M.
- Wealth Management pretax income of $824M vs. $800M a year ago, with net revenue of $3.6B slipping from $3.8B. Pretax margin of 23%.
- Investment Management pretax loss of $38M vs. a profit of $193M a year ago, mostly thanks to a reversal of previously accused carried interest associated with Asia P-E business.
- Total compensation expense of $3.4B falls from $4.2B a year ago.
- Fully phased-in CET 1 ratio of 12.4%. Tangible book value per share of $29.99 vs. Friday's close of $33.94.
- Conference call at 8:30 ET
- Previously: Morgan Stanley misses by $0.29, misses on revenue (Oct. 19)
- MS -5.7% premarket
Oct. 19, 2015, 6:59 AM
- Morgan Stanley (NYSE:MS): Q3 EPS (excl. DVA) of $0.34 misses by $0.29.
- Revenue (excl. DVA) of $7.33B (-15.7% Y/Y) misses by $1.21B.
- Shares -2.80% PM.
Oct. 18, 2015, 5:30 PM
Oct. 8, 2015, 9:40 AM
Oct. 7, 2015, 9:30 AM
- It's all about growth in the wealth management business, says RBC Capital's Fiona Swaffield, upgrading Morgan Stanley (NYSE:MS) to Outperform. Her $39 price target is 20% above last night's close.
- The key revenue driver for wealth management has been net interest income, and there's room for plenty more given the bank's ample funding to support loan growth, and its low loan to deposit ratio.
- Morgan Stanley is targeting $200B in deposits vs. the current $132B, and the penetration of mortgages in its client base to 5% from 2%.
- There's also the chance of higher interest rates, and Swaffield sees a 100 basis points increase boosting pretax earnings by $750M - a benefit, but hardly game-changing as the bank can probably be expected to earn somewhere in the area of $11B over the next year.
- Shares +1.9%
Oct. 6, 2015, 12:13 PM
- The two U.S. banks lost plenty of trading action from hedge fund clients to European competitors during the financial crisis, but are winning it back in part thanks to new capital rules forcing the European lenders to whittle down their operations.
- According to Preqin, Goldman (NYSE:GS) and Morgan Stanley (NYSE:MS) have added about six hundred basis points of market share since the end of last year to 37%.
- Prime brokerage is one of the few areas on Wall Street where revenue and pricing are on the rise, say analysts, and could provide a buffer to Q3 earnings expected to take a hit from weaker FICC action.
- Among the European banks losing market share are Deutsche Bank (NYSE:DB), and Credit Suisse, whose new CEO plans further cutbacks in prime brokerage.
Oct. 5, 2015, 3:31 PM
- The Street has priced in earnings declines for pretty much every sector, but Q3 and Q4 estimates for the financials have barely budged, and consensus sees Q3 results 10% above that of a year ago.
- Morgan Stanley's Huw van Steenis, however, sees FICC revenue declines of 10-25% - far more than the 5% or so that's been talked about by bank managements at recent investor conferences - as the commodity price crash combines with collapsing fixed-income trading, and the lack of volatility in forex action.
- With just $20B in FICC revenues, says van Steenis, Q3 is shaping up to be the second worst quarter for banks in the last two years. Leaving his own bank (NYSE:MS) out of the analysis, he sees FICC revenue declines of 17% at JPMorgan (NYSE:JPM), 9% at Goldman (NYSE:GS), and 6% at BofA (NYSE:BAC) and Citi (NYSE:C).
- Bottom line: "On EPS, we are 4% below consensus on average across our coverage for 2015, and 5% below for 2016. The biggest delta is for Barclays (NYSE:BCS), BNP Paribas (OTCQX:BNPQY), and Goldman in 2015, and SocGen (OTCPK:SCGLY), HSBC, and BNP in 2016."
- Source: ZeroHedge
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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