According to Richard Bove, you’d be stupid to even think no. While Bove is right, it’s lagged all but one of the big banks (WFC) with just a 30% gain YTD, that doesn’t have any effect on future results. The catalyst here is the full merger with Citi’s remaining 49%. Morgan Stanley Smith Barney is at present, a mash up of decades worth of mergers and acquisitions with very little though given toward how to seamlessly blend the smorgasbord of corporate entities into a well oiled machine (Trust me. I worked there). The computer systems are a mess (supposedly being fixed with the half billion dollar ‘360 platform’), internal and back office operations are convoluted, and interaction between legacy Morgan Stanley and legacy Smith Barney offices is far from smooth. True, MSSB has taken some steps in the direction of efficiency. Between a slight uptick in client assets and massive layoffs throughout the company, the average revenue per advisor grew to $755k from $692k back in 2009. So improvements have been made, but these numbers are still far from Merrill’s $873k per advisor average. Not to mention that the majority of the improving changes that Morgan Stanley has made won’t show any effect on their bottom line for quite a while to come. I can tell you firsthand, with the average age of a Morgan Stanley broker being somewhere near 92, the learning curve will be all but flat for these guys understanding and taking advantage of all the new bells and whistles that will emerge from unified corporate ownership.
The bottom line is that Morgan Stanley, despite looking “overwhelmingly cheap” still has some seriously strong internal headwinds that will continue to drag down their bottom line. This is why the bank holding company will continue to underperform in the immediate term, but keep it on your radar since good things are bound to solidify from this much needed restructuring. They just need time.
Morgan Stanley is “So Cheap, it’s Overwhelming,” Says Bove – Stocks To Watch Today – Barrons.com.
and
Analysis: Morgan Stanley investors await brokerage bounce | Reuters.
In late 2007 Bove was touting banks and saying it was the best time in history to buy. Within 1.5 year they were down 90%. It was the worst time in history to buy banks. In April 09 they changed to accounting rules from Mark to Market to Mark to Make believe.
The banks are bankrupt it is only their accounting schemes that keep them trading. Without the Fed help which will end soon they will be BK.