For Big Banks, Attacks Hurting '02 Forecasts
Moyer, Liz, Reilly, Patrick, American Banker
By this time of year Wall Street analysts usually have a pretty clear picture of how the banks they cover will fare for the rest of it. But some analysts say the terror attacks, which exacerbated market volatility, have made the future hazy.
For the biggest U.S. banks, the third quarter effectively ended Sept. 10. Analysts said uncertainty about revenue and profit growth will probably hover over the group well into next year.
The quarter was already looking weak, particularly for the corporate lending and capital markets activities that had crimped profits at such companies as Citigroup Inc., J.P. Morgan Chase & Co., Bank of America Corp., and Bank One Corp. for most of the year.
Some analysts, however, said that they had hoped to see a slight improvement in capital markets revenues from the second quarter, and far smaller writedowns from private equity investing.
Last month's attacks on New York and Washington put an end to any optimism. "It's a lost quarter, and no one has a clue about what to expect next," said Nancy Bush, an analyst at Ryan Beck & Co.
The consensus targets of Wall Street analysts as tracked by First Call Corp. reflect this view. Since Sept. 10 the estimate for Citi's third-quarter profits has fallen by 11 cents a share, to 64 cents, and the estimate for Morgan Chase by 8 cents, to 56 cents. The outlook for both Bank of America and Bank One is down by a penny, to $1.25 and 62 cents respectively.
Susan Roth, an analyst at Credit Suisse First Boston, said that she has revised her outlook for large-cap banks, with her full-year estimates now 3% below previous forecasts and 2002 estimates 7% lower.
"Market instability and economic uncertainty are likely to continue to take their toll on capital markets activity," Ms. Roth said. "A pickup in capital markets activity relies on improved prospects for economic growth."
The Financial Accounting Standards Board may have dashed hopes that the financial impact of the attacks could be accounted for as extraordinary. Some companies have already guided investors to expect lower profits as a result of business interruption from the events of Sept. 11.
Citigroup has estimated that its profits will be reduced by as much as $700 million because of the interruption and the insurance claims it will have to pay as a result of the attacks.
Bank of New York Co. said it would take a $125 million hit to earnings, or 17 cents a share. …