Beware the Tarp repayments

June 25, 2009

Shares of Goldman Sachs and Morgan Stanley are trading like the financial crisis never happened. In fact, Goldman’ stock is trading at  price that’s right around where it was the Friday before Lehman Brothers filed for bankruptcy last September.

But it looks the rally may have gotten ahead of itself. Roger Freeman, a Barclays Capital analyst, is scaling back his second-quarter estimates for Goldman and Morgan–largely because of the cost to both firms of repaying money to the Troubled Asset Relief Program.

Freeman now projects a 70 cents share loss for Morgan in the quarter, instead of a narrow 40 cents a shares profit. Goldman’s projected second quarter profit declines to $3.55 a share from $5.20 a share. Expect other analysts to follow suit.

Of course, the thing everyone is looking at with the big banks is how they do with trading with the Fed keeping bank borrowing costs near zero.

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