B of A Cuts TARP Giants (BAC, JPM, GS, MS)

Bank of America Merrill Lynch (BofA-Merrill), the new name for the brokerage arm of Bank of America Corporation (NYSE: BAC),  has come out this morning with a cautious call on brokerage firms and bank holding company giants.  It has trimmed estimates on JPMorgan Chase & Co. (NYSE: JPM),  Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS).  Interestingly enough, this call is not due to any crazy write-downs nor to any massive trading losses.

BofA-Merrill has noted that the trimming of estimates is due to repaying  the TARP funds.

JPMorgan is now only expected to post a whopping penny in earnings per share; consensus was $0.37 EPS.

As far as the firms, Goldman’s estimates were cut more than $1.00 to $2.92; consensus was $3.31 EPS. Morgan Stanley is now expect to post a loss for the quarter as a result; consensus was $0.34 EPS.

What is interesting about this call is that Bank of America’s Ken Lewis has said over and over how he wants to repay the TARP funds as soon as he can.  So what the brokerage firm’s analyst team did here in a sense is cut estimates on B of A.

The sword cuts both ways.

Jon C. Ogg
June 12, 2009