Goldman Sachs 4Q result may show losses

Goldman Sachs since their listing still has not shown any losses. But under the impact of the current financial crisis, Goldman Sachs record of no loss will be broken.

Because investment banking received the biggest impact from the current financial crisis, there will be bigger asset write downs for Goldman Sachs. Market estimates that Goldman Sachs in its 4Q report in December will show losses. At the same time, the financial crisis will worsen the business environment for many financial institutions. A lot of investors have started to worry that Goldman Sachs performance is not enough to cover its stock price which is higher than Morgan Stanley. Goldman Sachs current stock price is about 1.1 times its book value. Morgan Stanley's stock price is about half of its book value.

Currently there are reports that Goldman Sachs plans to retrench about 10% of its staff in reaction to the worsening economic environment. And the retrenchment program will mostly be in the fixed income and investment banking areas. Before this, Goldman Sachs has not been willing to follow the trend of retrenchment acts by other financial institutions.

The world stock markets has just went through the 'Black October'. S&P 500 dropped 17% in just October. Together with the unexpected strengthening of the USD against other currencies and the downward movement of the crude oil price, M&A activites have greatly reduced.

In addition to the worsening business environment, Goldman Sachs also faced a large number of asset write-downs. Data shows that some of Goldman Sachs major investments, such as private assets, public assets and real-estate investments value amounts to about 17.1 billion USD ending 3Q this year. Now it has greatly shrunk to about 3.4 billion USD or less. UBS analyst Glenn Schorr is the first in Wall Street to estimate that Goldman Sachs will show losses in its 4Q report. He estimates that Goldman Sachs coming earnings per share will drop from 1.4 USD to a 40 US cents loss per share.

Goldmans Sachs has come through 139 years and is famous in the investment banking industry with its outstanding risk control measures. Early in the beginning of 2007, Goldman Sachs detected the danger signals of the sub-prime crisis and started taking care of the related assets reducing the impact from the sub-prime crisis to a minimum.

From reports, in 2007 4Q financial results, Goldman Sachs net profit is about 3.22 billion USD, the largest earning per quarter in its history and the highest of the US investment banks. And at that time its competitors such as Merrill Lynch was deep in the sub-prime mess. Merrill Lynch 2007 4Q financial results review a loss amounting to 10 billion USD, the biggest quarterly loss in its history.