May 28 (Reuters) - J.P. Morgan Securities cut its profit view on three large U.S. investment banks and suggested investors avoid the brokerage sector as earnings estimate continue to appear “too bullish” in the second half of 2008 and 2009.
JP Morgan, however, said it prefers Goldman Sachs (GS.N) as compared to its peers as Wall Street’s biggest investment bank by profits and market value was the most diversified by product and region and the least dependent on mortgage business.
Lowering his estimate, analyst Kenneth Worthington said client activity had slowed and write-downs of leveraged loans and fixed income inventory continued in the quarter.
“Following the heightened credit and liquidity squeeze in March with the turmoil in the markets, we believe the brokers have experienced a meaningful slowdown in customer activity, particularly in fixed income trading,” Worthington said.
Worthington cut his second-quarter profit view on Goldman Sachs to $3.55 from $3.68 a share, on Lehman Brothers LEH.N to 18 cents from 64 cents a share, and on Morgan Stanley (MS.N) to $1.00 from $1.13 a share.
For 2008, he cut his earnings view on Goldman Sachs to $14.96 from $15.00 a share, on Lehman Brothers to $3.23 from $3.96 a share and on Morgan Stanley to $5.17 from $5.61 a share. (Reporting by Sweta Singh; Editing by Jarshad Kakkrakandy)