Brokerage Estimates Slashed, But May Trends Have Improved

Citigroup (C) analyst Prashant Bhatia cut estimates for Morgan Stanley (MS), Lehman Bros. (LEH), and Goldman Sachs (GS). The good news, however, is that May trends have improved considerably, adding fuel to the bull theory that February was the bottom. AP:

The second quarter has seen lower client-related trading volumes, little banking activity, losses related to ineffective hedging and reversals of gains on fair valuing liabilities, Prashant Bhatia wrote in a note dated May 16.

He expects significant asset sales related to leveraged loan inventory, and commercial and residential mortgages as a result of a greater degree of liquidity in the marketplace. “We expect the brokers may take some losses to exit concentrated positions,” Bhatia said.

“While the environment seems to have improved considerably in May, it will not offset the considerable weakness in March and April,” he added.

Citi rates Lehman and Morgan Stanley as Buy and Goldman as Hold.

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