NEW YORK (
) -- Equities revenues for investment banks will be lower than many analysts are estimating, according to a report published Monday by JPMorgan Chase.
JPMorgan analyst Kian Abouhossein cut his 2010 profit estimates for U.S. and European investment banks by an average of 6% in 2010 and 3% in 2011. Abouhossein's biggest cuts to 2010 estimates were for
. He lowered earnings projections by 9% for both banks, and now expects Goldman to earn $14.85 per share and Morgan Stanley to earn $2.90 per share. The current average analysts' estimates, according to
are for profits of $19.14 and $3.11 respectively on a per-share basis for fiscal 2010.
Abouhossein also cut estimates for
Despite high equities volumes in both the United States and Europe in April and May, Abouhossein states in his report that volumes "seem to have come down" in June. Also, he says volumes were driven by "low-touch" players, meaning lower margins for the investment banks.
Abouhossein highlighted Swiss banks UBS and Credit Suisse as his top picks, arguing they have limited exposure to European sovereign risk and are "the banking counterparty of choice," meaning that other large financial institutions are comfortable trading with them.
Abouhossein also expressed concern about the effect of proposed derivatives rules on U.S. investment banks, even though the rules
Shares of both U.S. and European investment banks were up with the broader market in early trading Monday, though Goldman shares were just 0.62% higher. Morgan Stanley shares were up 1.56% to $26.10.
Written by Dan Freed in New York