Goldman Sachs Group Inc. and Morgan Stanley, the major U.S. banks most reliant on trading, had their earnings estimates reduced by analysts as a weak fourth quarter dimmed prospects for a capital-markets rebound in the first half of 2012.
Sanford C. Bernstein’s Brad Hintz cut his fourth-quarter estimate for Goldman Sachs by 76 percent and more than tripled his expected loss for Morgan Stanley as “already anxious clients grew increasingly cautious,” he wrote in a note to investors today. Doug Sipkin, an analyst at Ticonderoga Securities LLC, lowered his 2012 Goldman Sachs estimate by 23 percent on a more pessimistic view of the firm’s fixed-income trading revenue.
The two New York-based banks will probably still more than double their earnings per share this year, according to analysts surveyed by Bloomberg. The firms’ 2011 results are likely to fall short of estimates made at the start of last year on a decline in trading volume, concern that the European debt crisis would spread and one-time items such as preferred-share redemptions.
“We believe the threat emanating from Europe will dominate customer activity, and we see little hope of any resolution in the first half of the year,” Hintz wrote. “Regulatory concerns and the overall pace of the global economic recovery pose incremental headwinds for the large brokerage firms.”
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