This bank stock is getting ‘downgrades’ amidst talks of higher interest rates

on Sep 29, 2021
  • Mike Mayo rates Morgan Stanley at "neutral" on CNBC's "Halftime Report".
  • The analyst explains why he's not bullish on MS like he is on other bank stocks.
  • Shares of the investment bank are up nearly 45% on a year-to-date basis.

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The U.S. Federal Reserve is expected to raise interest rates next year. Naturally, financials are gaining more traction as they tend to do well in such an economic environment.

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But there is one stock in the banking space that is not getting the same love as its peers.

Mike Mayo rates Morgan Stanley at ‘neutral’

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Wells Fargo’s Mike Mayo gave Morgan Stanley (NYSE: MS) a “neutral” rating on Wednesday, contrasting his unflinching support for rivals like JPMorgan Chase, Goldman Sachs, U.S. Bancorp, and PNC Financial.

Mayo expects the “tech-driven revolution” to help banks achieve record efficiencies and sharply expand profit margins. In the case of Morgan Stanley, however, he said on CNBC’s “Halftime Report”:

We think Morgan Stanley’s structural change has got a long way. It was our top pick for a number of years, but you can’t dance with everybody.

Mayo’s comments on the bank’s E-Trade acquisition

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Morgan Stanley bought E-Trade late last year, but Mayo said the acquisition’s success is yet to be determined. He added:

You don’t decide on the success of an acquisition in the first few months. It’ll take a couple of years to see how they’re going to integrate E-Trade. Morgan Stanley was extremely lucky with the timing of the acquisition, but there’s some heavy lifting to do to see the follow-through. So, we’d rather be on the sideline.

Mayo’s rating comes a day after Oppenheimer and Berenberg downgraded MS on “valuation” and “no absolute upside”. Shares of Morgan Stanley are up about 45% this year.

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