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UPDATE: Morgan Stanley Raises Price Targets On Large BanksLast update: 5/22/2009 12:00:10 PM(Updates with fresh stock prices and opposing viewpoint of economist Nouriel Roubini in sixth, seventh and eighth paragraphs.)
By Ed Welsch
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Large bank stocks are set to rise over the next year or two as the pace of economic decline begins to slow, Morgan Stanley analysts said Friday. The firm raised its price target on the 16 large bank stocks it covers by an average of 33% and said that most would be able to repay TARP money by the fourth quarter; it raised its price target for Bank of America Corp. (BAC) 28% to $32, Citigroup Inc. (C) 50% to $6, JPMorgan Chase & Co. (JPM) 33% to $60 and Wells Fargo & Co. (WFC) 33% to $44. In recent trading Friday, however, shares of large banks fell, with Bank of America shares down 3.6% to $11 and the broader KBW Bank Index declining 1.4% to $35.85. Morgan Stanley\'s report follows an upgrade of the large banks Thursday by Goldman Sachs on a similar rationale: that there are signs of a bottom in the pace of decline in several broad economic indicators, including jobless claims, industrial production, factory utilization and home prices. Morgan Stanley\'s assumption about rising bank stocks rests on the projection that there was some stabilization in indicators including initial jobless claims, which fell 12,000 to 631,000 last week after a sharp spike the previous week to 643,000. The firm also said it saw signs of slowing deterioration in April in the nearly unchanged factory capacity utilization report, and a slower pact of contraction in industrial production. Not everyone agrees with the so-called green shoots theory that a recovery of financial companies and the broader economy is beginning. Renowned New York University Economist Nouriel Roubini, who foresaw a collapse in the housing market and financial sector while others were still bullish, criticized the Goldman economic team for promoting the green shoots idea based on slowing deterioration in economic data. In a blog posting earlier this week, Roubini wrote that improvement in metrics is still more in the minds and hopes of the green shooters than in the reality of the recent data. In a section describing risks to its outlook, Morgan Stanley said its projections could prove to be inaccurate if its economic growth turned out to be disappointing, which could cause higher credit costs and lower capital markets activity for the banks. The Morgan Stanley analysts couldn\'t be reached for comment. Though the note was generally positive for the banking sector, Morgan Stanley did downgrade SunTrust Banks Inc. (STI) to underweight from equal weight, saying it is behind its peers in raising loss provisions, and will have to raise them significantly over the next year to catch up. Shares of SunTrust declined 7.6% to $13.47 in recent trading. -By Ed Welsch, Dow Jones Newswires; 201-938-5244; edward.welsch@dowjones.com (END) Dow Jones NewswiresMay 22, 2009 12:00 ET (16:00 GMT)
By Ed Welsch
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Large bank stocks are set to rise over the next year or two as the pace of economic decline begins to slow, Morgan Stanley analysts said Friday. The firm raised its price target on the 16 large bank stocks it covers by an average of 33% and said that most would be able to repay TARP money by the fourth quarter; it raised its price target for Bank of America Corp. (BAC) 28% to $32, Citigroup Inc. (C) 50% to $6, JPMorgan Chase & Co. (JPM) 33% to $60 and Wells Fargo & Co. (WFC) 33% to $44. In recent trading Friday, however, shares of large banks fell, with Bank of America shares down 3.6% to $11 and the broader KBW Bank Index declining 1.4% to $35.85. Morgan Stanley\'s report follows an upgrade of the large banks Thursday by Goldman Sachs on a similar rationale: that there are signs of a bottom in the pace of decline in several broad economic indicators, including jobless claims, industrial production, factory utilization and home prices. Morgan Stanley\'s assumption about rising bank stocks rests on the projection that there was some stabilization in indicators including initial jobless claims, which fell 12,000 to 631,000 last week after a sharp spike the previous week to 643,000. The firm also said it saw signs of slowing deterioration in April in the nearly unchanged factory capacity utilization report, and a slower pact of contraction in industrial production. Not everyone agrees with the so-called green shoots theory that a recovery of financial companies and the broader economy is beginning. Renowned New York University Economist Nouriel Roubini, who foresaw a collapse in the housing market and financial sector while others were still bullish, criticized the Goldman economic team for promoting the green shoots idea based on slowing deterioration in economic data. In a blog posting earlier this week, Roubini wrote that improvement in metrics is still more in the minds and hopes of the green shooters than in the reality of the recent data. In a section describing risks to its outlook, Morgan Stanley said its projections could prove to be inaccurate if its economic growth turned out to be disappointing, which could cause higher credit costs and lower capital markets activity for the banks. The Morgan Stanley analysts couldn\'t be reached for comment. Though the note was generally positive for the banking sector, Morgan Stanley did downgrade SunTrust Banks Inc. (STI) to underweight from equal weight, saying it is behind its peers in raising loss provisions, and will have to raise them significantly over the next year to catch up. Shares of SunTrust declined 7.6% to $13.47 in recent trading. -By Ed Welsch, Dow Jones Newswires; 201-938-5244; edward.welsch@dowjones.com (END) Dow Jones NewswiresMay 22, 2009 12:00 ET (16:00 GMT)
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