April 8, 2009 / 12:43 PM / 10 years ago

UPDATE 1-Oppenheimer sees Q1 loss for MS, capital raise for BofA

April 8 (Reuters) - Oppenheimer & Co reversed its first-quarter profit view on Morgan Stanley (MS.N) to a loss and said Bank of America (BAC.N) may need to raise an additional $36.6 billion by year end.

However, the brokerage raised its earnings view on Goldman Sachs (GS.N), saying the company should benefit from improved trading environment in the first two months of the quarter.

What is likely to push Morgan Stanley into a significant loss position is the narrowing of spreads on its own debt, analyst Chris Kotowski wrote in a note to clients.

The big event of 2009 is likely to be the ongoing erosion of loan loss portfolios, said the analyst, who expects deterioration to continue in full swing.

With the ongoing deterioration in credit quality, banks may bolster their loan loss provisions as much as they can while still showing some modest profit, the analyst wrote in a note.

“We expect this to be the general pattern for major commercial banking companies,” Kotowski said.

Oppenheimer expects non-performing assets at the commercial banking companies under its coverage to increase by about 25 percent during the first quarter.

The brokerage believes that market has very low expectations and that 2009 earnings for the most part do not matter as long as there are no losses severe enough to substantially deplete tangible book value or key capital ratios.

The brokerage’s first-quarter forecast on the large banks ranges from a loss of 59 cents a share to profit of $1.29 a share. For related alerts, double click [ID:nWNAB1838] (Reporting by Sweta Singh in Bangalore; Editing by Himani Sarkar)

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