Morgan Stanley: Greece Calls In Sick Loser - TheStreet

NEW YORK (

TheStreet

) --

Morgan Stanley

(MS) - Get Report

was the loser among the largest U.S. financial names on Monday, with shares sliding 5% to close at $13.49, as both the Greek prime minister and finance minister threw an ailment monkey wrench into Europe's debt crisis.

The

Dow Jones Industrial Average

I:DJI

declined 1%, while the

S&P 500

(SPX.X)

and

NASDAQ Composite

I:IXIC

indexes each saw 2% declines, as multiple European worries resurfaced.

The government of Cyprus announced a formal request for top European officials for bailout funds, because of the island nation's "large exposure in the Greek economy," just hours after Spain formalized its request for 100 billion euro in assistance for its banking sector from the European Financial Stability Facility. Meanwhile, Greece's finance minister Vassilis Rapanos resigned because of health concerns, according to several reports.

European leaders will meet later this week to negotiate a plan to stabilize the region.

The

KBW Bank Index

(I:BKX)

declined 3% to close at 43.89, with all 24 index components showing declines.

Morgan Stanley's shares have now declined 10% year-to-date, following a 44% decline during 2011.

The shares for less than half of their reported March 31 tangible book value of $27.37, and for six times the consensus 2013 earnings estimate of $2.24 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $1.38.

Oppenheimer analyst Chris Kotowski on Monday reiterated his "Outperform" rating and $28 price target for Morgan Stanley, while lowering his 2012 EPS estimate to $1.23 from $1.61 and his 2013 estimate to $$2.51 from $2.70, saying the company was among the "hardest hit by our estimate reductions because they don't have a commercial bank to offset the weakness in investment banking," and that his firm had taken its second-quarter "our investment banking fee revenue assumption down from $1.3B to $1.0B," while also cutting its estimated "principal transactions revenue from $3.4B to $2.6B."

Please see

TheStreet's

8 Post-Downgrade Bank

Stock Bargains

for much more detail on Morgan Stanley and other large U.S. bank holding companies trading below tangible book value.

Interested in more on Morgan Stanley? See TheStreet Ratings' report card for this stock.

Shares of

Citigroup

(C) - Get Report

declined over 4% to close at $26.74. The shares have now returned 2% year-to-date, after dropping 44% decline during 2011.

The shares trade for just over half their reported March 31 tangible book value of $50.90, and less than six times the consensus 2013 EPS of $4.60. The consensus 2012 EPS estimate is $4.09.

Oppenheimer analyst Chris Kotowski on Monday reiterated his "Outperform" rating for Citigroup, while lowering his price target to $48 from $51, his 2012 EPS estimate to $4.41 from $4.74 and his 2013 estimate to $5.16 from $5.27, because of expected weak second quarter trading and investment banking results.

Kotowski said that although his firm is becoming "more tempted" by Goldman Sachs and Jefferies, "trading at just 78% and 97% of tangible book" as of Friday's market close, Oppenheimer continues "to think the low-hanging fruit is in the commercial banking sector. The stocks are just as cheap and sometimes cheaper (Citi at 56% of TBV!

as of Friday's close) and the recovery is very clearly visible here and now, rather than just being a reasonable probability at some indeterminate point in the future."

The analyst added that for Citigroup's second-quarter results, "the major things to watch for here will be the progress of the wind-down of Citi Holdings and the speed at which the company can start chewing through its DTA (deferred tax asset)," and that "with the level of

net oan charge-offs probably down by over $1.5 billion on a year-over-year basis, the combination of normalizing trading revenues and diminishing losses should start generating some US taxable income, which is what we need to diminish the DTA."

Citigroup reported that as of March 31, its net DTA totaled $51.9 billion, and said that "although realization is not assured, Citi believes that the realization of its recognized net DTAs at March 31, 2012 is more likely than not based on expectations as to future taxable income in the jurisdictions in which the DTAs arise and available tax planning strategies ... that could be implemented if necessary to prevent a carryforward from expiring."

"Realization of the DTAs will continue to be driven in the near term by Citi's generation of U.S. earnings," the company said, adding that "Citi does not expect significant utilization of its DTAs as a result of normal business operations during 2012."

Interested in more on Citigroup? See TheStreet Ratings' report card for this stock.

Shares of

Bank of America

(BAC) - Get Report

declined over 4% to close at $7.60

The shares trade for 0.6 times their reported March 31 tangible book value of $12.87, and for nearly eight times the consensus 2013 EPS of a dollar, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 59 cents.

With

Fannie Mae

(FNMA)

and

Freddie Mac

(FMCC)

maintaining their more aggressive stance on pursuing

mortgage putback

claims against the largest U.S. loan servicers, investors will be very interested to see what Bank of America has to say on the matter when the company reports its second-quarter results on July 18.

FBR analyst Paul Miller on Friday said that Bank of America "is currently not paying claims from the GSEs per our sources," with the dispute centering on "whether the agencies can push back loans if the borrower remained current for two-plus years" before defaulting. While FBR believes "Bank of America has a strong argument that defaults after the initial 24-month period are generally more economically driven than affected by underwriting standards," Miller raised his total mortgage putback loss estimate from the company to $53.267 billion from $42 billion, adding that Bank of America "still has exposure to a number of private-label putbacks, including a pending $8.5 billion settlement for a portion of these loans."

The analyst estimates that Bank of America has already realized $31.704 billion in mortgage putback losses.

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.

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Your Scorecard on Bank Regulation

--

Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.