Oppenheimer: Morgan Stanley Outlook Just 'Ho Hum'

The quality of Morgan Stanley’s MS 1Q earnings was similar to that of its peers. Oppenheimer’s Chris Kotowski maintained a Perform rating for the company, saying that the concern area was “not so much income statement trends,” rather it was “the outlook for capital returns.”

FICC

Morgan Stanley’s FICC revenues declined 56 percent y/y, which was substantially worse than the average of 19.5 percent reported by other companies. Although this has “brought some relief” on FICC RWAs, which are down $4B linked quarter to $132B, it does not “seem commensurate” with a headcount reduction of 15 percent or the revenue reduction, analyst Chris Kotowski said.

“The whole industry needs capital returns in order to generate reasonable ROEs, but for MS the issue seems particularly acute to us. The very significant retrenchment in FICC (which has brought down both revenues and RWAs) has not thus far brought commensurate relief in CCAR, and this quarter's call did not leave us with optimism that it would in the 2016 CCAR,” Kotowski wrote.

Take On Total Results

The miss in the results versus the Oppenheimer estimates represented “a lot of little things rather than any one big thing,” the analyst commented.