Morgan Stanley (MS): Is it the Best Bank to Buy?

Page 1 of 2

Morgan Stanley (NYSE:MS) is expected to experience a revenue declination of 18% this fiscal year, but should see revenue growth of 22% by the end of FY2013, thanks to a rebound in sales and trading. One of the key growth initiatives for Morgan Stanley is its global wealth management operations, which have grown to account for 50% of total revenues, compared to 30% in 2007.

Another key growth opportunity is its ability to generate net interest income from this segment, where NII as a percent of revenue was 11% in 2011. We believe Morgan Stanley has room to grow this margin, especially when comparing it to wealth management peer Charles Schwab – where 35% of total revenue is derived from net interest income. With the purchase of Citi’s remaining stake of Smith Barney, Morgan Stanley will have one of the top retail platforms and should have less of a dependence on trading revenues.

Another plus for Morgan Stanley investors is the bank’s ability to enhance shareholder value by increasing its dividend and repurchasing shares. MS currently sports dividend yield of 1%, but has over $18 billion in cash. Morgan Stanley has also managed to lower its balance sheet risk, thanks in part to a focus on less capital-intensive businesses.

SAC CAPITAL ADVISORS

From a valuation standpoint, Morgan Stanley trades at one of the cheapest book multiples in the industry at 0.6x. What’s more is that the stock trades at one of the cheapest forward P/E ratios at only 9x. Also boding well for the bank is its 15% long-term expected EPS growth. We believe Morgan’s industry-low valuation, coupled with robust growth prospects, makes it one of the best value buys in the banking business. Billionaire Steven Cohen of SAC Capital is one of Morgan Stanley’s big-name investors (check out Steven Cohen’s biggest bets).

Citigroup Inc. (NYSE:C) is expected to grow revenues 8% in 2013 on the back of expected 10% loan growth. Citi is also a relatively cheap stock showing marked improvement, with 1.85% of loans in non-accrual status as of 3Q, down from 1.90% a year ago. 3Q results were strong, where loans increased 11% year over year and global deposits were up 5%. Citi also trades near the bottom of the industry at 0.6 times book, but its long-term expected EPS growth rate comes in at 11%. George Soros added Citi to his portfolio last quarter (check out George Soros’ newest picks).

What about the rest of Morgan Stanley’s peers?

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!