Goldman cuts Morgan target on home equity woe
NEW YORK (MarketWatch) — Is home equity the new subprime? Goldman Sachs may think so — the brokerage lowered its 2008 earnings estimate for JP Morgan Chase & Co. to $3.30 from $3.44 Thursday amid warnings that problems in the bank’s home equity loan portfolio could cost it $450 million, more than twice previous estimates.
A team of Goldman (GS) analysts headed by William Tanona made the predictions in a note to investors.
JP Morgan (JPM) was down more than 2% in early trading Thursday.
“Home equity losses will be [JP Morgan]’s most significant headwind,” the Goldman analysts said, citing plummeting housing prices and skyrocketing negative equity as major concerns for the bank in coming months.
Goldman retained a “neutral” rating on the stock. Merrill Lynch and Co. (MER) also trimmed its earnings target for JP Morgan Thursday, to $3.83 from $4.07.