Prashant A. Bhatia, an analyst at Citigroup Inc. in New York, today cut third-quarter earnings estimates for three investment banks, with Lehman Brothers Holdings Inc. taking the largest hit.
He widened his projected quarterly loss for Lehman to $3.25 a share, from a previous forecast of a loss of 41 cents a share.
Mr. Bhatia expects New York-based Lehman to take fresh asset-related write-downs of $2.9 billion during the current quarter.
Additionally, the analyst slashed his 12-month price target on Lehman to $35 a share, from $50. But he rates shares of Lehman as “buy.”
Mr. Bhatia wrote in a report that he sees a “lower probability” that Lehman will sell Neuberger Berman LLC of New York to raise capital in the near term.
“Even under the potentially more-stringent rating agency guidelines related to the amount of preferred securities in the capital mix, we anticipate that Lehman can absorb over $3 billion of after-tax losses without adding more common equity,” he wrote.
Meanwhile, Mr. Bhatia lowered his third-quarter earnings estimate for Goldman Sachs Group Inc. of New York to $2.50 a share, from $4.50.
He also reduced his third-quarter earnings forecast for New York-based Morgan Stanley by a penny to 75 cents a share.
Mr. Bhatia expects Goldman Sachs and Morgan Stanley to post quarterly write-downs of $1.8 billion and $1.7 billion, respectively.
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