Friday, October 8, 2010

Citigroup Poaches Nomura Energy Analysts, Nomura Retaliates by Initiating Coverage of Citi with a "BUY" (C; GS; MS; JPM)

Hey, no hard feelings.
In July '09, while Citi was still bleeding, Nomura bought NikkoCiti Trust for about 70% of what they'd have to pay today. A couple days before the European energy analysts went to C, Nomura snatched Citi's head of cash equity trading.
It's all good.
From the WSJ's Deal Journal:
New Reasons to Love Goldman Sachs and Morgan Stanley
As financial firms prep a likely ugly round of third-quarter earnings reports, you have to dig under a lot of rocks to find a bullish take on banks.

And then there’s the latest from Glenn Schorr. The veteran bank analyst, who joined Nomura Securities last month from UBS, said in a report today that Goldman Sachs and Morgan Stanley “have taken considerable steps to improve their balance sheets and are well positioned to handle coming increased capital/regulatory requirements.”

Schorr, who had “buy” ratings on both Morgan and Goldman when he left UBS in June, recommends in his new report that investors buy Goldman shares. His rating on Morgan is “neutral.”
The new Nomura analyst also opened with ”buy” ratings on J.P. Morgan and Citigroup, while giving a neutral rating on Bank of America.

Schorr said in an interview that it’s been several years since he recommended Citigroup, a business he says is now “over the hump” in getting through its bad news. He says he particularly likes Citi’s international businesses.
Schorr’s report may come as a welcome relief to big banks, which begin reporting earnings next week. There are growing fears that increasing regulation and shriveling trading volumes will pinch banks’ profits in the third quarter and beyond.

On Goldman and Morgan, Schorr acknowledged the companies face tougher regulation that forces them out of some lucrative businesses. But he says that with the stocks trading relatively cheap in recent months, Goldman and the industry in general will bounce back.

“People overlook that these are flexible, dynamic businesses that won’t just sit there as punching bags and take it on the chin,” Schorr said. “They’ve never faced anything like this, but they will adapt, overcome and improvise… If there are illiquid assets that become bad-return businesses” due to increased capital requirements “they will exit.”

Schorr’s $175 target price for Goldman is 16% above the New York firm’s closing price Wednesday of $150.84. His $27.75 target price on Morgan Stanley was about 9% above its closing price today....MORE

HT: Fierce Finance who writes:
...It's fair to say Schorr will not have any trouble wrangling meetings with executives. But the standard bank analyst caveat applies here. Bank earnings are notoriously tricky to call. After the third-quarter results are announced, we'll see more analysts adjust. It will be interesting, to say the least....