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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
Oct. 1, 2015, 5:11 PM
- JPMorgan Chase (NYSE:JPM) will pay almost a third of a $1.86B settlement to resolve accusations that a dozen big banks conspired to limit competition in the credit default swaps market, Bloomberg reports.
- JPM reportedly will pay $595M, followed by Morgan Stanley (NYSE:MS) with $230M, Barclays (NYSE:BCS) at $175M, Goldman Sachs (NYSE:GS) at $164M, Credit Suisse (NYSE:CS) at $160M and Deutsche Bank (NYSE:DB) at $120M; BofA (NYSE:BAC), BNP Paribas (OTC:BNPZY), UBS, Citigroup (NYSE:C), Royal Bank of Scotland (NYSE:RBS) and HSBC would pay less than $100M each.
- The deal would avert a trial and end years of litigation by hedge funds, pension funds, university endowments, small banks and other investors, who sued as a group.
Oct. 1, 2015, 9:34 AM
- Equities chief Edward Pick is named global head of sales and trading, putting him in charge of fixed-income trading, reports the WSJ.
- Investment banking rainmaker Dan Simkowitz has been tapped to be head of investment management, reporting directly to MS CEO James Gorman. Overshadowed by the fast growth in wealth management over the past few years, this area had previously been under the charge of President Greg Fleming.
- "We always need to look to our future while managing the present,” says the memo - singed by Gorman, Fleming, and Colm Kelleher (also a president) - announcing the changes.
- Both Pick and Simkowitz joined the bank in 1990 and each ran key, well-performing businesses. Their new task will be to re-charge divisions with less-than-impressive track records of late.
Sep. 28, 2015, 2:48 PM
- It isn't just Glencore (OTCPK:GLCNF, OTCPK:GLNCY) who is tanking, as at least one measure of raw materials producers plunges to seven-year lows following the company's woes and data that showed weakening Chinese industrial profits.
- Shares of Glencore plunged 29% to close at just 69 pence, an all-time low, exaggerated by a damning report that said future earnings are so uncertain that the company may need to direct all of its efforts to repay debt.
- Freeport McMoRan (FCX -10.2%) is hit hard after breaking below support at $10/share, and global mining peers Rio Tinto (RIO -4.1%), BHP Billiton (BHP -4.5%) and Vale (VALE -9.4%) also are smacked down.
- A number of other firms also are in situations not that much different from Glencore, says DTN analyst Darin Newsom, noting that Caterpillar (CAT -2.2%) and Deere (DE -1.6%) have been struggling and adding that pressure on Glencore may “create a vacuum those other struggling companies could get sucked into."
- Along with oil and gas producers and precious metals miners, even financial stocks are affected, with Morgan Stanley (MS -3.6%) and Goldman Sachs (GS -3.4%) underperforming their banking peers, perhaps as investors grow nervous about the potential for any of Glencore's problems possibly blowing back on other commodity trading operations.
Sep. 16, 2015, 12:39 PM
- Merger-and-acquisition volume in 2016-17 should be $3.3T-$4.5T, says Guggenheim, up from its previous forecast of $2.7T-$4.5T. The current drivers of M&A are likely to remain in place; macroeconomic conditions may remain uneven; and several specific factors may compel consolidation in certain industries. Health care, media, and telecom activity has been robust, and should stay so. Activity in energy should increase, but banking M&A should stay subdued.
- The winners? U.S. bulge bracket and boutique firms have gained market share at the expense of European and other non-U.S. companies. Showing the most market share gains is Goldman Sachs (NYSE:GS), followed by Morgan Stanley (NYSE:MS), JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), and Citigroup (NYSE:C). Goldman remains Guggenheim's Best Idea, and BofA and Ciit remain buys, partly thanks to the M&A thesis.
Aug. 31, 2015, 11:19 AM
- “When you feel like crying, it’s time to start buying," says analyst Glenn Schorr and team, boosting both Goldman (GS +0.7%) and Morgan (MS +1.6%) to Buy from Hold.
- Valuations look good after the roughly 15% pullback in both - with Goldman going for 9.7x earnings and 1.1x book, and Morgan at 9.2x and 1.0x.
- Q3 looks like it's been a tough one so far, but the quarter isn't over yet, and boosted volatility should mean higher volumes in both banks' FICC business.
- He also notes positive seasonality: While Sept. can be sluggish (and this year should prove no exception thanks to a late Labor Day and 2 mid-week Jewish holidays), October and December have proven to be strong months.
Aug. 27, 2015, 10:06 AM
- A rare growth business for Wall Street banks has been loans backed by investment portfolios, but with margin calls being issued this week, profits could take a hit if clients pull back from borrowing.
- Morgan Stanley (MS +1.6%) had $25.3B in securities-based loans outstanding as of June 30, up 37% year-over-year. Bank of America (BAC +0.2%) had $38.6B of the loans, up 14.2%. Wells Fargo (WFC +1.1%) had $59.3B, up 16%.
- The amounts are small compared to overall bank lending, but change comes at the margin, and the largest brokerage firms have reported higher securities-based loan balances each quarter for more than two years.
- Look for profits at bank wealth-management units to decline in coming quarters, says Portales Partners' Charles Peabody, in part thanks to declines in securities lending.
- Source: WSJ
Aug. 26, 2015, 2:42 PM
- No financial sector stocks are immune to the "higher risk" themes of energy, interest rates, and emerging markets, say Nomura's Steven Chubak and Sharon Leung, but they have picked three oversold ones offering big long-term value.
- Morgan Stanley (MS +3.7%), says the team, has been disproportionately punished over energy concern, E*Trade (ETFC +3.1%) for rates (the chance they're not headed higher), and Lazard (LAZ +2.9%) for its exposure to emerging markets/China.
- Long-term earnings potential supports more than 30% upside at all three, they say.
- The team is also bullish on Citigroup (C +2.9%), but note the stock has been surprisingly resilient despite heavy leverage to both emerging markets and rates. They thus prefer Morgan.
Aug. 19, 2015, 3:42 PM
- The new venture - Securities Product Reference Data, or SPReD - is likely to be launched in the next six to 12 months, reports the WSJ, with each of JPM, GS, and MS investing seven figures.
- The company will pull together and clean massive amounts of reference data on financial instruments at a lower cost than what each bank would spend on its own.
- With revenue growth slow and compliance costs on the on a fast rise, banks are under pressure to find savings wherever possible. Noninterest expenses at the six largest U.S. banks by assets rose 11.9% from 2009 to 2014. Data management spending is typically in the tens of millions of dollars, but can go as high as nine figures for the largest lenders, according to Deloitte Consulting.
Jul. 31, 2015, 7:52 AM
- According to Reuters, the value of merger and acquisition deals through July 30 was $436.4B, including 14 deals worth over $5B apiece. Although down from June's torrid pace of $546.8B, it still ranks as the seventh busiest month on record. Leading the pack was Teva's $40.5B purchase of Allergan's generic drugs business.
- The top investment bank in terms of the total value of transactions was Goldman Sachs (NYSE:GS), involved in 35 deals worth $148.8B, including half of the top ten. JP Morgan (NYSE:JPM) was second with 30 deals worth $116.1B while Morgan Stanley (NYSE:MS) was third with 33 deals valued at $95.9B.
- Global M&A so far this year is $2.64T, up 41% from last year. The action in the U.S. is up 66%.
- Energy and healthcare are the leading sectors. There have been 1,557 deals in energy worth $407B. Healthcare is close behind with 1,577 deals worth $395B.
- ETFs: UNG, USO, OIL, UGAZ, UCO, DGAZ, UWTI, BIB, SCO, BNO, BOIL, GAZ, DBO, DWTI, DTO, UGA, KOLD, USL, GRX, UNL, IRY, BIS, IXJ, DNO, BME, UHN, DBE, OLO, SZO, DCNG, GRN, RJN, FUE, OLEM, JJE, ONG, UBN
Jul. 27, 2015, 8:13 AM
- Investa Property Group is Australia's 3rd-largest owner of downtown office buildings with about a A$9B portfolio, and Morgan Stanley (NYSE:MS) put the operation up for sale earlier this year.
- Among the more than 20 bidders for Investa were Blackstone and Brookfield Asset Management, but the winner is China Investment Corporation. No price was disclosed, but Reuters reports Investa fetched more than A$3B.
- Previously: Blackstone, Brookfield reportedly among bidders for billions in Aussie real estate (April 21)
Jul. 24, 2015, 3:31 PM
- Goldman's (GS -1.8%) Q2 results confirmed the team's expectation of positive revisions to 2016 consensus EPS. Zions (ZION -0.7%) has "multiple catalysts" to reach improve profitability goals and EPS growth over the next three years.
- Guggenheim's four key investment themes: 1) Names levered to improving M&A, with Goldman being the best idea, followed by Morgan Stanley (MS -1.3%); 2) Restructuring stories, with Zions the best idea, but First Horizon (FHN -1%), Ally Financial (ALLY -1.8%), and BofA (BAC -1.6%) also worth looking at; 3) Idiosyncratic growth stories like MasterCard (MA +0.7%), Visa (V +4.5%), Synchrony Financial (SYF -2.4%), and Signature Bank (SBNY -0.8%); 4) Names with a distinct M&A catalyst in the regionals group like BB&T (BBT -1.5%), CIT Group (CIT -1.6%), and Springleaf (LEAF -1.4%).
- Mixed results from credit card companies affirm the team's preference for SYF, but the risk/reward at AmEx (AXP -1.4%) is improving. AmEx, CapOne (COF -13%), and Discover (DFS -2.7%) results show the boosted competition they face form the banks, which is slowing growth, and lifting marketing and rewards costs.
- Source: Barron's
- Previously: Capital One tumbles after earnings miss and trio of downgrades (July 24)
Jul. 20, 2015, 3:58 PM
- "We're very comfortable with the business [we've] got and the size of the business,” says Morgan Stanley (MS -0.4%) CEO James Gorman, speaking on the Q2 earnings call. "We had a desire to get to scale, and we are well and truly at scale.”
- Wealth Management pre-tax income of $885M in Q2 was up 13.8% Y/Y, with revenue of $3.875B up 4.5%. Compensation expense stayed flat Y/Y, while non-comp expense rose 5%, allowing a profit margin inside the bank's 22-25% targeted range.
- Like many others in the industry, Morgan is focused on growing fee-based accounts and loans, as opposed to traditional commission business. Unlike, for instance, Merrill Lynch, Morgan isn't trying to do so by boosting its adviser head count. As of the end of Q2, Morgan had 15,771 advisers, off 3% Y/Y.
- Previously: Morgan Stanley up 3.8% after earnings beat (July 20)
- Previously: Morgan Stanley beats by $0.05, beats on revenue (July 20)
Jul. 20, 2015, 2:55 PM
- JPMorgan (JPM +0.4%) faces the largest capital "surcharge" or 4.5% of its risk-weighted assets, with the other seven lenders falling in the 1-3.5% range.
- Citigroup's (NYSE:C) surcharge is 3.5%, BofA (NYSE:BAC), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) 3%, Wells Fargo (NYSE:WFC) 2%, State Street (NYSE:STT) 1.5%, and Bank of New York Mellon (NYSE:BK) 1%. Taken together, the group's capital cushion will more than $200B larger than if the surcharge was not implemented.
- The surcharges will begin to be implemented on January 1, and fully phased in by January 2019. JPMorgan has taken steps to boost its capital levels, and Fed officials indicate the bank is about $12.5B shy of the full surcharge, reports the WSJ.
- The other lenders currently have the necessary capital.
- This new requirement comes on top of the existing base 7% common-equity capital standard necessary for most banks.
Jul. 20, 2015, 7:16 AM
- Q2 net income (excl. DVA) of $1.7B or $0.79 per share vs. $1.2B and $0.58 one year ago. ROE (excl. DVA) of 9.1%.
- Institutional Securities pre-tax income of $1.44B on revenue of $4.99B vs. $873M and $4.161B a year ago. Advisory revenue of $423M, equity underwriting revenue of $489M and fixed income underwriting revenue of $528M all roughly flat Y/Y. Equity sales and trading revenue of $2.3B vs. $1.8B a year ago. FICC revenue of $1.3B up from $1B - this as most other banks saw Y/Y decline.
- Wealth Management pre-tax income of $885M on revenue of $3.875B vs. $763M and $3.702B a year ago. Asset management fee revenue of $2.2B vs. $2.1B. Transactional revenue of $8872M vs. $991M. Net interest income of $737M vs. $577M. Total client assets of $2T. Client assets in fee-based accounts of $813B up 7% Y/Y. Average annualized revenue per representative of $978K up 8% Y/Y.
- Investment Management pre-tax income of $220M on revenue of $751M vs. $209M and $705M a year ago.
- CET 1 ratio of 12.5%. Tangible book value per share of $29.54.
- Conference call at 8:30 ET
- Previously: Morgan Stanley beats by $0.05, beats on revenue (July 20)
- MS +3.8% premarket
Jul. 20, 2015, 7:02 AM
- Morgan Stanley (NYSE:MS): Q2 EPS (excl. DVA) of $0.79 beats by $0.05.
- Revenue (excl. DVA) of $9.56B (+12.2% Y/Y) beats by $460M.
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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