In a note to investors, Wachovia Securities Analyst Doug Sipkin commented on the state of the leading Wall Street securities firms in light of the worsening global credit crisis.
Sipkin blamed the “The failure of Bear Stearns” on a “management issue” rather than a “market issue.” JP Morgan Chase & Co. recently purchased Bear Stearns, the fifth largest securities company, for $236 million-that’s $2/share-a 90% market drop in just two days. The securities firm ran out of money after clients took away funds.
Sipkin, however, reassured investors that the action taken by the Federal Reserve to reduce emergency lending rates will keep the other four big securities firms in business.
The Wachovia analyst says that worries about Lehman Brothers are misguided and that the bank has sufficient liquidity to keep business running. Sipkin cited Lehman’s “superior management” and “superior business.”
Lehman and Goldman Sachs are expected to garner new business from the Bear sale. Sipkin said Goldman will likely benefit from “migrating prime brokerage balances,” while Lehman would likely pick up “material market share” in mortgages.
Morgan Stanley, said Sipkin, seems to be weathering the crisis because it has its asset management and brokerage businesses.
Sipkin pointed to Merrill Lynch as appearing to be the weakest of the top Wall Street firms-but said that it would also likely stay afloat, considering that its balance sheet had the highest leverage.
Related Web Resources:
Ahead of the Bell: Investment Banks, Chron.com/AP, March 18, 2008
US stock market drops as Bear Stearns sold for $2/share, Reuters, March 17, 2008
JP Morgan Shares to Acquire Bear Stearns, Bear Stearns
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