UPDATE 2-Lehman, Morgan Stanley forecasts cut by Goldman
(Adds analyst comments, background; updates share movement)
By Tenzin Pema
BANGALORE May 14 (Reuters) - Lehman Brothers Holdings Inc LEH.N may suffer a second-quarter loss, as Wall Street investment banks take hits from slower client and investment banking activity and poor results from principal and proprietary trading, a Goldman Sachs & Co analyst said.
William Tanona, the analyst, also slashed his second-quarter and 2008 earnings outlooks for Morgan Stanley (MS.N: Cotización).
Tanona is the latest in a growing line-up of Wall Street analysts to cut estimates on U.S. investment banks, but is the only one now projecting a second-quarter loss at Lehman, according to Reuters Estimates.
He expects a quarterly loss of 20 cents per share at Lehman, compared with his earlier forecast for a profit of $1.35 per share. Tanona halved his profit forecast for Morgan Stanley to 80 cents per share from $1.60.
The analyst said quarterly results may suffer from hedging activity and losses related to structured credit liabilities will also hurt results. He expects losses from credit spread tightening to total $1 billion at Morgan Stanley and $400 million at Lehman.
TIME TO BUY?
In spite of his forecasts, Tanona expects investment banking trends to improve, as many of the U.S. Federal Reserve's actions should help drive economic growth in late 2008 and early 2009. Continuación...