Morgan Stanley: Financial Loser

NEW YORK ( TheStreet) -- Morgan Stanley ( MS) was the loser among the largest U.S. banking names on Thursday with shares sliding 2.5% to close at $19.74.

The broad indexes were mixed, after the U.S. Labor Department reported that initial jobless claims for the week ended March 24 declined by 5,000 to 359,000, from a revised 364,000 the previous week. While initial jobless claims were at their lowest level since April 2008, the good news was not enough to keep U.S. stocks from following European markets down, now on fears of over government deficits in Portugal and Spain, with both countries seeing sovereign debt yields climb recently.

The U.S. Treasury on Thursday said it had completed an auction of preferred shares held by the government for six banks that had received bailout assistance through the Troubled Assets Relief Program, or TARP. The Treasury sold $410.8 million in TARP preferred shares, netting about $362 million after expenses, for a loss to the government of $48.8 million.

However, in its statement, the Treasury added that it had "recovered $260 billion from TARP's bank programs through repayments, dividends, interest, and other income - compared to the $245 billion initially invested," so that "each additional dollar recovered from TARP's bank programs is an additional dollar of profit for taxpayers."

The KBW Bank Index ( I:BKX) pulled back over 1% to close at 49.58, with all 24 index components seeing declines, except for KeyCorp ( KEY), which was flat, at $8.48.

Morgan Stanley's shares have now returned 31% year-to-date, following a 44% during 2011.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

European fears may have been a contributing factor the Morgan Stanley's slide on Thursday, with the company reporting net exposure to Italian bonds of $4.9 billion as of Dec. 30, while net exposure to Spanish securities totaled $1.4 billion.

Credit Suisse analyst Howard Chen last Friday reiterated his "Outperform" rating for Morgan Stanley, with a $26 price target, and while he expects the company to post operating earnings of 40 cents a share for the first quarter, he expects a messy quarter, with a bottom-line net loss of 41 cents a share, "entirely to the incorporation of $2.2 Bn in debit valuation adjustment losses."

Morgan Stanley trades for nine times the consensus 2013 EPS estimate of $2.32, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $1.94.

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

Shares of Bank of America ( BAC) dipped over 2% to close at $9.52.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

The shares have now returned 72% year-to-date, following last year's epic 58% decline. For some added perspective, the 52-week return for Bank of America's shares is a negative 28%.

Bank of America's shares are still trading for a heavily discounted 0.7 times the company's reported Dec. 30 tangible book value of $12.95. While investors clearly aren't thrilled with the consensus 2012 EPS estimate of 68 cents, the shares are attractively priced at nine times the consensus 2013 EPS estimate of $1.06.

As Bank of America continues to flirt with a $10 price level, analysts are sending mixed signals, with a prime example being Baird Equity analyst David George on Tuesday downgrading the shares to a neutral rating, while raising his 2012 EPS estimate to 65 cents from 50 cents.

George said his firm does not "believe the intermediate-term earnings outlook justifies putting new money to work in the stock."

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


-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to
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 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.