Goldman: JP Morgan Turnaround Before Morgan Stanley

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Goldman: JP Morgan Turnaround Before Morgan Stanley


According to analysts at Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM) is a better story in the short term than Morgan Stanley (NYSE:MS).  JPMorgan now is on Goldman’s “conviction” buy list while Morgan Stanley was downgraded to neutral.

JP Morgan has had a rough year, along with the banking sector in general.  Unfortunate miscalculations lead to a $2 billion loss which sparked controversy and possible government regulation.  Jamie Dimon is a solid leader and he is certainly an icon in the industry.  Shares of JP Morgan have lost 15% since we learned of the bad trade.

Morgan Stanley has not had a great year at all.  The biggest events that standout for Morgan Stanley this year is the blundered Facebook Inc (NASDAQ:FB) IPO and the Moody’s Corporation (NYSE:MCO) downgrade, which has been anticipated all year.  These two events have help cost Morgan Stanley 25% of their share price.

With all that on the table, you must consider that Morgan Stanley is taking on a new route to find potential customers and better serving current customers, as the investment bank announced that 17,000 of its financial advisors will have access to Twitter and LinkedIn.

This could really help give Morgan Stanley an edge over the short term which may offset any turbulence that we have seen thus far.  Goldman Sachs has also expressed some interest in allowing financial advisors access to social media sites in the name of finding new customers.

While JP Morgan has yet to embrace social media, one thing they do well at is making money and a lot of it.  Even though their trading loss put them in a bad light, give it some time before the investment bank is back on its feet and it appears that everything is ok.  Goldman maintained their target price for JP Morgan at $42 and even lowered their second quarter earnings estimate to $0.60 from $0.75.

The bottom line here is that whether Goldman likes JP Morgan better than Morgan Stanley or not, all three of these banks were downgraded my Moody’s last week.  They all are going to have a much harder time getting and being able to afford loans.  A bank such as Wells Fargo & Company (NYSE:WFC) which was not downgraded is going to be a much more attractive story than any bank that was downgraded, as loans will be cheaper.

Disclosure: No positions

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