- NEW YORK: Citigroup cut its third-quarter earnings outlook and price targets for several US banks to reflect the continued volatility in US credit markets and the absence of a lasting solution to the European sovereign debt issues.
The brokerage reduced its third-quarter earnings estimates for US banks, including Goldman Sachs Group, JPMorgan Chase & Co, and Morgan Stanley, by an average of around 45 percent, and said the weak economic outlook and continued uncertainties will affect the banks through 2013.
Total third-quarter trading and investment banking revenues are likely to be down about 35 percent, compared with the year-ago period, the brokerage said in a note dated Sept. 11.
Citigroup lowered Goldman Sachs’ third-quarter estimate to 10 cents from $2.70, citing weak trading revenues and negative impact of wider credit spreads and equity markets on its investment and lending business.
However, the brokerage raised its third-quarter earnings estimate on Bank of America from 18 cents to 61 cents to account for one-time gains from the sale of China Construction Bank stake.
“Heading into the quarter, our favorite name is JPMorgan Chase & Co, as we believe results could benefit from a modest boost in mortgage banking,” Citigroup said.
Citigroup, which expects M&A revenue for banks to increase through 2013, lowered its price targets on banks, including Bank of America Corp, joining other brokerages like Nomura and Robert W. Baird who made similar cuts last week.