MarketWatch: Banks, brokers battered anew, with further gloom in forecast

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Goldman downgrade pressures brokers
Firm sees more write-downs to come; Citi added to conviction sell list

By Riley McDermid, MarketWatch


NEW YORK (MarketWatch) -- Financial sector stocks sank in early trading Thursday as shares of Citigroup Inc. fell to their lowest level in a decade after Goldman Sachs put the stock on its conviction sell list and downgraded several brokers.

Goldman also predicted Citi would be forced to record a $8.9 billion write-down and said a cut in its dividend program is likely.

The firm also lowered its rating on brokers to neutral from attractive.

Goldman estimated an additional $4.2 billion in write-downs at Merrill Lynch & Co.

The news sent Citigroup shares down more than 5% as they fell below $18 in the early going. Morgan Stanley and J.P. Morgan Chase & Co. also stumbled.

Goldman said that while fears about another investment bank failing are overblown, it is "hard pressed" to find a catalyst to move the group significantly higher over the next few months as fundamentals continue to deteriorate. See Ratings Game.

The Select Sector SPDR Financial was off nearly 2%, while the Amex Securities Broker/Dealer Index and the SPDR KBW Bank ETF both slipped more than 2%.

On the earnings front, credit-card issuer Discover Financial Services reported a 12% quarterly profit increase. However, the stock was down nearly 2% as the company raised its loan-loss provision as a result of worsening credit trends.

In European news, Belgian-Dutch banking group Fortis said it would attempt to raise as much as $12.5 billion in new capital by issuing shares, disposing of non-core assets and getting rid of its interim dividend. ......(more)

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