Why Morgan Stanley is this analyst's top banking pick

Big Banks have kicked off the second-quarter earnings season over the past couple of trading days, Bank of America (BAC) and Morgan Stanley (MS) being the latest financial institutions to report their results.

Bank of America shares are rising on its earnings beat while forecasting its net interest income (NII) to pick up in the fourth quarter of 2024. Topping overall earnings estimates, Morgan Stanley saw its wealth management segment miss net revenue estimates by $70 million.

The Morning Brief welcomes Argus Research director of financial services research Stephen Biggar to talk about how he is reacting to Morgan Stanley's quarterly results after naming it a top pick.

"A little bit light on the wealth management side for Morgan Stanley today, certainly offset by a terrific performance by investment banking, revenues up 51% there," Biggar says. "So that's been kind of the story broadly with banks and what we expect going into the quarter that we'd have a much better backdrop and environment for investment banking."

Biggar weighs in on the areas interest rate cuts by the Federal Reserve will benefit banks the most.

"Lower rates would be a benefit for banks both on the loan growth side — loan growth has been very anemic as high interest rates have curbed loan demand — and also taking some, some pressure off those deposit costs," Biggar explains to Yahoo Finance. "So I think that's why banks are, well, they're very well hedged to whether rates go up or down."

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This post was written by Luke Carberry Mogan.