Banking on Banks: Why Morgan Stanley Is Bullish on Bank Stocks
Morgan Stanley on banks
Morgan Stanley’s (MS) James Gorman said in the interview that he’s bullish on bank stocks (KBE). According to Gorman, bank stocks are positioned well in the present scenario compared to the financial crisis of 2008.
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After nearly a decade, bank stocks are showing some improvement at the capital level. Recently, the Federal Reserve held bank stress tests for major banks. In the first round, 34 major banks confirmed that they have adequate capital to face any major financial problem.
JPMorgan Chase (JPM), Goldman Sachs (GS), Morgan Stanley (MS), Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) have more than the required level of capital and could increase their dividends by 12.0%, 25.0%, 60.0%, 3.0%, and 100.0%, respectively, in the upcoming quarters.
Gorman also believes that the Federal Reserve’s gradual rate hike process will strengthen the profit margins of these banking stocks. Thus he believes that investing in banking stocks will provide a good return.
The Financial Select Sector SPDR ETF (XLF), which tracks the performance of major financial services companies, rose nearly 7.2% on a year-to-date basis as of July 3, 2017. The SPDR S&P Bank ETF (KBE), which tracks the performance of major bank stocks, rose nearly 41.3% in the last one-year period.
In the next part of this series, we’ll look at Gorman’s view on the global economy.