(1888PressRelease)
December 06, 2007 - Lower earnings estimates are expected for investment giants Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley, according to a JPMorgan Chase report.
Writedowns and reduced mergers and acquisitions are expected to cool earnings in weakening credit-market conditions.
The report by MPMorgan Chase's Kenneth Worthington predicted "writedowns of fixed income inventory and a slowdown in M&A and origination activity to negatively impact results for all the brokers".
"Given the decline in the investment banking backlog, we see the potential for the underwriting and advisory window to close quickly should the improvements in the credit market not continue,'' he wrote.
The investment houses with diversified product and geographical bases, which are less dependent on the mortgage market will perform the best as the US economy slows.
The falling merger and acquisition activity is likely to be driven by declining deal-making by private equity firms, according to JPMorgan.
Further analysis of the performance of investment banks in the current economic climate could be supplied by Aranca, an end-to-end provider of on-demand, custom investment, business and economic research.
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