(Updates article with comments from David Konrad of D.A. Davidson about Morgan Stanley’s deal to acquire Eaton Vance and loan-loss provisioning activity.)
Bank stocks typically drop during recessions. This time around, with the big players well-capitalized, largely free from the worst of loan loss set-asides and benefitting from a rebounding economy, investors may be looking at an opportunity staring them in the face.
And the biggest banks have clear advantages: fees from investment banking and asset management. (Below are tables showing expected and historical provisions for loan losses, non-interest income, earnings per share and analysts’ ratings for the largest dozen U.S. banks.)
The hot space — asset management
Morgan Stanley (MS) has been making moves to become a premier asset manager. On Thursday, the firm said it would acquire Eaton Vance Corp. (EV) for $7 billion in cash and stock. Eaton Vance had $507 billion in assents under management as of July 31, and Morgan Stanley said the merger would bring assets under management for its Morgan Stanley Investment Management unit to $1.2 trillion.
Just on Oct. 2, Morgan Stanley completed its acquisition of discount broker E-Trade Financial. At that time, the bank said the firm’s total assets under management (AUM) had risen to $3.3 trillion. That makes for a pro forma total of $3.8 trillion in AUM, assuming the Eaton Vance acquisition is completed following regulatory approval.
A Twitter posting from Stephanie Link of HighTower Advisors underlined how hot the asset management business is:
Big consolidation in wealth management space this morning with Morgan Stanley buying Eaton Vance for $7B. Comes