Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

Not time to be long large cap banks yet, JPMorgan double upgraded at Morgan Stanley

Stock Markets Dec 06, 2022 11:36
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.
 
STT
+0.10%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BK
-1.24%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
JPM
-0.47%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Sam Boughedda 

In a note to clients Tuesday, Morgan Stanley analysts said it's not time to be long Large Cap Banks yet, with the firm upgrading JPMorgan (NYSE:JPM) to Overweight from Underweight and downgrading State Street (NYSE:STT) to Equal-Weight from Overweight and Bank of New York (NYSE:BK) to Underweight from Equal-Weight.

The analysts explained that the Fed rate hikes might be approaching the late cycle, but "bank credit is early cycle and NIMs are mid-cycle. The longer the Fed keeps rates high, the tougher for banks and borrowers."

"NIMs are about to turn lower. While loan growth is at record highs, funding costs are increasing at the fastest pace in history, and capital is tight. Bankers are tightening loan standards and widening spreads to make it worth their effort to fund new loans," the analysts explained.

Morgan Stanley double upgraded JPMorgan based on its operating leverage inflecting positively, Consumer & Community Bank taking market share, and progress on higher CET1 ratio regulatory requirements.

State Street was lowered as the firm's Overweight catalyst played out last Wednesday after the bank terminated its acquisition of BBH Investor Services, resulting in an 8% relief rally. The Bank of New York Mellon downgrade was said to reflect the risk that deposit outflows persist for longer during QT given the bank's "skew toward fixed income asset manager clients and its key position as Fed clearing agent."

Commenting on the Fed, the analysts stated that it's not enough for the Fed to just slow or stop hiking rates, it "has to end QT to get more positive on the banks."

"Our economist's outlook calls for Fed Funds to get to 4.675% in February and then stay there until December 2023. That's a full year of higher rates, coupled with a full year of QT, which our economists don't have ending until 2Q24," they added.

Not time to be long large cap banks yet, JPMorgan double upgraded at Morgan Stanley
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email