UPDATE 1-Wachovia cuts profit views on Goldman, Morgan Stanley

viernes 17 de octubre de 2008 16:10 CEST

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Oct 17 (Reuters) - Wachovia Capital Markets lowered its 2008 and 2009 earnings estimates for Goldman Sachs Group Inc (GS.N: Cotización) and Morgan Stanley (MS.N: Cotización) to reflect recent capital raises and much softer earnings expectations.

Both the companies are to receive $10 billion each under the U.S. Treasury's bailout plan, which should go a long way into improving sentiment around their long-term viability, analyst Douglas Sipkin wrote in a note to clients.

"The injections likely remove going concern risk and appear quite favorable from a capital standpoint," he said.

U.S. officials announced on Tuesday a plan to inject $250 billion capital by acquiring preferred stock and warrants to purchase significant stakes across a number of banks.

Under the plan, Goldman and Morgan will get the capital in exchange for senior preferred shares that pay a 5 percent annual dividend for five years.

The Treasury will also get $1.5 billion in warrants from both firms, Sipkin said.

If the warrants were exercised at current prices, existing shareholders for Goldman Sachs would be diluted by about 3 percent and for Morgan Stanley by about 6.5 percent, he said.

Over-the-counter derivative trading is certainly on the decline as is the level of hedge fund assets, private equity assets, and general risk taking, the analyst added.   Continuación...