UPDATE 1-Goldman adds Marshall & Ilsley to conviction sell
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June 11 (Reuters) - Marshall & Ilsley Corp's MI.N larger-than-average exposure to the construction sector will likely result in "elevated" loan losses this quarter, according to Goldman Sachs & Co, which added Wisconsin's largest bank to its "conviction sell" list.
Twenty percent of the bank's loan portfolio is made up of construction loans, nearly twice the industry average, and includes $1.6 billion of high-risk residential land exposure in Arizona, analyst Brian Foran said in a note to clients.
The portfolio in Arizona, one of the states hardest hit by the nation's housing slump, had a mark-to-market loan-to-value ratio of 104 percent at the end of March, reflecting declining home prices. Generally, mortgage portfolios with high LTV ratios are seen as higher risk.
Foran said he expects Milwaukee-based Marshall & Ilsley's stock to trade about 12 percent below its current level.
U.S. banks have been battered by mounting loan losses as the slumping economy, skidding housing markets, record oil prices, rising unemployment and tighter credit conditions make it harder for borrowers to stay current on their debts.
Goldman Sachs said it lowered its profit per share estimates on Marshall & Ilsley to 31 cents for the second quarter, and to $1.40 from $1.80 a share for the year. It also lowered its 12-month price target to $18 from $21. It rates the bank "sell."
Shares of Marshall & Ilsley were down nearly 5 percent at $19.35 in pre-market trading. They had closed at $20.34 Tuesday on the New York Stock Exchange. (Reporting by Dhanya Skariachan in Bangalore; Editing by Jarshad Kakkrakandy)
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