Jan 8 (Reuters) - The deepening of the financial crisis with increased credit costs dampen the investment case for U.S. banks, as severe losses will reduce future book value, and further delay normalized returns, analysts at Sanford C. Bernstein said.
Analysts led by Kevin St. Pierre raised their 2008-2010 total loss estimate for the industry by 11 percent to $420 billion, and said they remain “cautious” on the sector.
“Driven by the more negative macro assumptions, we are increasing our industry loan loss estimates by loan type. The net result is a higher, later, more prolonged peak in charge-offs,” the analysts wrote in a note to clients.
The banks that will be “most dramatically impacted” by the brokerage’s higher credit loss estimate are Citigroup (C.N), Synovus Financial (SNV.N), Marshall & Ilsley MI.N and KeyCorp (KEY.N), the analysts said.
These banks will see a cumulative 2009-2010 earnings per share decline of more than 75 percent to 125 percent, the analysts, who also cut their price target and changed their 2008 profit/loss estimates on 15 U.S. banks, said. [ID:nWNAB7900] (Reporting by Sweta Singh in Bangalore; Editing by Pratish Narayanan)