UPDATE 1-US banks' earnings may fall on Europe woes - JMP

Mon May 21, 2012 4:33am EDT

* Cuts JPMorgan, BofA, Citigroup to "market underperform"

* Downgrades Goldman, Morgan Stanley to "market underperform"

* Expects banks' share prices to suffer on Europe concerns

May 21 (Reuters) - Large U.S. banks, including JPMorgan Chase & Co, and investment banks such as Goldman Sachs will likely see their share prices and earnings fall significantly this year on account of the growing crisis in Europe, said JMP Securities.

JMP downgraded Goldman and Morgan Stanley to "market underperform" from "market outperform" - its top rating. The brokerage lowered its rating on Citigroup Inc, Bank of America Corp and JPMorgan by a notch to "market underperform."

"Our base case scenario (60 percent chance and the basis for our estimate cuts) is Greek exit/no contagion, where the bulge firms would suffer some losses to Greece, and capital markets activity still sags substantially over worries about contagion," analyst David Trone wrote in a note to clients.

Trone viewed the best case scenario as having a 10 percent chance that there is no Greek exit of the euro zone, resulting in no losses and stable capital markets activity.

According to global economists polled by Reuters earlier this month, a slim majority - 35 out of 64 - thought Greece would still be in the euro zone by the end of next year, while the rest thought it would not be.

An overwhelming majority of economists - 50 out of 65 -however, agreed that Greece still poses a grave danger to the euro zone economy and its very existence.

Analyst Trone cut his price target on shares of Goldman to $77 from $169 and on Morgan Stanley to $11 from $26. He has a share price target of $5.50 for Bank of America, $23 for Citigroup and $28 for JPMorgan.

"We believe other capital markets names are safer and will likely fall less," said Trone.

Goldman shares closed at $95.49 on Friday on the New York Stock Exchange, while those of Morgan Stanley closed at $13.35.

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