Brad Hintz of Bernstein Research writes:
U.S. Brokerage: Doom and Gloom in Q4; Will 2012 Be Any Better?
• We reduce our Q4 '11 estimates for both GS and MS amid a challenging operating backdrop across the global capital markets industry. For GS, we cut our estimate from $3.15 to $0.77; for MS we reduce our estimate from a loss of $0.19 to a loss of $0.75.
• We do not expect a robust recovery in 2012. The EU threat will still dominate customer behavior, and we see little hope of any near-term resolution. Moreover, regulatory concerns and the pace of economic growth pose further headwinds.
• But sentiment has reached a nadir and is overly discounting shares. It's certainly difficult to forecast profitability in a new regulatory world, but we believe these firms will be able to adapt their balance sheets and business mixes to meet regulation.