Analysts See Lower Q2 Earnings At Investment Banks

Wall Street analysts have forecast a huge drop in second quarter earnings for Goldman Sachs Group Inc and Morgan Stanley, while Lehman Brothers Holdings Inc is expected to post its first ever quarterly loss, mainly on hedging losses, Reuters reports.

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Wall Street analysts have forecast a huge drop in second-quarter earnings for Goldman Sachs Group Inc and Morgan Stanley, while Lehman Brothers Holdings Inc is expected to post its first-ever quarterly loss, mainly on hedging losses, Reuters reports.

Analysts expect the three Wall Street investment banks reporting results this week to record losses mainly from ineffective hedging, amid an overall tough operating environment. Lehman is projected to take the worst hit.

“Business conditions appear to be among the worst in several years, bulk asset sales have provided price transparency that should trigger more asset write-downs, and hedging was noticeably less effective,” says David Trone, an analyst at Fox-Pitt Kelton.

Goldman’s earnings are expected to be $3.03 to $3.70 per share, while Morgan Stanley’s earnings are seen at $0.75 to $1.08 a share, according to analysts’ data compiled by Thomson Reuters.

Last week, Lehman said it expects a second-quarter loss of $2.8 billion, or $5.14 a share, mainly due to poor trading results and hedging losses. Lehman’s second-quarter loss estimate was more than 10 times the analysts’ average expectation.

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