This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Buy Morgan Stanley on 'Earnings Momentum': Deutsche Bank

NEW YORK ( TheStreet) -- Morgan Stanley's (MS - Get Report) "earnings momentum is poised to accelerate," according to Deutsche Bank analyst Matt O'Connor, who late on Thursday upgraded the investment bank's shares to a "buy" rating from a "hold" rating.

Morgan Stanley previously announced plans to purchase its remaining 35% stake in its retail brokerage joint venture with Citigroup (C - Get Report), and is awaiting Federal Reserve approval to complete the transaction, which could come "any day," according to O'Connor.

Having the full revenue stream from the joint partnership will boost Morgan Stanley's earnings, as will the continued rise in equity prices.

"MS has previously estimated a $400m lift to earnings from buying in the remainder of the stake, greater order flow capture, elimination of certain expenses and a partial benefit of a pickup in deposits," O'Connor wrote. The analyst expects "an additional earnings boost," as $50 billion in deposits move onto Morgan Stanley's balance sheet over time.

O'Connor added that "if the market holds at current levels, there's about $0.10 of annual EPS lift to come (with a similar additional EPS lift for each further 5% rise in the markets)."

The analyst also sees "meaningful leverage to rising interest rates," for Morgan Stanley, writing that "a 100bp move in rates would boost annual EPS by about $0.20."

The Federal Reserve has kept the short-term federal funds rate in a range of zero to 0.25% since later 2008. Since September, the central bank has been making monthly purchases of $85 billion in long-term securities in an effort to hold long-term rates down.

The Federal Open Market Committee has repeatedly said it was likely to leave the federal funds rate in its current range at least until the U.S. unemployment rate moves below 6.5%. But top FOMC and Federal Reserve officials have given conflicting statements recently about the timing of a curtailment of the Fed's bond-buying.

The market always anticipates monetary policy changes, and the recent rise in market rates on 10-year U.S Treasury bonds could signal a policy change in the near term. The market rate for 10-year U.S. paper was 2.13% on Thursday, increasing from 1.70% a month earlier.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
C $51.82 1.70%
MS $33.52 1.20%
AAPL $109.79 1.90%
FB $88.30 1.20%
GOOG $604.90 1.20%


Chart of I:DJI
DOW 16,253.77 +195.42 1.22%
S&P 500 1,937.63 +23.78 1.24%
NASDAQ 4,699.7780 +63.6730 1.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs