Investment-blog.net: Stocks, Emerging markets, Bonds, Currencies and Commodities

Forecasting further write-downs, Goldman cuts estimates for banks

Aug 20, 2008 U.S Hot Stocks

Goldman sees more pain for banks, brokers

Analysts cut profit estimates and warn of more write-downs, asset sales

By John Spence, MarketWatch

Last Update: 8/20/2008 3:13:00 PM

BOSTON (MarketWatch) — Goldman Sachs analysts became the latest to chop their
profit estimates on bank and brokerage stocks on the expectation of more ugly
write-downs triggered by the ongoing tumult in credit markets.

“We expect third-quarter results will be hampered by declining global equity
markets, further deterioration in mortgage assets, and slower levels of corporate
and institutional activity,” wrote Goldman analysts led by William Tanona in a
research note sent Wednesday.

Also, Goldman said although banks are aggressively unloading assets to raise
capital and shoring up their balance sheets, things aren’t likely to improve
anytime soon. Any significant recovery “is still a few quarters away, as we
anticipate additional asset sales and write-downs in coming quarters throughout
the financial-services sector.”

Goldman lowered its third-quarter and full-year estimates on Morgan Stanley (MS),
Lehman Brothers Holdings Inc. (LEH), J.P. Morgan Chase & Co. (JPM), Citigroup
Inc. (C) and Merrill Lynch & Co. (MER).

“Once again, the majority of our negative estimate revisions are being driven by
higher than estimated write-downs on mortgage assets,” the analysts wrote. “In
addition though, we are also seeing results being negatively impacted by slower
levels of client activity and expenses and fines from auction rate securities.”

Financials stocks, already down sharply during the credit crunch, have been under
fire this week. In particular, markets are anxious over whether government-backed
mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) will require a bailout.
The stocks traded sharply lower Wednesday. See related story.
Click for Detail

The KBW Bank ETF (KBE) is off more than 40% over the past year while iShares DJ
U.S. Broker-Dealers (IAI) is down 35%.

Lehman Brothers fell 13% on Tuesday after J.P. Morgan analysts predicted
quarterly write-downs as high as $4 billion and investors worried about Lehman’s
future as an independent firm. Lehman reports third-quarter results in
mid-September.

Did you like this? If so, please bookmark it, about it, and subscribe to the blog RSS feed.

Possibly Related Posts:

• Not many seem to seriously be considering the uphill battle and tremendous odds Yahoo is facing right now.
• US Oct Online Retail Sales Up Just 1% - ComScore
• Perspectives on the latest Fannie/Freddie homeowner rescue plan - by Peter Schiff.
• In recession or depression, people only consume food, go short Retail stocks
• This bailout manipulation must stop. More debt is not the solution to debt. Making everyone pay for the actions of fools.

Did you like this? If so, please bookmark it, about it, and subscribe to the blog RSS feed.

Technorati Tags: Auction Rate, Citigroup Inc, Credit Crunch, Fannie Mae, Global Equity Markets, Goldman Sachs, Goldman Sachs Analysts, Institutional Activity, J P Morgan Chase, J P Morgan Chase Co, John Spence, Lehman Brothers, Lehman Brothers Holdings, Lehman Brothers Holdings Inc, Merrill Lynch, Merrill Lynch Co, Mortgage Assets, Negative Estimate Revisions, Profit Estimates, Third Quarter Results

Tags: Auction Rate, Citigroup Inc, Credit Crunch, Fannie Mae, Global Equity Markets, Goldman Sachs, Goldman Sachs Analysts, Institutional Activity, J P Morgan Chase, J P Morgan Chase Co, John Spence, Lehman Brothers, Lehman Brothers Holdings, Lehman Brothers Holdings Inc, Merrill Lynch, Merrill Lynch Co, Mortgage Assets, Negative Estimate Revisions, Profit Estimates, Third Quarter Results