Goldman Sachs Group Inc. and Morgan Stanley had their earnings estimates lowered by Brad Hintz, a Sanford C. Bernstein & Co. analyst, amid a decline in trading he called “a full-scale rout.”
Hintz cut Goldman Sachs's third-quarter per-share earnings estimate by 15% to $2.62 and the full-year estimate by 8.6% to $15.59 per share, according to a note Friday about the two New York-based banks. Morgan Stanley's per-share third- quarter estimate was decreased 20% to 41 cents, and the 2013 figure dropped 4.8% to $1.98.
“While the third quarter is typically seasonally soft, Q3 2013 appears to be turning into a full-scale rout in trading as weak activity and limited risk-taking constrained performance,” Hintz wrote. Fixed-income trading volume could decline 20% to 25% on average in the three months ended Sept. 30, he wrote.
Analysts have been reducing their third-quarter earnings estimates for the biggest U.S. banks. JPMorgan Chase & Co., the nation's largest lender, said trading revenue will probably fall this period and Jefferies Group LLC said revenue from fixed- income trading plunged 88% in its fiscal third quarter, which ended Aug. 31, compared with a year earlier.
Marty Mosby, an analyst for Guggenheim Securities LLC, downgraded shares of Goldman Sachs and Bank of America Corp., the second-biggest U.S. bank, to neutral from buy as revenue from capital-markets and mortgage banking declines, according to a note today.
Fixed-income trading revenue at the biggest U.S. banks will probably fall 20% in the third quarter from a year earlier amid lower volume, Richard Staite, an analyst at Atlantic Equities LLP, said in a note this week. That led him to cut his estimate for Goldman Sachs's per-share third-quarter earnings by 18 percent and Morgan Stanley's by 25%.