Tag Archives: Morgan Stanley

Chief Equity Strategist warns of a Recession worse than ‘normal’

Revelations 18:23 ‘For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • Morgan Stanley Warns of Something Worse Than a ‘Normal Recession’
  • Morgan Stanley’s Chief U.S. Equity Strategist Michael Wilson said that he’s convinced a corporate earnings recession is coming—and that it could be worse than a “normal” recession.
  • Businesses reluctant to cut staff in the face of deteriorating economic conditions and as demand falls would put more pressure on profit margins, he warned. This could lead to a situation where unemployment doesn’t move up meaningfully but corporate earnings plunge.
  • Separately, in an analytical note cited by Bloomberg, Wilson and his team of strategists said the soaring dollar was creating an “untenable situation” for stocks and this, combined with central banks tightening policy “at a historically hawkish pace,” means that odds are growing for “something to break.”

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Morgan Stanley launches Black recruitment program to boost trading unit’s diversity

By Imani Moise

(Reuters) – Morgan Stanley is piloting a program to recruit Black talent in its sales and trading division, executives told Reuters, in corporate America’s latest initiative to improve diversity after nationwide protests against racial inequality.

The Morgan Stanley Experienced Professional Program within its Fixed Income & Business Resource Management Divisions is seeking Black professionals with at least two years’ full-time work experience in any field who want to work in finance.

“As long as you have the skill set around communication, analytical abilities, interpersonal skills, and you are willing to work hard, you could have a strong career,” Derek Melvin, a managing director who designed the program, said in an interview on Wednesday.

The banking industry has been scrutinized for its lack of racial diversity since the May 25 death in police custody of George Floyd, a Black man, sparked demonstrations and prompted deep introspection at companies across the country.

That has led to fresh pledges to improve diversity and tie executive compensation to meeting related targets. However, such action has triggered concern from authorities.

Last week, Wells Fargo & Co defended its diversity initiatives after the U.S. Labor Department questioned whether they were unlawful or discriminatory.

Morgan Stanley’s program is only open for up to 20 people. Melvin said he hopes the program, if successful, will be replicated across the firm’s institutional securities business.

That division, the bank’s largest breadwinner, reported a 21% jump in revenue for the third quarter on Thursday, helping the bank breeze past Wall Street estimates.

Successful applicants will get a month of training before doing 10-week rotations on different trading desks, leading to a full-time job.

Feedback on the program so far has been overwhelming, Melvin said. Since advertising it at the end of September, his team has received over 700 applications. Successful applicants will be chosen by the end of the year.

“Our expectations were that after a month, we’d have about 100 to work through,” Melvin said in an interview. “But we’ve been surprised to the upside here.”

(Reporting by Imani Moise; Editing by Christopher Cushing and Paul Simao)

Federal Reserve announces post-stress test capital ratios for large banks

By Pete Schroeder

WASHINGTON (Reuters) – The U.S. Federal Reserve announced on Monday how much each large bank that underwent its 2020 stress tests will have to hold in additional capital.

The results mark the first time the Fed has given out custom capital requirements for each bank under its new “stress capital buffer,” and takes effect on Oct. 1. Goldman Sachs and Morgan Stanley were ordered to hold the most capital of the 34 firms tested, with ratios of 13.7% and 13.4% respectively.

The custom capital requirements follow stress test results released in June, which found that banks would weather heavy capital losses should the economic fallout from the coronavirus pandemic drag on or worsen. The Fed ordered banks to cap dividend payments and bar share repurchases until at least the fourth quarter to ensure they have sufficient cushions.

The new capital ratio combines the minimum capital requirements of 4.5% and the new “stress capital buffer,” which is determined by how each bank fared under a hypothetical severe economic downturn. That buffer is at least 2.5%, but was highest for Deutsche Bank’s U.S. operations at 7.8%.

The nation’s largest banks also face an additional capital surcharge for their predominant role in the financial system, ranging from 1% to 3.5% for JP Morgan Chase, the nation’s biggest bank.

The Fed also announced that it had reaffirmed the stress test results for five banks that requested reconsideration: BMO Financial Corp., Capital One Financial Corp, Citizens Financial Group Inc, Goldman Sachs and Regions Financial Corp. The Fed said the additional review found its stress test models worked as intended and there were no errors.

(Reporting by Pete Schroeder; Editing by Chizu Nomiyama and Jonathan Oatis)