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March 9 (Reuters) - Barclays Capital cut its price targets on Goldman Sachs (GS.N) and Morgan Stanley (MS.N) and said it expects the former investment-banking giants to post losses for December, mostly due to asset markdowns, investment losses and “very subdued” core earnings.
Shares of Goldman Sachs fell 4 percent while those of Morgan Stanley fell more than 5 percent Monday morning on the New York Stock Exchange.
However, shares of both companies recouped some of their early losses.
Analyst Roger Freeman estimated that Morgan Stanley lost 40 cents a share in December and Goldman Sachs $1.80 a share for the month.
Both companies changed their fiscal year end to Dec. 31 from Nov. 30, and will report results for December separately.
Goldman Sachs and Morgan Stanley became bank-holding companies regulated by the U.S. Federal Reserve in September, after Lehman Brothers LEHMQ.PK failed, Merrill Lynch agreed to be bought and the financial markets spun out of control.
Freeman cut his share-price target on Goldman Sachs by 26 percent to $100, and on Morgan Stanley by 6 percent to $30. He maintained an “equal-weight” rating on both companies. [ID:nWNAB1604]
The analyst expects both firms to turn profitable in the first quarter.
“With the improving mix of businesses after incorporating the Smith Barney JV, we believe Morgan Stanley’s earnings stream is looking increasingly stable,” Freeman said.
In January, Citigroup (C.N) agreed to merge its Smith Barney brokerage with Morgan Stanley’s wealth-management unit, in which Morgan Stanley will initially own 51 percent.
Shares of Goldman Sachs were trading down 7 cents at $75.58 while those of Morgan Stanley were down 20 cents at $16.98 Monday afternoon. (Reporting by Anurag Kotoky in Bangalore; Editing by Anne Pallivathuckal)