Goldman downgrades fellow banks

Analyst cites industry deterioration and a lengthy economic recovery for lowering its view, rating Citigroup a 'conviction sell.'

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Goldman Sachs said it lowered its rating on the U.S. broker industry because of continued deterioration of the banking industry and the prospect of a lengthy recovery.

"We are lowering our coverage view on the brokers to Neutral from Attractive, as we see limited near term catalysts," read the report, published Wednesday by Goldman Sachs (GS, Fortune 500) analyst William Tanona. "Fundamentals continue to deteriorate as expected, but the pace of deterioration appears to be far worse than we originally anticipated."

In his report, Tanona said he upgraded the group to "attractive" after the collapse of Bear Stearns in March because he did not see a high probability of another bank failing. He said he downgraded the industry because he doesn't see many prospects for improvement in the near future.

"Although we still believe that to be the case, we are hard pressed to find a catalyst that will move the group significantly higher over the next few months as fundamentals continue to deteriorate," wrote Tanona. "In addition, we also believe a recovery will take longer than originally anticipated."

Goldman Sachs also downgraded Citigroup (C, Fortune 500) to "conviction sell." Tanona expects the firm to take an additional $8.9 billion in writedowns in the second quarter. The analyst also expects "significant" writedowns for Merrill Lynch.

"We see multiple headwinds for Citigroup including additional writedowns, higher consumer provisions as a result of rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales," read Tanona's report.

The firm maintained its "conviction buy" for Morgan Stanley (MS, Fortune 500). To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
The best TV deals for the Super Bowl Want a new TV for the Super Bowl? Some great deals make now the time to buy. More
Top-paying jobs Orthopedic surgeons take home a median $410,000 in salary and bonus annually. What other great careers from CNNMoney and PayScale.com's list of Best Jobs in America offer hefty paychecks? More
Fastest-growing jobs Demand for IT security consultants are projected to grow a solid 37% between 2012 and 2022. What other careers on CNNMoney and PayScale.com's list of America's best jobs will see big opportunities? More


Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2015 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2015. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2015 and/or its affiliates.