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Business

Goldman Sachs reports first loss in a decade

Latest update : 2008-12-16

Wall Street giant Goldman Sachs reported a 2.12-billion-dollar net loss in the fiscal fourth quarter, its first negative result since 1999. CEO Lloyd Blankfein said the rare loss reflected "extraordinarily difficult operating conditions."

AFP - Wall Street giant Goldman Sachs on Tuesday reported a 2.12 billion dollar net loss in the fiscal fourth quarter to November, the first loss since the investment firm went public in 1999.

The loss amounted to 4.97 dollars a share, much more that market expectations of 3.50 dollars, and reflected a reversal from the 7.01 dollars a share the firm earned during the same period last year.

Goldman and Morgan Stanley were the last of two major independent investment banks which became bank holding companies earlier this year in a bid to have easier access to credit to survive the current financial crisis.

Goldman chief executive Officer Lloyd Blankfein blamed the firm's first loss as a publicly traded company on the deteriorating financial environment but emphasized that it remained profitable.

"Our results for the fourth quarter reflect extraordinarily difficult operating conditions, including a sharp decline in values across virtually every asset class," he said.

"While our quarterly performance obviously didn't meet our expectations, Goldman Sachs remained profitable during one of the most challenging years in our industry's history," he added.

Goldman chalked up a net revenue of 22.22 billion dollars and net earnings of 2.32 billion dollars for the whole fiscal year.

But for the fourth quarter, it posted a negative net revenue of 1.58 billion dollars, as writedowns outstripped revenue during the period.

Net revenues in investment banking fell 48 percent to 1.0 billion dollars while those in its trading group were a negative 4.36 billion dollars due to losses from investments including corporate debt, private and public equities, and trading in credit products.

Goldman's financial result Tuesday begins what is expected to be another round of weak earnings from key companies amid turmoil stemming from a home mortgage meltdown.

But Goldman result hardly rocked the market.

"Ahead of today's official report, nearly every analyst on Wall Street predicted that GS (Goldman Sachs) would lose money in the fourth quarter," said Elizabeth Harrow of Schaeffer's Investment Research.

Goldman Sachs' shares traded up 5.27 percent at 71.73 dollars on Tuesday.

Even though the company's reported loss did not exceed the gloomiest forecast, ratings agency Moody's Investors Service downgraded the long-term debt ratings of Goldman Sachs to A1 from Aa3, saying the "outlook remains negative."

The downgrade reflects "the increased vulnerabilities that the ongoing credit market crisis has exposed in the model of Goldman Sachs and other wholesale-funded investment, commercial, and universal banks," Moddy's said.

It said a persistent difficult operating environment "will continue to challenge the firm."

 

Date created : 2008-12-16

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