While the aftermath of JPMorgan Chase's (JPM) disclosure late on Thursday of a $2 billion second-quarter trading loss continued, with executive changes at the company and additional reaction from analysts, concerns over Europe predominated.
Greek politicians continued to struggle to form a new government following elections over a week ago, putting years of European bailout efforts at risk and leading to increased fears of a massive sovereign default and a possible exit from the euro.
The KBW Bank Index (I:BKX) declined 3% to close at 45.20, with all 24 index components showing declines.Morgan Stanley's are down 5% year-to-date, following last year's 44% decline. The shares have pulled back 48% from their year-to-date closing high of $21.17 on March 26. The shares trade for just over half their reported March 31 tangible book value of $27.37, and for six times the consensus 2013 earnings estimate of $2.42, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $1.43. Credit Suisse analyst Howard Chen rates Morgan Stanley "Outperform," with a $26 price target, and said on May 3 after meeting with chief operating officer Jim Rosenthal that he was "encouraged by Mr. Rosenthal's message on better controlling what can be controlled in light of a challenging operating environment and came away better understanding changes that have been made to improve the firm's operational and risk management framework." Chen and said that "franchise restoration, healthier market conditions and the absence of new negatives from here could drive share price outperformance, and that his firm's "expectations for the company's weak return profile already is reflected in current valuations." The analyst estimates that Morgan Stanley will earn $1.15 a share during 2012, followed by 2013 EPS of $2.20. Interested in more on Morgan Stanley? See TheStreet Ratings' report card for this stock. The company purchased $221 billion in mortgage loans during the first quarter.
Philip van Doorn. To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.
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