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March 18 (Reuters) - Goldman Sachs upgraded Lehman Brothers Holdings Inc LEH.N and Morgan Stanley (MS.N) to “buy” from “neutral,” saying the risk of another liquidity crunch for a bank or broker was substantially lower due to the Federal Reserve’s recently announcedliquidity measures.
Analyst William Tanona expects the Fed will continue to implement policy initiatives which allow both banks and brokers access to liquidity in an attempt to preserve the integrity of the financial system.
“We believe these initiatives could include an acceleration of interest rate cuts, an expansion of the Term Securities Lending Facility (TSLF) from the current $200 billion as well as a continued broadening of the financial assets which are acceptable as collateral,” he added.
Both Lehman and Morgan Stanley were added to Goldman Sachs’ Americas Buy List. Morgan Stanley was also added to Goldman Sachs’ Conviction Buy List.
Both Lehman Brothers and Morgan Stanley should benefit from the significant percentage of revenue which is earned outside the United States, where economic growth should prove more resilient, Tanona said.
Both firms derive about 40 percent to 50 percent of their revenue from outside North America, he noted.
Tanona cut his six-month price target on Lehman’s stock to $45 from $58. He has a 6-month price target of $50 on Morgan Stanley’s stock.
Shares of Lehman, which reported better-than-expected quarterly results, were up 36 percent at $43.19 in late morning trade on the New York Stock Exchange. Morgan Stanley’s shares were up 15 percent at $41.84.
Reporting by Tenzin Pema in Bangalore; Editing by Bernard Orr