Analyst says a 'friendly activist' in Morgan Stanley is great news ... for now

Mayo: 2017 to be make or break for James Gorman
Behind ValueAct's Morgan Stanley bid
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ValueAct's recently disclosed stake in Morgan Stanley isn't a cause for concern — if anything, it's "great news" for Morgan Stanley, according to one bank analyst.

On Monday, regulatory filings revealed that the hedge fund had acquired 38 million shares of the investment bank, or a roughly 2 percent stake.

The stock was up about 2 percent in intraday trade Tuesday.

This kind of investment is "what the banking sector needs," said CLSA's Mike Mayo during an interview on CNBC's "Halftime Report." He explained that while Morgan Stanley has "an excellent franchise," its "execution has fallen short."

Mayo said the bank has struggled with flat earnings, fixed income shortfalls and single-digit return on equity. Morgan Stanley shares have declined more than 4 percent in 2016.

Jeff Ubben, head of activist hedge fund ValueAct, told CNBC that his firm is "very supportive" of Morgan Stanley CEO James Gorman. Although the firm isn't necessarily angling for major changes at the investment bank, Mayo said that could change.

"You have a friendly activist involved, and that friendly activist might not be so friendly if Morgan Stanley misses their 2017 targets," he said. In particular, the bank needs to focus on achieving its ROE targets next year, Mayo concluded.

Disclosure: Mayo owns shares of Morgan Stanley.

— CNBC's Scott Wapner contributed to this report.