March 10 (Reuters) - Morgan Stanley said it was cautious on U.S. large-cap banks, including Bank of America (BAC.N), Citigroup (C.N) and JPMorgan Chase (JPM.N), citing severe credit deterioration over the next two to three quarters.
The investment bank cut its 2008 estimates on banks by $8.8 billion to take into account further expected write-downs in capital markets businesses.
"Additionally, we are lowering our forecast for capital market sensitive revenues: investment banking fees, trading and asset management fees," analyst Betsy Graseck said in a research note.
Morgan Stanley estimated an additional $5 billion in collateralized debt obligation (CDO) write-downs at both Citigroup and Bank of America, and $145 million at Wachovia Bank, in the first quarter based on ABX trends.
The analyst also sees higher losses for some banks' home equity portfolios due to the severe stress in the housing market.
Following is a table listing Morgan Stanley's price target and estimate changes on 10 U.S. banks.
Price Target 2008 EPS
Rating New Old New Old Bank of America (BAC.N) Equalweight $33 $36 $2.97 $3.75 Citigroup (C.N) Underweight $20 $22 $2.09 $2.60 JPMorgan Chase (JPM.N) Overweight $37 $39 $3.18 $3.40 Key Corp (KEY.N)
Underweight $17 $18 $1.48 $1.67 PNC Financial Services (PNC.N) Overweight $68 $68 $5.25 $5.30 Suntrust Bank (STI.N) Equalweight $53 $53 $4.08 $4.11 Wachovia Bank WB.N Underweight $28 $30 $2.84 $3.56 Bank of New York Mellon Corp (BK.N) Overweight $52 $52 $3.09 $3.13 Northern Trust Corp (NTRS.O) Overweight $80 $80 $3.80 $4.04 State Street Corp (STT.N) Overweight $90 $90 $5.12 $5.17 (Reporting by Biswarup Gooptu in Bangalore; Editing by Deepak Kannan)