Punk Ziegel cuts profit view for 4 U S investment banks

Punk Ziegel analyst Richard Bove cut his 2008 earnings outlook for four top U.S. investment banks, which will report their first-quarter results next week, citing write-offs as hindrance to near-term performance.

Bove said unless there was a dramatic turn-around in the markets, the writedowns will continue into the current quarter.

"Thus, the hope for recovery in earnings for the second fiscal quarter is not likely to appear," he said.

In the longer term, the four investment banks -- Bear Stearns Cos Inc (BSC.N: Quote, Profile, Research), Goldman Sachs Group Inc (GS.N: Quote, Profile, Research), Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research) -- need to rebuild operating models, Bove said in a note to clients.

Bove, who also cut his estimates for 2009 and 2010, said he did not expect any recovery in mortgages, credit derivatives, private equity or investment banking in the longer term.

"Thus, these companies are likely to experience declines in activity until 2010," he said.

This outlook is diametrically different than the outlook of the commercial banks who are likely to benefit from the brokers' woes, he added.

The following table shows the stocks whose earnings outlook was lowered:

Company RIC Q1 EPS View 2008 EPS View Target Price

Old New Old New Old

New

Bear Stearns BSC.N $1.54 $0.50 $6.47 $2.69

$67.00 $45.00

Goldman Sachs GS.N $2.30 $2.05 $15.79 $14.35

$201.00 $186.00

Lehman LEH.N $0.93 $0.53 $5.69 $3.75

$65.00 $53.00

Morgan Stanley MS.N $0.75 $0.64 $5.38 $4.79 $43.00 $43.00

http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/

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Punk Ziegel cuts profit view for 4 U S investment banks