The Banking Royal Commission only seems to bring bad news to the financial sector as it casts a long shadow over our best-known institutions.
You only need to look at the underperformance in the share prices of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) to see what I mean.
These stocks are lagging the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) and I don't think they can make a meaningful rebound as long as the Royal Commission continues to paint the big banks as predators.
It isn't only the banks that are affected. Wealth advisors, mortgage brokers and insurers are also in the firing line.
But there may be a surprising winner from the Royal Commission spotlight on bad practices in the financial industry. Morgan Stanley thinks media companies will benefit from all the negative publicity on the sector.
"We have a cautious outlook for traditional media stocks. But identify a surprise catalyst which could add A$150-$250m in ad revenue, and prima facie, lift EPS by say +5% to +15% for Internet, Outdoor and TV companies," said the broker.
"Anecdotally we can observe a spike in bank brand building ad campaigns, which appear to be running in conjunction with the Royal Commission, e.g., highlighting Banks' positive community involvement. And it's more than a hunch, the numbers support our conclusion."
Ad spend is up 5% in the first two months of this calendar year compared with the same time in 2017 and is running ahead of the broker's forecast of 2%-3% for 2018.
Furthermore, ad spending by banks is up a whopping 32% in January and February as the wider financial industry increased their ad spend by 21% or $25 million over the same period.
If you strip out ad spend growth by banks and other financial companies, Morgan Stanley estimates that ad spend would have only inched up 2.3%.
It's too early to say that the growth in ad spending will be sustained and the broker isn't rushing to upgrade the stocks in the sector.
However, the broker notes that the stocks best placed to benefit from this potential trend include outdoor advertising companies APN Outdoor Group Ltd (ASX: APO) and HT&E Ltd (ASX: HT1), as well as free-to-air television broadcasters Nine Entertainment Co Holdings Ltd (ASX: NEC), Seven West Media Ltd (ASX: SWM), Southern Cross Media Group Ltd (ASX: SXL) and Prime Media Group Limited (ASX: PRT).
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