Nomura Securities on U.S. Capital Markets: Some Key Areas of Focus Heading Into Earnings - What to Watch For
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Rating Summary:
26 Buy, 18 Hold, 2 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Nomura Securities on U.S. Capital Markets: Some Key Areas of Focus Heading Into Earnings - What to Watch For in 4Q Results
Analyst, Glenn Schorr, said, "With earnings season for US financials set to kick off on January 13th, we thought it would be interesting to highlight some key areas that investors will likely be focused on this time around:
1) Has Goldman Lost its Mojo? Despite solid investment banking (#1 in Announced M&A in 2011) and leading market share in equities, soft FICC (-500bp in market share vs. 2009) and a 6% YTD ROE have investors wondering if GS has lost its “mojo” given changes in leverage and the new regulatory landscape;
2) Can Morgan Stanley Sustain its Strong Equity Showing? MS posted a 29% y/y increase in 2011 YTD equity trading (peer group average is flat) and gained 500bp of market share since 2009;
3) Will Comp Expense Be a Lever? Despite the 10% y/y decline in capital markets revenues, 2011 YTD comp expense is up for BofA (NYSE: BAC), Citi (NYSE: C), JPMorgan (NYSE: JPM), and Morgan Stanley (NYSE: MS). Investors are expecting some comp flexibility in 4Q11, but prior year deferred comp may limit this (we think JPM has the most flexibility);
4) Looking for Follow-through on Expense Initiatives. We think investors will want to see expense improvement from BAC (related to “New BAC” initiative – $5bn annual run rate reduction by 2014) and if State Street (NYSE: STT) and Bank of NY Mellon (NYSE: BK) are on track with their announced cost programs. We also expect Northern Trust (Nasdaq: NTRS) to give new color on its cost save initiatives; and
5) BEN’s Global Bond Flows Remain a Key Driver. We estimate Global Bond accounted for more than half of Franklin’s net inflows for the last twelve months (gross flows are more broadly distributed). We think choppy performance of its Global Bond products could lead to outflows and cause modest overall outflows for Franklin (NYSE: BEN) (in addition to the previously disclosed $11bn Oct. outflow from Hybrids) and lead to earnings pressure in the December quarter.
Analyst, Glenn Schorr, said, "With earnings season for US financials set to kick off on January 13th, we thought it would be interesting to highlight some key areas that investors will likely be focused on this time around:
1) Has Goldman Lost its Mojo? Despite solid investment banking (#1 in Announced M&A in 2011) and leading market share in equities, soft FICC (-500bp in market share vs. 2009) and a 6% YTD ROE have investors wondering if GS has lost its “mojo” given changes in leverage and the new regulatory landscape;
2) Can Morgan Stanley Sustain its Strong Equity Showing? MS posted a 29% y/y increase in 2011 YTD equity trading (peer group average is flat) and gained 500bp of market share since 2009;
3) Will Comp Expense Be a Lever? Despite the 10% y/y decline in capital markets revenues, 2011 YTD comp expense is up for BofA (NYSE: BAC), Citi (NYSE: C), JPMorgan (NYSE: JPM), and Morgan Stanley (NYSE: MS). Investors are expecting some comp flexibility in 4Q11, but prior year deferred comp may limit this (we think JPM has the most flexibility);
4) Looking for Follow-through on Expense Initiatives. We think investors will want to see expense improvement from BAC (related to “New BAC” initiative – $5bn annual run rate reduction by 2014) and if State Street (NYSE: STT) and Bank of NY Mellon (NYSE: BK) are on track with their announced cost programs. We also expect Northern Trust (Nasdaq: NTRS) to give new color on its cost save initiatives; and
5) BEN’s Global Bond Flows Remain a Key Driver. We estimate Global Bond accounted for more than half of Franklin’s net inflows for the last twelve months (gross flows are more broadly distributed). We think choppy performance of its Global Bond products could lead to outflows and cause modest overall outflows for Franklin (NYSE: BEN) (in addition to the previously disclosed $11bn Oct. outflow from Hybrids) and lead to earnings pressure in the December quarter.
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