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