Bank Woes continue?
• Analysts have cut their earnings estimates for the top five U.S. banks by over $1B in total, due to increasing fears about a sharp fall in trading revenue – especially from fixed-income operations – and higher legal costs.
• JPMorgan (JPM) has been particularly affected, with consensus for net income down $526M to below $5B. The company’s legal woes in light of further revelations from the “London whale” are seen adding $2B to expenses.
• Analysts have lowered their net income for Bank of America (BAC) by $128M, for Goldman Sachs (GS) by $123M, for Morgan Stanley (MS) by $97M, and for Citigroup (C) by $210M. The latter has already reportedly told investors about a sharp drop in trading revenues by up to 10% as the firms focus towards fixed income and forex are seen as weak.Also its high exposure to emerging markets have not helped as capital flight and falling currencies have taken the colour off.
• Banks had hoped a big September would help offset a slow summer, but that hasn’t happened.The period between Thanksgiving and Christmas can be volatile and profitable , banks and hedge funds are increasingly looking to this period for further value in difficult conditions to date.