Morgan Stanley vs. Goldman Sachs: the battle continues
No less than FoxBusiness columnist Charles Gasparino noted recently that Morgan Stanley CDS prices dipped below Goldman Sachs CDS prices, suggesting that the market now accords Goldman Sachs a higher likelihood of some sort of credit default event. To be sure, neither bank is any danger of such an event. But in the ongoing, inevitable comparison of the two banks, such price movements have meaning.
"Traders and analysts say the move is an indication that investors have more confidence in the risk management expertise of Morgan Stanley's chief executive James Gorman over Lloyd Blankfein, his counterpart at Goldman Sachs and long considered among Wall Street's best risk managers. Since taking over as Morgan's chief executive in 2010, Gorman has moved the firm away from risk-taking such as trading, and emphasized advice through Morgan's retail brokerage arm and its investment bank -- both of which have propelled the firm's earnings over Goldman's in the third quarter," Gasparino writes.
For support, he turns to the influential and ubiquitous analyst Richard Bove: "In the past couple of weeks it is apparent that investors have decided that Gorman's approach to the business is better than Blankfein's."
The third-quarter results may be prompting some to agree. The seemingly FICC-dependent Goldman Sachs fared a lot worse than Morgan Stanley, which has sought to grow wealth management as a revenue contributor. In the third quarter, wealth management net revenue ($3.5 billion) was close to institutional securities net revenue ($3.9 billion). We may even see the former start to contribute even more revenue than the latter in coming quarters.
This will be a concept and idea worth watching for the near future, even as CDS spreads even out. All in all, we may be at a critical turning point, with Morgan Stanley taking—finally—the upper hand.
- here's the column