(Reuters) - Goldman Sachs and Morgan Stanley are likely to use any "bank" acquisition to build high net worth or commercial relationships, an analyst at J.P. Morgan Securities said.
Both the former investment banks are likely to be opportunistic in growing their deposit franchise, analyst Kenneth Worthington said in a note to clients and adjusted his 2009 profit estimates on the companies.
"We see both Goldman and Morgan Stanley maintaining their relative strength in rates, currencies, and commodities within fixed income, and cash and derivatives trading in equities," Worthington said.
Both the companies are well-positioned to gain market share in 2009 after their three big rivals failed earlier this year, the analyst said.
Goldman Sachs and Morgan Stanley became bank holding companies regulated by the U.S. Federal Reserve in September, after Lehman Brothers
Worthington expects mid-single-digit return on equity in 2009 for both Goldman and Morgan Stanley given the limited upside in revenue-generating ability in origination and trading.
Valuation on risky assets is likely to continue declining in the first half of 2009, leading to continued writedowns, he said.
The analyst said he views the current market environment as "Goldman's" with numerous attractive investment opportunities including various distressed and underpriced assets.
The company is likely to benefit from improved trading activity as it has the capital and risk culture to invest in new trading opportunities, Worthington said.
"We continue to avoid the brokerage sector, but recommend Goldman Sachs for those that want exposure to the sector," he added.
(Reporting by Anurag Kotoky in Bangalore; Editing by Jarshad Kakkrakandy)
