Downgrading Citi and GS to Neutral. POs cut. Common denominator: expected weakness in Q1:11 results. Results unlikely to be dismal, and should show improvement over Q4, but we don’t expect seasonal improvement as strong as often seen in the past. Client engagement remains subdued, Mid-East turmoil likely only to further reduce customer risk appetite. Thus we are making significant cuts to our forecasts, and expect consensus to decline over the coming weeks. Increasingly, we believe investors will look to the theme of improving cash flow/ return of capital via dividends/ buybacks, and also to play financials that are less– or even positively – affected by restrictions on banks such as Volcker Rules. In our coverage, this includes names such as BX and KKR, as well as LAZ. This, together with low valuation relative to current earnings, drives keeping JPM “Buy”.
Friday, March 04, 2011
BofA Downgrades Goldman and Citibank
BoA's Guy Moszkowski says the big concern is cash flow, especially as regulations take effect and customer risk appetite falls:
Downgrading Citi and GS to Neutral. POs cut. Common denominator: expected weakness in Q1:11 results. Results unlikely to be dismal, and should show improvement over Q4, but we don’t expect seasonal improvement as strong as often seen in the past. Client engagement remains subdued, Mid-East turmoil likely only to further reduce customer risk appetite. Thus we are making significant cuts to our forecasts, and expect consensus to decline over the coming weeks. Increasingly, we believe investors will look to the theme of improving cash flow/ return of capital via dividends/ buybacks, and also to play financials that are less– or even positively – affected by restrictions on banks such as Volcker Rules. In our coverage, this includes names such as BX and KKR, as well as LAZ. This, together with low valuation relative to current earnings, drives keeping JPM “Buy”.
Downgrading Citi and GS to Neutral. POs cut. Common denominator: expected weakness in Q1:11 results. Results unlikely to be dismal, and should show improvement over Q4, but we don’t expect seasonal improvement as strong as often seen in the past. Client engagement remains subdued, Mid-East turmoil likely only to further reduce customer risk appetite. Thus we are making significant cuts to our forecasts, and expect consensus to decline over the coming weeks. Increasingly, we believe investors will look to the theme of improving cash flow/ return of capital via dividends/ buybacks, and also to play financials that are less– or even positively – affected by restrictions on banks such as Volcker Rules. In our coverage, this includes names such as BX and KKR, as well as LAZ. This, together with low valuation relative to current earnings, drives keeping JPM “Buy”.
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