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The big fight: Goldman Sachs vs Morgan Stanley
We're looking at a battle between two investment banks and two business models, so who will win the fight between Goldman Sachs and Morgan Stanley? Saxo's Head of Equity Strategy, Peter Garnry has been investigating these titans of Wall Street. Goldman, he says, continues to emphasise the old model of high risk capital markets, fixed income trading and commodities. Morgan Stanley has gone down a "safer" route, focusing on retail brokerage and wealth management.
Peter says what sets any industry winner apart from its competitors is its relentless ability to produce a higher return on the capital invested. In almost every fiscal quarter since 2003, Goldman Sachs has had a higher twelve month rolling return on equity than Morgan Stanley. It's a testament, he says to Goldman's business model and its staff.
Morgan Stanley would likely have failed if the Fed and the US government hadn't intervened in the economy in the wake of the global financial crisis. It led to the bank making an imoprtant strategic decision and scale down high risk and capital intensive businesses such as fixed income trading. It's new business model is beginning to work, says Peter.
However, Goldman Sachs is likely to be the big winner, according to Garnry. It has a higher growth potential. As competitors leave the riskier ground, it's likely to have a far easier time in the years ahead.
Read more about Peter's analysis into Goldman and Morgan Stanley here:
http://www.tradingfloor.com/posts/goldman-sachs-morgan-stanley-win-future-1911505755
02:10 minutes
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