Along with
the widely expected Fed rate cut, international markets are going to watch out
for the results of the big four investment banks in the US after the turmoil brought
about by the US sub prime crisis, reports CNBC-TV18. >Analysts
said it would be a glimpse into the health of the financial institutions. Lehman
Brothers will be coming out with its results tonight and Morgan Stanley will do
so tomorrow. Bear Sterns and Goldman Sachs will be following them on Thursday.
The market believes that Bear Sterns will bear the brunt, followed by
Lehman Brothers. Goldman Sachs and Morgan Stanley have a huge diversification,
so they might take a smaller cut. >Analysts
believe that it is very tough to estimate the results over the short term, as
they do not know how much write-offs the companies will make. Even if they make
the write-offs, they could do it over the quarters that follow. >Also,
these assets have to be marked to market. Over the last few days, there have been
no active market, so the marked to market thing might be very difficult for these
companies. >There
are various numbers floating around. Goldman Sachs might write down $3.1 billion
(30 per cent of 2006 profits), Lehman Brothers $2.8 billion (25 per cent of 2006
profits) and Bear Stearns may write down $700 million (25 per cent of 2006 profits).
>It is expected
that Bear Sterns may come out with profits, which are 40 per cent lower than last
year, Morgan Stanley''s may be 10 per cent lower than last year, Lehman Brothers
about 5 per cent lower than last year and Goldman Sachs will come out with a higher
profit of 33 per cent, because of the sale of its power company. Analysts
added that it would be very interesting to see how these companies will come out
with the results. By the end of the week, it will be known how bad the financial
situation really is. >Rate
cuts in the past have led to major divergence in the way the markets have reacted.
What will the trends throw up now? Now,
whether the market cuts the rates by 25 or 50 bps today and even cuts the discount
lending window by another 50 bps, the market will surely get some direction from
tomorrow and it will react.
also see : General
reports on Banks & Financial Institutions
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