Whitney Cuts Goldman Sachs, Morgan Stanley Estimates

Dec. 17 (Bloomberg) -- Meredith Whitney, the analyst known for predicting Citigroup Inc.’s dividend cut last year, reduced earnings estimates for Goldman Sachs Group Inc. and Morgan Stanley through 2011 because customers are trading less.

She now projects Goldman Sachs will earn $6 a share in the fourth quarter, $19.65 in 2010 and $20.60 in 2011. Those compare with the average analyst estimates of $5.65, $18.82 and $21.22, respectively, according to data compiled by Bloomberg. Whitney said Morgan Stanley’s profit will be $2.60 next year and $2.75 in 2011, versus average forecasts of $3.30 and $3.69. Both companies are based in New York.

“Our early look for the quarter shows that client activity appears to have slowed,” the New York-based analyst who runs Meredith Whitney Advisory Group LLC wrote in a report sent to clients.

Since the Standard & Poor’s 500 Index’s sank to a 12-year low in March, monthly stock trading volume has fallen 36 percent. Fewer than 7.87 billion shares changed hands each day on U.S. exchanges during November, the lowest month average since August 2008, Bloomberg data show. It’s risen to 8.12 billion so far in December.

Goldman Sachs and Morgan Stanley were the two biggest U.S. securities firms before converting to banks during last year’s financial crisis. Morgan Stanley returned to profit last quarter for the first time in a year, and Goldman Sachs has racked up record earnings in the first nine months of 2009.

Whitney has “neutral” ratings on both stocks. Goldman Sachs shares fell 1.1 percent to $163.19 at 9:41 a.m. in New York, trimming their gain this year to 93 percent. Morgan Stanley lost 0.8 percent to $30.10 and has rallied 88 percent since Dec. 31.

The analyst previously forecast profit of $6.38 a share in the fourth quarter for Goldman Sachs, $21.73 in 2010 and $24.04 in 2011. Morgan Stanley’s projections were $2.63 next year and $3.28 in 2011.