Add another hatchet to investment banking second-quarter earnings estimates.
- The clouds gather around Goldman HQ
Goldman Sachs and Morgan Stanley are staring at another challenging quarter, according to Sandler O’Neill.
The analyst firm slashed its second-quarter estimate for Goldman to 49 cents from $2.97 and for Morgan Stanley to 26 cents from 53 cents, excluding projected gains from the effects of widening credit spreads.
Sandler’s mind is full of worries: Trading revenues are pressured by weak volume and inventory mark-downs. Market volatility is crimping banking and underwriting.
And Goldman’s sizeable private equity investment activities could have $476 million in losses, down from a previously estimated gain of $1.4 billion. It was this segment that pushed Goldman to a third-quarter loss last year, one of its worst quarters as a public company. And it has been busy selling some assets this quarter, including Wednesday’s sale of a portion of its Kinder Morgan stake and the sale of more of its stake in Industrial & Commercial Bank of China in April.
Last week, Bank of America also cut estimates across the investment banks, as the gloom is starting to spread.
But stocks are up today across the board on a financial rally. Goldman is up 2.5% to $94.45 and Morgan Stanley is up 6% at $13.63.
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- BofA-Merrill Analysts Slash Estimates On Investment Banks (blogs.wsj.com)
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