Third-quarter earnings for investment banks will be bleak, according to analysts who have slashed their revenue estimates, Financial News reports.
Many expect companies including Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns to have a tough time after the credit crunch froze mergers and acquisitions activity.
“This is likely to be the worst quarter in three years,” says Richard Bove, a financial institutions analyst for Punk Ziegel. “These stocks have all been rated ‘sell’ for some time.”
Morgan Stanley and Merrill Lynch are expected to suffer least, said Michael Hecht, a securities analyst for Bank of America.
“Morgan Stanley and Merrill Lynch have a high mix of international revenues which we expect to hold up better and a higher mix of businesses that generate fee-based and agency-oriented revenues, such as retail brokerage and asset management,” he says.