We are downgrading our recommendation on Morgan Stanley (MS) to Underperform from Neutral. The company’s fourth quarter earnings were substantially behind the Zacks Consensus Estimate.
Robust topline growth and a dip in interest and operating expenses were partially offset by losses in fixed income sales and debt-related credit spreads. Also, low level of activity was witnessed in sales and trading revenues although strong gains were posted in underwriting, wealth management and investment banking operations.
Given the current critical sustainability factor, we remain on the edge to notice the financial impact of the company’s JV with MUFG that is scheduled to commence in May 2010.Zacks Investment Research
