Despite the miss, Harte still has a “buy” rating and a $22 price target on the stock.
During the call, the company detailed a strategic shift away from higher risk-weighted trading businesses.
“They’re saying the right things about focusing on return and getting out of the higher risk, higher risk-weighted businesses,” Harte said. “But the trouble I have there — and I’m going to do some more work on it — but typically your higher risk-taking businesses are the more profitable business and the more client-demanded business. Sometimes those can be the harder ones to walk away from if you’re actually trying to expand your revenue share.”
While Harte does not see Morgan Stanley being bought out anytime soon by a larger financial institution, he wouldn’t rule it out in the future.
“I wouldn’t be so sure that if we get into a better market, the demand for a franchise like this wouldn’t increase,” he said.
Harte added that he thinks the bank remains one of the top investment banking franchises out there.
“I think if the environment gets better, they’re going to do better and so if we can get any kind of environmental tailwinds it’s going to be a great thing to own the stock here,” he said. “The trouble is, as we’ve seen the last couple years, it’s tough to say exactly when that is going to happen, and I think investors are getting a little tired of trying to play that macro game.”
—By CNBC.com’s Katie Little
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Jeff Harte does not own shares of Morgan Stanley.
Follow Katie Little on Twitter @katie_little.