Wall Street warns: The BofA and Goldman issues are not over

According to some analysts, 15% decline this year for the banking sector is not enough. Wall Street puts the sector in doubt that it will start recovering.

Brian Kleinhanzi of Keefe Bruyette & Woods Inc. (KBW) has changed its positive outlook for the sector to worse for the coming year. According to him, there are not enough positive catalysts, except to continue to depreciate the shares of banks, providing a good opportunity for large discount purchases. For the moment, the sector remains under severe pressure from the disappointing credit environment and macroeconomic risks.

KBW lowered its ratings for Bank of America Cop. and Morgan Stanley because of the more bleak expectations for the development of the world economy and the presentation of the American. The main reasons for the banking sector to be less appreciated are: the falling rate of lending and the increase in the amount of deposits.

Atlantic Equities reduced its rating to Goldman Sachs Group Inc. neutral and reduced their stock price forecast, with their $ 295 target cut to $ 205 per share. This is caused by the fear of the success of David Solomon's new CEO strategy and the scandal of the Malaysian 1MDB.

Atlantic also lowered its forecast for performance as the investment banking environment is heavily depressed. In particular, for fixed income assets and the earnings from currencies and raw materials currently under pressure from growing macroeconomic uncertainties. Lending is worsened because of the rise in interest rates, and earnings from stock markets are reduced due to market volatility.

KBW and Atlantic forecasts come as the banking sector has already declined 11% since the fourth quarter, putting the sector in the shadow of its worst performance since 2011. The sector is highly susceptible to further weakening unless fundamental factors begin to improve.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

Read more:

• Risk off after the escalation in the Middle East, markets are recovering in a period of calm
• The macroeconomic events for today’s trading calendar
• The US government has confirmed the attacks, Trump is calling an emergency staff meeting
• Has the war between Iran and the US started?
• US markets remain under pressure, traders await Iran’s response