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Goldman Sachs incurs first loss since IPO
By siliconindia
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Wednesday, 17 December 2008, 23:40 IST
Bangalore: Goldman Sachs, an U.S. based independent brokerage has reported a net loss at its equities business in its fourth fiscal quarter. Goldman along with its rival Morgan Stanley has become bank holding companies, providing them with access to the federal government's $700 billion rescue plan and allowing them to borrow at the U.S. Federal Reserve's discount window and making it easier to get stable sources of funding.
According to Lloyd Blankfein, Chief Executive Officer, Goldman Sachs said that even financing can't mask the woes from this quarter, as the company saw its revenue turn negative amid declines in values across virtually every asset class. For the period ended November 30, Goldman reported a net loss of $2.12 billion, compared with net income of $3.22 billion, a year earlier.
"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," said Blankfein.
Earlier, Goldman Sachs had received $10 billion from the government's Troubled Asset Relief Program. Analysts had said that they expected a big chunk of the government bailout money that large banks received to go toward fourth-quarter writedowns and loss provisions, reported Mint.
Revenue plunged to negative $4.36 billion at Goldman's trading and principal investments business, from revenue of $6.93 billion a year earlier. Meanwhile, it recorded a net loss amid losses from corporate and real-estate investments. The asset-management and securities-services division, which includes lending and other services to hedge funds, also posted a five percent drop in revenue as profits fell 19 percent due to lower fees amid market depreciation and outflows in assets.
Goldman also is facing danger from its heavy exposure to the equity markets, which have fallen roughly one-third this year, and some of its investments, which includes investments in everything from troubled auto loans in Thailand to struggling golf courses in Japan.
The company has said that it will cut about 3,250 jobs, or 10 percent of its work force, including its entire staff in Dubai, as it looks to cut costs.