Lorne Steinberg Morgan Stanley MS-N PAST TOP PICK Sep 06, 2023

This week, they delivered a big revenue and earnings beat. Investment banking revenue rose 25% and equity 51%. Strong expense control as seen in their 69% efficiency ratio and bought back $750 million in shares. The sky is the limit for these guys. 

He's most excited about banking de-regulation, loosening constraints as a result of the 2008 banking crisis. De-regulating will loosen a lot of capital, so he owns MS in anticipation.

They announced lay-offs, but no financial advisors. 70% of earnings come from the wealth business. They have a strong balance sheet and pay a 3% dividend yield that's growing. MS is-5% this year. The time to buy.

Friday kicks off bank earnings season, a sector that has been crushed, because Wall Street expects a downturn in the economy. They recently closed a deal at a good price, but there's no other good news. Capital markets have only gotten worse due to tariffs.

Money centre + wealth management (about 50% of total revenue). Accumulated companies over the years. New CEO comes from within. Traded off to a compelling valuation versus its history. Well positioned once we come out of all this. Yield is 3.72%.

A generation ago, their business was fixed income and capital markets. Now, 50% of business is wealth management. They have a toe in the water in capital markets, which should grow in the second half of this year with more M&A activity.

Had healthy top and bottom line beats. All three divisions beat. Wealth management is seeing huge inflows. 

The capital markets banks are all performing really well. That tells you something about the rest of the market; if investors are focusing on these banks, then they must have a view that lots of deals will be done and that capital markets provide a good opportunity. This name is more investment management than trading, but still very attractive.

He bought it. The debt-to-equity ratio is a little better than GS, so he prefers MS. Owns both.

In terms of quality, hard to argue against JPM -- best of breed. GS is tops on the investment banking side. He's overweight US banks.