Financial stocks hit by mortgage fears
Financial stocks hit by mortgage fears
By David Wighton in New York
Copyright The Financial Times Limited 2007
Published: February 28 2007 02:00 | Last updated: February 28 2007 02:00
Financial stocks were battered yesterday, with Goldman Sachs tumbling more than 8 per cent on concerns about the US mortgage market and the impact of a possible slowdown in China.
NYSE Group was down 6 per cent and Nasdaq down almost 5 per cent amid fears about the health of the long bull market.
Investors are also nervous about the effect rising defaults on subprime mortgages will have on the Wall Street banks' lucrative business securitising the loans.
Lehman Brothers stock dropped nearly 5 per cent to $74.19 for a fall of almost 10 per cent in the past three trading sessions. Bear Stearns was down 4 per cent at $152.31, 8 per cent lower than Thursday's close.
Lehman and Bear Stearns are seen as the most exposed to the loss of securitisation revenues from subprime mortgages and losses from any retained portions of subprime securitisations on their balance sheets. Brad Hintz, analyst at Sanford Bernstein, estimates a worst case earnings reduction of 4 and 5 per cent respectively.
A number of Wall Street banks have acquired subprime mortgage lenders recently to ensure a continued supply of loans for securitisation, increasing their potential exposure to problems in the market.
Merrill Lynch, which paid $1.3bn for First Franklin, a subprime lender, in September, saw its shares fall nearly 4 per cent to $83.43 yesterday, giving it a drop of almost 9 per cent since Thursday's close.
Among the Wall Street banks, Goldman Sachs was hardest hit yesterday, although the fall in its stock of about 10.4 per cent since Thursday is in line with that of Morgan Stanley, which was down 5.6 per cent yesterday.
Goldman has a larger exposure to China than other Wall Street banks partly because of its 5 per cent stake in Industrial and Commercial Bank of China.
Analysts said the sharp fall in brokerage stocks was unsurprising given the strong run they have had over the past couple of years. Goldman stock is still up almost 90 per cent since the start of 2005.
The stocks of the big Wall Street banks were hit at the end of last week as concerns about the subprime mortgage market intensified. The perceived risk of owning lowly rated mortgage-backed bonds rose to another record yesterday.
Lenders are pulling back on loans to the riskiest borrowers.
By David Wighton in New York
Copyright The Financial Times Limited 2007
Published: February 28 2007 02:00 | Last updated: February 28 2007 02:00
Financial stocks were battered yesterday, with Goldman Sachs tumbling more than 8 per cent on concerns about the US mortgage market and the impact of a possible slowdown in China.
NYSE Group was down 6 per cent and Nasdaq down almost 5 per cent amid fears about the health of the long bull market.
Investors are also nervous about the effect rising defaults on subprime mortgages will have on the Wall Street banks' lucrative business securitising the loans.
Lehman Brothers stock dropped nearly 5 per cent to $74.19 for a fall of almost 10 per cent in the past three trading sessions. Bear Stearns was down 4 per cent at $152.31, 8 per cent lower than Thursday's close.
Lehman and Bear Stearns are seen as the most exposed to the loss of securitisation revenues from subprime mortgages and losses from any retained portions of subprime securitisations on their balance sheets. Brad Hintz, analyst at Sanford Bernstein, estimates a worst case earnings reduction of 4 and 5 per cent respectively.
A number of Wall Street banks have acquired subprime mortgage lenders recently to ensure a continued supply of loans for securitisation, increasing their potential exposure to problems in the market.
Merrill Lynch, which paid $1.3bn for First Franklin, a subprime lender, in September, saw its shares fall nearly 4 per cent to $83.43 yesterday, giving it a drop of almost 9 per cent since Thursday's close.
Among the Wall Street banks, Goldman Sachs was hardest hit yesterday, although the fall in its stock of about 10.4 per cent since Thursday is in line with that of Morgan Stanley, which was down 5.6 per cent yesterday.
Goldman has a larger exposure to China than other Wall Street banks partly because of its 5 per cent stake in Industrial and Commercial Bank of China.
Analysts said the sharp fall in brokerage stocks was unsurprising given the strong run they have had over the past couple of years. Goldman stock is still up almost 90 per cent since the start of 2005.
The stocks of the big Wall Street banks were hit at the end of last week as concerns about the subprime mortgage market intensified. The perceived risk of owning lowly rated mortgage-backed bonds rose to another record yesterday.
Lenders are pulling back on loans to the riskiest borrowers.
posted by Carlos T Mock @ 8:51 AM
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