Goldman Sachs posts 1st loss, but shares rise
Goldman Sachs Group Inc. on Tuesday reported its first quarterly loss since it went public in 1999, losing $2.29 billion during its fiscal fourth quarter, but investors seemed unfazed and sent its shares up 14.4%.
The loss proves the turmoil in the financial markets has tripped up even the best-run financial institutions. The New York-based bank has long been considered the premier investment bank on Wall Street, and in recent quarters the sturdiest amid the turmoil.
Goldman lost $4.97 a share in the quarter ended Nov. 30, contrasted with earnings of $3.17 billion, or $7.01, last year.
Analysts polled by Thomson Reuters, on average, predicted a loss of $3.73 a share for the latest quarter. Over the last several weeks, analysts sharply slashed their estimates amid ongoing concern about investment losses. Just a month ago, analysts predicted that Goldman would lose just 28 cents a share, with some analysts still forecasting a quarterly profit.
Goldman’s shares jumped $9.54 to $76 on Tuesday amid a broad rally on Wall Street.
Analysts attributed the strong stock performance to investors’ finding the few bright spots among the gloomy results, noting that although the loss was big, it was not well beyond expectations.
Goldman reported negative revenue of $4.36 billion in its trading and principal investments unit. Negative revenue occurs when a company must reverse some previously recognized revenue because its value has declined.
Overall, Goldman reported negative revenue of $1.58 billion, compared with revenue of $10.74 billion during the year-earlier quarter.
The principal investment division lost $2 billion on corporate investments, $961 million from real estate investments and $631 million tied to the firm’s investment in Industrial and Commercial Bank of China. Goldman purchased a minority stake in the Chinese bank in 2006. The loss tied to that investment was because of a decline in ICBC’s share price.
Negative revenue from fixed income totaled $3.4 billion as losses were widespread across the division, said David Viniar, Goldman’s chief financial officer.
Goldman’s quarterly loss came during a three-month period that brought sweeping changes to the investment banking sector -- a sector essentially being rebuilt after the September collapse of Lehman Bros. Holdings Inc. and the sale of Merrill Lynch & Co. to Bank of America Corp.
With investors lacking confidence in the stand-alone banking model, both Goldman and Morgan Stanley quickly gained federal regulatory approval to become bank holding companies.
Morgan Stanley is scheduled to report fiscal fourth-quarter results today.
