Bove Slashes Goldman Earnings Estimates by Two-Thirds

Wednesday, 14 Dec 2011 07:40 AM

By Dan Weil

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The bad news continues to mount for the U.S. banking sector. Ace analyst Dick Bove of Rochdale Securities has just cut his fourth-quarter earnings estimate for Goldman Sachs by two-thirds.

His per-share forecast of 79 cents stands 70 percent below the FactSet consensus of $2.61 a share, Yahoo reports.

So what prompted Bove’s move? "Trading activity has slowed down dramatically, there's been a big drop in investment banking activity," he tells Yahoo.

"Mergers and acquisitions are down 10 to 15 percent, new equity offerings are down 15 percent, trading in things like governments and agencies have fallen off dramatically, trading in commodities is way down.”
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Put it all together, and Goldman’s not making enough money to “come anywhere close to where the street estimates are," Bove says.

Dick-Bove-3-thumb-200.jpg
Dick Bove
(Rochdale file photo)
You may wonder why other analysts haven’t downgraded their forecasts as well. "The standard practice on the part of most analysts is to wait for the last week of the quarter and then adjust their estimates," Bove says.

"So my assumption is, when we get to the last week of the quarter, between Christmas and New Year, you'll see the numbers coming down very dramatically."

Ironically, Goldman itself has positive things to say about other banks. Its analysts expect banks that return capital to shareholders next year to do so to the tune of 50 percent of profits. The analysts anticipate more share buybacks than dividend increases.

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