Oppenheimer downgrades top US investment banks, urges shift to alt asset managers

KKR & Co

Yesterday 11:59

** Oppenheimer downgrades leading U.S. investment banks, recommends investors redeploy proceeds from sales in the sector into alternative asset managers
** Morgan Stanley MS.N shares fall 1.6% premarket after brokerage cuts stock to underperform from perform  
** Oppenheimer also downgrades peer large-cap banks Goldman Sachs GS.N, Citigroup C.N and Bank of America BAC.N
** MS and GS, Wall Street's pure-play investment banks, have gained 19% and 16% YTD, cashing in on a rebound in dealmaking and a wave of mega IPOs; Citi up ~22%, while BofA lags peers with a ~5% gain over the same period
** Shares of both Citi and BAC down 0.6% before the bell 
** Oppenheimer raises estimates for 2027 profit on expectations that investment banking wallet will be 20%-25% larger than normal vs its prior view but adds despite this it does not find the valuations compelling 
** "We recommend limiting exposure in the large-cap bank group to the most boring and stable commercial banks one can find, which is USB and PNC in our group," Oppenheimer analyst Chris Kotowski writes in a note 
** In the alternative asset managers, the brokerage recommends Ares Management ARES.N, Blackstone BX.N and KKR KKR.N
** Shares of alternative asset managers have been pressured this year amid jitters over private credit exposure and concerns about elevated investor redemptions from flagship funds
** ARES down ~33% YTD, BX has lost ~25.5% and KKR has fallen ~30% through previous close 

 (Reporting by Manya Saini in Bengaluru)
 ((Manya.Saini@thomsonreuters.com))