NEW YORK (
has lowered its third-quarter earnings estimates for rival
arguing weak trading activity is likely to hurt profits.
The report by analyst Richard Ramsden cites an earnings miss by
Jefferies & Co.
earlier in the month as evidence of the weak trading environment. Also this month,
analyst Michael Carrier cut his estimates for Morgan Stanley and Goldman, citing similar factors.
Ramsden stated in his report that "the weakness is somewhat well known," but argues a still-unresolved question is the impact of new global guidelines, known as Basel 3, that increase the minimum amount of capital banks are expected to hold to guard against potential losses. Citing figures provided by
about the impact on its business, Ramsden sees a potential 20% increase in so-called "risk-weighted assets."
Risk-weighted assets (RWA) refers to a formula for determining how much of a capital cushion banks need based on the amount of risk they are perceived to be taking. Ramsden writes that a 20% increase in RWA would amount to $5 billion and have a "meaningful impact" on Morgan Stanley's return on equity.
Morgan Stanley shares were lower by 0.92% in early trading Wednesday, though slightly better than shares of Goldman,
Bank of America
. Among the largest U.S. banks, only
was higher in early trading.
Written by Dan Freed in New York
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.