Goldman Sachs Raises Brokerage Estimates

Goldman Sachs & Co. raised its fourth-quarter profit estimates by at least 12% for Merrill Lynch & Co., Lehman Bros. Holdings Inc. and Morgan Stanley Dean Witter & Co., citing strong investment banking fees and trading commissions amid a bull market.

Merrill Lynch, the largest U.S. brokerage by capital, is expected to make $1.45 a share in the three months ending Dec. 31, up from Goldman analyst Richard Strauss’ previous estimate of $1.30.

Strauss now forecasts Morgan Stanley and Lehman Bros., the No. 2 and No. 3 U.S. brokerages, will each earn $2.10 in the quarter ending Nov. 30, up from his earlier estimate for each of $1.75.

“Record investment banking activity, remarkably high trading volumes and solid equity market gains should continue to drive profits in the fourth quarter and into 2000,” Strauss said in a report to clients.

On the New York Stock Exchange, Merrill rose 56 cents to close at $85.50, and Morgan Stanley rose $2.69 to close at $124.13, but Lehman fell $1.94 to close at $80.50.

A 10% gain in the blue-chip Standard & Poor’s 500 index since Oct. 1 has helped boost average daily trading volume on the New York Stock Exchange to 873.5 million shares, up 21% from the fourth quarter of 1998.

Shares of TD Waterhouse Group Inc., meanwhile, eased 56 cents to close at $18.81 on the NYSE as the online broker reported an increase in profit for the quarter ended Oct. 31, but a drop in transaction volume.

November trading looks strong, however, company executives told analysts. Industrywide, November trading is likely to rise 50% from October, said James Marks, an analyst at Credit Suisse First Boston.