Morgan Stanley loses bull rating as Goldman cites risks to earnings growth

Goldman Sachs Equity Research downgraded Morgan Stanley (NYSE:MS) stock to Neutral from Buy on Tuesday as analyst Richard Ramsden pointed to risks to the investment bank’s earnings growth.

(MS) shares drifted down 1.2% in after-hours trading, adding to the 1.6% dip recorded in the regular session.

The analyst sees 3% downside risk to Morgan Stanley’s (MS) 2025 estimated net interest income for its wealth division, “largely driven by continued, albeit slowing cash sorting and pressure on asset yields when rates come down,” he wrote in a note.

With wealth revenue representing a larger portion of overall revenue relative to peers, “this presents risk to earnings growth,” he added.

Elsewhere, the note said, Morgan Stanley (MS) has less room to boost share buybacks vs. peers following unexpectedly large increases in stress capital buffers, a component of banks’ minimum capital requirements set by the Federal Reserve.

Goldman’s Neutral rate aligns with the SA Quant system rating and the average sell-side analyst rating, both at Hold, and diverges from the average SA analyst rating of Buy.