Lehman should survive any confidence crisis: Hintz
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Mon, 14 Jul 2008 12:13:02 GMT |
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NEW YORK (Reuters) - Lehman Brothers Holdings Inc should be able to survive any crisis of confidence, given the strengthening of its funding base and its support from the Federal Reserve, Sanford C. Bernstein & Co analyst Brad Hintz said on Monday.In a research note, Hintz said Lehman's quarterly report filed last week shows progress on improving both funding and reducing balance sheet risk.Lehman is also able to borrow at the Fed's so-called discount window. This had not been the case in March when smaller Wall Street banking rival Bear Stearns Cos collapsed, eventually agreeing to a takeover by JPMorgan Chase & Co . Hintz is a former Lehman chief financial officer."The Federal Reserve is buying time for the securities industry and the commercial banks by providing access to this funding window," Hintz wrote. "As a result we do not believe that Lehman will be forced into a 'shotgun marriage' like Bear Stearns."The analyst said Lehman's total assets fell 18.7 percent quarter over quarter, while gross leverage, securities borrowed and receivables also declined.Despite this, Hintz said Lehman's balance sheet is not yet "bulletproof," citing rising exposure to less liquid assets and an increase in commercial paper outstanding."Even with these issues, Bernstein believes that the strengthening of Lehman's funding base and balance sheet combined with the continued support of the Federal Reserve, means that (the) firm should be able to survive any confidence crisis," Hintz wrote.He expects Lehman to lose $2.24 per share in its current fiscal year, and post a profit of $4.19 per share in 2009. He rates the company "market-perform" with a $45 share price target, roughly triple where it closed on Friday.The shares closed Friday at $14.43 on the New York Stock Exchange, down 81 percent from their 52-week high set last July 17.The shares rose to $16.11 in pre-market trading after the U.S. government announced a rescue plan for mortgage finance companies Fannie Mae and Freddie Mac .(Reporting by Jonathan Stempel; Editing by John Wallace)
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