Lehman Brothers Holdings Inc may post a third-quarter loss, according to an analyst at Banc of America, who said slowing fixed-income sales and trading over the next few quarters will make it difficult for Lehman to show revenue and earnings improvement.
"While on the one hand Lehman has successfully transformed from a one-business firm to a more diversified investment bank, Lehman remains the most fixed-income sensitive firm," BofA analyst Michael Hecht said.
He expects Lehman to post a third-quarter loss of $3.45 a share, versus his prior profit view of $0.08, and widened his 2008 loss view for the company to $8.75 a share from his prior loss estimate of $3.69 a share.
Analysts including Merrill Lynch's Guy Moszkowski and Deutsche Bank's Michael Mayo lowered their earnings forecasts for Lehman this week.
Several Wall Street analysts have also been speculating a possible sale of all or a portion of Lehman's asset-management business -- a move mentioned in media reports as a possibility for weeks.
"Asset management remains a highly valuable asset, leading us to believe that a potential Neuberger monetization would not be motivated by capital shortfall but rather unlocking shareholder value and we think leaves the door open for a partial spin versus outright sale," Hecht wrote in a note to clients.
Hecht said he had recently met with Lehman President and Chief Operating Officer Bart McDade.
Lehman management was quoted by Hecht as saying the firm's liquidity position remained sound, it already had more than $40 billion of deposits and was still looking to grow its base of deposits.
This "opens the door to contemplating a potential bank acquisition, though management stopped short of seeing an outright sale to a bank or going private as reasonable, attractive alternatives," the analyst wrote in a note to clients.
The analyst cut his price target on the stock to $20 from $23, and maintained a "neutral" rating.
Shares of Lehman closed at $15.57 Wednesday on the New York Stock Exchange.
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