- For Bank of America, Burnell cut his third-quarter EPS estimate to 29 cents from 34 cents, saying that the nation's largest bank would "benefit from benefit from divestitures announced during the quarter, most notably the firm's sale of 51% of its
China Construction Bankstake," which is expected to result in an after-tax gain of $3.3 billion. The analyst also expects "continued (but sharply lower) elevated mortgage-related costs." Wells Fargo's full-year 2011 earnings estimate for Bank of America was cut to a loss of 26 cents from a loss of 14 cents a share, and the 2012 EPS estimate was cut drastically, from $1.45 to 90 cents.
- For Citigroup, Burnell cut his third-quarter EPS estimate only slightly, to 85 cents from 86 cents, saying his previous estimate "upon initiation of coverage on September 16, 2011 had already factored in challenging capital market conditions." Wells Fargo's fully-year 2011 EPS estimate for Citi was lowered by a nickel to $3.75, and he 2012 estimate was cut to $4.15 from $4.70.
- For Goldman Sachs, Burnell lowered his third-quarter EPS estimate to a loss of 49 cents from a profit of $2.76, to "reflect a challenging quarter from the Investing & Lending front as marked-to-market valuations reflect the dramatic downturn of the broader markets in the quarter." Wells Fargo's 2011 EPS estimate for Goldman was cut to $5.40 from $10.50, and the 2012 estimate was lowered to $14.50 from $18.00.
- For JPMorgan, the analyst lowered his third-quarter EPS estimate to 97 cents from $1.27, citing a "more difficult environment in most investment banking businesses" and "continued mortgage-related litigation costs in Q3 - though we are modeling $500MM, down from the $1.2B taken in Q2. Burnell's full-year 2011 EPS estimate for JPM was cut to $4.60 from $5.15 and his 2012 estimate was lowered to $5.10 from $5.90.
- For Morgan Stanley, Burnell reduced his third-quarter EPS estimate to $32 cents from 56 cents, to reflect "challenging market conditions, which in turn, likely drove down trading performance in the quarter." The analyst's full-year 2011 EPS estimate for Morgan Stanley was cut to 67 cents from $1.25, and his 2012 estimate was lowered to $2.00 from $2.95. Burnell said the 2012 revision reflected "continued softness in trading performance and weaker prospects for underwriting activity in light of continued market uncertainty and lower risk taking activity."
NEW YORK ( TheStreet) -- Saying that the third quarter "offers no hiding place in the capital markets," Wells Fargo Securities analyst Matthew Burnell on Tuesday cut his earnings estimates for Bank of America ( BAC), Citigroup ( C), JPMorgan Chase ( JPM), Morgan Stanley ( MS) and Goldman Sachs ( GS). The analyst cited "a much weaker trading environment than expected and a visible slowdown in investment banking activity levels," in making the following estimate cuts:
commercial and industrial loan growth of 5.3% annualized in the first 11 weeks of Q3 2011 for the top 25 U.S. banks," with commercial loan balances rising "nearly 11% yr/yr with only one week remaining in Q3 2011 - the largest increase in three years." The analyst also said that "low mortgage rates have materially improved refinancing volumes," and that industry data "suggests banks should see improved mortgage banking revenue from increased application volumes in Q3," although this would be tempered by the impact of market volatility on mortgage servicing rights "hedging results" and an increase in mortgage putback demands, "given the greater aggressiveness with which the agencies appear to be treating mortgage lenders on this subject in Q3." >>To see these stocks in action, visit the 5 Big Bank Earnings Estimates Cut by Wells Fargo portfolio on Stockpickr. -- Written by Philip van Doorn in Jupiter, Fla. To contact the writer, click here: Philip van Doorn. To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.