Morgan Stanley (MS) is implementing changes that will bring the company revenue stability and an ability to generate higher ROE, making MS a near-perfect business mix, says Brad Hintz, Equity Research Analyst at Sanford Bernstein & Co., LLC.
“Morgan Stanley is becoming a potentially better version of the old Merrill Lynch. MS will have a high-operating-leverage retail business that will thrive late in an economic cycle. MS will have the massive channel-distribution power of a Merrill Lynch and will be able to charge a premium for access to its clients. Retail will be approximately 50% of MS revenues,” Hintz said.
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Morgan Stanley‘s investment banking business numbers are highly profitable, and the company is strong in equity underwriting and M&A, Hintz says. He adds that the company’s credible trading businesses and a more cautious management team are also positioning MS to benefit as the economic cycle continues.
“Morgan Stanley‘s fixed has reduced proprietary trading and is going to be a customer execution business. High RWA asset positions are rolling off, and balance sheets are being constrained. All these changes imply to us that the new Morgan Stanley will be able to generate higher ROE and less revenue volatility,” Hintz said.
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