Goldman Sachs Cuts Morgan Stanley First-Quarter Estimate 60%

Goldman Sachs Group Inc. (GS) cut its first-quarter earnings estimate for Morgan Stanley by 60 percent on expectation of lower interest rate, credit and currency trading revenue.

Morgan Stanley, the sixth-largest U.S. bank by assets, had its earnings estimate lowered to 32 cents from 80 cents, analysts Daniel Harris and Richard Ramsden said today in a note. Full-year estimates for 2011 and 2012 were cut to $2 per share from $2.75 and $2.65 from $3.05, respectively. The average first-quarter estimate of 21 analysts surveyed by Bloomberg is 38 cents.

Revenue from interest rate, credit and currency trading will be $1 billion, down from the previous estimate of $1.7 billion, as charges from its hedging of exposure to monoline insurers affect results by $400 million to $500 million, according to the note. New York-based Morgan Stanley (MS) will also face a $300 million charge related to the narrowing of its credit spreads, the note said.

Investment-banking revenue will be $100 million lower than previously estimated, according to the note. Merger and acquisition advisory revenue will be down 14 percent from the fourth quarter. Global wealth-management revenue of $3.3 billion in the fourth quarter will be flat because of a decline in client activity, Harris and Ramsden said in the note.

Morgan Stanley fell 24 cents, or 0.9 percent, to $26.67 at 10:55 a.m. in New York Stock Exchange composite trading.

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