Banks’ trading and investment banking results are expected to be lousy again in the fourth quarter, and today Wells Fargo analyst Matt Burnell got out the axe and started cutting his expectations. Burnell slashed his fourth quarter EPS estimates for the banks by an average of about 10%.
Burnell is also worried about bank performance for the next couple of years, and cut estimates for 2012 and 2013 by an average of 1% “due to our concerns over a continuation of similar risk aversion in the future.”
Burnell expects the fourth quarter to be challenging for Goldman Sachs (GS), Morgan Stanley (MS), Citigroup (C), JPMorgan Chase (JPM), and Bank of America (BAC), and expects consensus estimates to continue to face pressure.
“A challenging environment for both investment banking (reduced equity issuance) and trading (volumes have dropped 10% or more across debt and equity markets Q4/Q3) have caused us to reduce Q4 2011 estimated EPS for several of our universal/capital markets banks (UCMBs) by an average of 10%. We are cutting Q4E as follows: GS to $1.80 (-27%), MS to 18 cents (-15%), Citi to 78 cents (-4%), JPM to 99 cents (-4%).� As a result, 2011 EPS estimates are now 4% lower on average to 21 cents for BAC, $4.09 for C, $4.37 for GS, $4.56 for JPM, and $1.45 for MS.”
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