Goldman Sachs and Morgan Stanley will top second-quarter earnings expectations because of a rebound in credit markets and elevated trading activity highlighted by the Brexit volatility at the end of the quarter, according to Credit Suisse.
Goldman shares may rally 20 percent from here, the firm predicted. Both stocks are down more than 15 percent year to date as of midday Monday.
"We raise our 2Q16 estimate for the brokers — GS and MS — to reflect a healthier operating backdrop for the trading businesses," Credit Suisse's Christian Bolu wrote in a note to clients Monday. "A rebound in credit markets (2Q16 was the best quarter for credit market asset prices since 2009) and elevated trading activity in and around Brexit should drive solid sequential quarter growth in trading revenues and profits."