May 12, 2009 / 12:06 PM / 10 years ago

UPDATE 1-Bove raises targets on Goldman Sachs, Morgan Stanley

May 12 (Reuters) - Rochdale Securities analyst Richard Bove raised his price targets on Goldman Sachs Group Inc (GS.N) saying it stands to benefit from volume increases, and on Morgan Stanley (MS.N) citing its new balance sheet.

“The world has changed dramatically in the past two months. The month of April was a substantial improvement for financial companies compared to a very dismal March. May is better than April,” the veteran banking analyst wrote in a note to clients.

He raised his price target on Goldman Sachs’ stock to $200 from $152 and that on Morgan Stanley to $35 from $30.

Bove said it appears that the volume of activity has risen in the equity markets and merger activity is about to start again.

Goldman stands to benefit as it is involved in the large M&A deals and as volumes will increase, the analyst said.

“This quarter may be well above street expectations while (Goldman) stock is ready to make another run higher,” Bove said.

Separately, the analyst said Morgan Stanley has reduced the size of its balance sheet by $570 billion to a level of $625 billion in the past 18 months.

Morgan Stanley now has larger dependence on deposits and long-term debt and also continues to add common equity raising $4.0 billion more in the past few days, putting it in a strong defensive position, Bove said.

“Based on its new balance sheet structure, the firm is likely to take a more aggressive stance in trading and investment banking,” the analyst said.

Goldman shares, which have surged 45 percent over the past three months, closed at $135.78 Monday on the New York Stock Exchange. Morgan Stanley shares closed at $26.07. (Reporting by Archana Shankar in Bangalore; Editing by Deepak Kannan)

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