Banks set to overcome mortgage fears Shanny Basar in New York 12 Mar 2007 Concerns about the exposure of US investment banks to the recent turmoil in the mortgage markets are overblown, according to analysts. But the banks could show signs of pressure in emerging markets and credit trading when they start reporting first-quarter figures this week. Results from Goldman Sachs and Lehman Brothers, whose first quarter ended last month, will give an indication of concerns in the sub-prime loan sector. UK bank HSBC last week took a $10.6bn (â¬8bn) hit for bad debts after problems in its US mortgage lending business. More than 20 sub-prime lenders have closed. Despite these concerns, Lauren Smith, an analyst at Keefe, Bruyette & Woods, a financial services investment bank, has raised her earnings per share estimates for Goldman Sachs and Morgan Stanley. She said: âWe believe concerns over big brokersâ exposures to sub-prime is overdone.â A sub-prime loan is one in which the borrower has difficulties in obtaining mortgage financing because of poor credit or hard-to-document income or assets. Smith said investment banks were distributors or transfer agents for the loans which stayed on a bankâs balance sheet for up to 45 days waiting to be securitised. Keefe, Bruyette increased first-quarter earnings estimates for Goldman Sachs by 15% to $4.80 because of higher-than-expected revenues from fixed income, currencies and commodities and equity trading. Morgan Stanleyâs earnings per share estimates rose from $1.79 to $1.82 because of higher trading and investment banking revenue assumptions.