Analyst Brad Hintz at Sanford C. Bernstein & Co. predicted in a research note to clients that fixed income will remain a weak business segment for investment banks in the first quarter. “Market conditions remained challenging through February, as troubles spread through a variety of areas within the fixed-income market,” wrote Mr. Hintz, adding it will compound weakness in the high-margin mergers & acquisitions sector, hurt by the credit crunch.
As a result, Mr. Hintz estimated that big fixed-income participants such as Goldman Sachs Group and Lehman Brothers might miss current first-quarter earnings forecasts by as much as 40%. Mr. Hintz lowered his earnings forecasts by 45% for Goldman Sachs, 42% for Lehman Brothers and 41% for Bear Stearns. Morgan Stanley fared better due to a diversified business model, as the analyst lowered his earnings forecast for the firm by only 12%.
