Stern Agee Starts KBW at "Sell"

Stern Agee analyst Ada Lee said Wall Street is too optimistic about Keefe, Bruyette & Woods' prospects for profit this year and next.

Her estimates for profit of $1.13 per share in 2008 and $1.05 per share in 2009 fall well below analysts' consensus forecasts of $1.27 per share in 2008 and $1.51 per share in 2009, according to a Thomson Financial survey.

KBW is stuck with pools of loans and assets from insurers, banks, homebuilders and real estate investment funds, Lee said. As the value of these pools erodes, KBW will have to book losses, she said.

Growing revenue will remain difficult in an market "that appears allergic to financials," Lee said.

KBW's stock lost $1.35, or 5.6 percent, to $22.91 in afternoon trading Thursday. Lee holds a $16 price target on the stock.