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Morgan Stanley: Attractive Profile But Better Value Exists Elsewhere

Jul. 06, 2017 9:36 AM ETMorgan Stanley (MS)C, DB, GS, JPM, UBS6 Comments
Labutes IR profile picture
Labutes IR


  • Morgan Stanley has an interesting business profile with relatively good growth prospects, especially due to its large exposure to wealth management.
  • Its operating momentum has been strong and profitability is improving towards its target, with further upside coming mainly from macroeconomic factors.
  • Its capitalization is strong leading to increasing capital returns. However, its current valuation already reflects this profile and better value exists elsewhere in the sector.

Morgan Stanley (NYSE:MS) has a much more attractive business profile than a few years ago, being now focused on wealth management and equities giving it relatively good growth prospects. Its operating momentum has improved after several years of weak results and should be supported from positive macroeconomic factors. Its capitalization is strong, allowing for an attractive and growing capital return policy, but this profile seems to be already reflected in its valuation. Therefore, Morgan Stanley does not appear to be particularly cheap and better value can be found elsewhere among large U.S. banks.

Company Overview

Morgan Stanley is a global financial services company. It has about 55,000 employees worldwide and a market capitalization of $84 billion. Its business is divided across three main segments, namely Institutional Securities, Wealth Management and Investment Management. Despite its global presence, about 75% of its revenues are still generated in the Americas.

Morgan Stanley is one of the largest players within the investment banking industry, enjoying a significant market share in each of its business segments. This industry is characterized by its global reach and strong competition, a profile that isn't expected to change anytime soon. Its main competitors are other global banks with large investment banking and wealth management operations, including Goldman Sachs (GS), Deutsche Bank (DB) or UBS Group (UBS).

Morgan Stanley's largest business is Institutional Securities (investment banking), accounting for about half of its revenues. Like most investment banks, Morgan has cut assets and staff in its fixed-income business following the global financial crisis and its revenue mix is now more exposed to equities and advisory, compared to its peers.

Its equities franchise account s for about half of its revenues within this business segment, the highest weight compared to other large U.S. investment banks. For instance, Goldman's generates 33% of IB revenues from equities, while Citigroup is

This article was written by

Labutes IR profile picture
Labutes IR is an Fund Manager specialized in the financial sector, with more than 15 years' of experience in the financial markets. Under my coverage is mainly the Financial sector, including Banks, Insurance, Real Estate, and FinTechs both in the European and U.S. markets. For my personal investments, I also invest on 'Income' stocks across several sectors as I'm building a portfolio for retirement, being my goal to retire in about 20 years. Associated with the existing author The Outsider.

Analyst’s Disclosure: I am/we are long C. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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