Investment banks seen with worry

NEW YORK – Wall Street analysts have made some last-minute adjustments to their projections for how U.S. investment banks will fare during the third quarter, and the prognosis isn’t too good.

This past week, Bank of America Securities, Citigroup and Sanford C. Bernstein & Co. all trimmed earnings estimates for investment banks with the most exposure to the debt market. The global credit turmoil of the past month has inhibited the companies’ ability to underwrite bond offerings, and distressed subprime debt remains a worry.

With quarterly results scheduled to be released starting next week, investors, many of them lulled by last year’s succession of record-setting profits, are clearly nervous. The reports will give Wall Street the insight it has sought to determine how much the banks have been hurt by the markets’ upheaval.

Indeed, there has been a palpable worry on Wall Street that investment banks are carrying significant losses on their books and now must begin to disclose them. Subprime loans that were merely troubled in previous quarters might need to finally be written off. And, the third quarter could show how much companies have backed away from the normally lucrative business issuing debt in the fixed-income market.

Those worries were enough to make analysts cut projections for Bear Stearns Cos. and Lehman Brothers Holdings Inc., which have been the two hardest-hit.