Wall Street analysts are becoming increasingly bearish on the financial sector, with the latest evidence being todays lowering of third-quarter earnings projections for investment banks by Sanford Bernstein & Co.
Saying in a note to clients that the brokerage sector is not out of the woods, Sanford Bernstein analyst Bradley Hintz cut his third-quarter earnings estimate for Goldman Sachs Group to $2.50 a share from a prior forecast of $3.35 a share. He also cut Morgan Stanleys earnings estimate to 81 cents from $1.04, while Lehman Brothers estimate was cut to a $1.40 loss from a 74-cent profit.
Mr. Hintz expected more mark-to-market adjustments in mortgage-backed securities, both residential and commercial, as well as in collateralized debt obligations.
Goldman analyst William Tanona on Tuesday also lowered his third-quarter profit estimates for financial firms because of the mortgage crisis. The biggest reduction was for Lehman, which Mr. Tanona now saw posting a loss of $2.75 a share vs. a previously anticipated 68-cent profit. The large swing reflected expectations that Lehman would have to write down up to $3.5 billion on $15 billion worth of mortgage-related holdings.