*WARBURG CUTS CHASE MANHATTAN <CMB.N> Q3 EPS VIEW TO $1.28 FROM
1.33
NEW YORK, Sept 10 (Reuters) - Warburg Dillon Read said on Friday it lowered its third quarter earnings estimate on Chase Manhattan Corp. to $1.28 a share from $1.33 because of lower market-sensitive revenues, investment banking fees and trading revenues, as well as lower private equity gains.
Analyst Thomas Hanley said he also lowered his full year 1999 earnings estimate to $5.40 a share from $5.55, but maintained his strong buy rating on the stock and $105 price target.
-- "The main reason for the earnings revision is lower than expected market sensitive earnings," Hanley wrote. "In particular, investment banking fees, trading revenues, and private equity gains will likely all be considerably lower than the second quarters record results."
-- Hanley stressed he still believes in Chase's business model and feels comfortable with the company's ability to generate double-digit earnings growth for the foreseeable future.
-- Also believes Chase shares are attractively priced relative to other multinational bank stocks and large cap financial companies.
-- Also lowered his 2000 estimate to $6.00 from $6.20 a share. Believes Chase is well-positioned to maintain an earnings per share growth rate of 10 to 12 percent over the next few years, Hanley wrote.
-- Hanley expects investment banking revenues to be in the $430 million range in the third quarter. The historically strong third quarter was substantially below the $585 million of second quarter 1999, he said. Deal flow has been good in the third quarter, but has lacked many mega-deals.
-- Trading revenues should also be softer, he wrote. Excluding net interest income, trading revenues could be near $480 million for the third quarter, also well below second quarter's total of $526 million, he wrote.
-- "While we believe trading revenues were quite strong during the month of July and the first three weeks of August, we suspect that they may have been a bit choppy since," he wrote. "We think that the company may have suffered some foreign exchange losses as a result of being improperly positioned with regards to the dollar/yen exchange rate during the last week of August."
-- Private equity gains should also return to a more normal level near $290 million, down from $513 million in the second quarter.
-- On a more positive note, expects continued stable credit quality measures and downward revision in no way reflects a change of heart regarding asset quality, he said.
The share price tumbled on Thursday on concerns about weak third quarter profits, closing at 77-1/2. It eased to 77 in early morning Friday trading.
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