Goldman, U.S. brokers may earn 40% less profit, Bernstein says

Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Bear Stearns Cos. may earn 40 percent less profit than estimated in the first quarter because of lower investment banking revenue, said Sanford C. Bernstein & Co.Morgan Stanley may report 12 percent less profit, according to New-York based analyst Brad Hintz, who also cited "challenging" fixed income markets for reduced earnings.Fixed income and trading "will be the center of investor concern this quarter," Hintz wrote in a note. "Market conditions remained challenging through February as troubles spread through a variety of areas within the fixed income market."Investment banking revenue may decline 35 percent on average for the firms, he wrote. "The high margin businesses of equity underwriting and M&A had their weakest quarters since 2005."Hintz cut Bear Stearns' first-quarter profit forecast by 41 percent to $1.59 a share and lowered Lehman's earnings estimate by 42 percent to $1.15. Goldman's profit estimate was cut 45 percent to $3.03 and Morgan Stanley's earnings forecast was reduced 12 percent to $1.49.Morgan Stanley may be hurt the least among the four brokers because it has the most diverse business mix, Hintz wrote. He rates Morgan Stanley at "outperform" and holds "market perform" ratings on Bear, Lehman and Goldman.