Options Wonderland

[daiello]

Goldman to Post Loss in Fourth Quarter, Merrill Analyst Says

By Sarah Thompson and Christine Harper

Nov. 3 (Bloomberg) -- Goldman Sachs Group Inc., which posted a record profit last year, is likely to report a fourth-quarter loss because of a ``terrible'' stock market, estimates Guy Moszkowski, an analyst at Merrill Lynch & Co.

Goldman will lose 49 cents a share in the quarter that ends this month instead of the $2.98 profit Moszkowski predicted earlier, he wrote in a note to investors today. New York-based Goldman has never reported a quarterly loss since it became a public company in 1999.

Most major global stock indexes have dropped more than 25 percent this year, with the Standard & Poor's 500 down 34 percent and the Hang Seng Index down 48 percent. Goldman's private equity positions and its stake in the Industrial & Commercial Bank of China are likely to suffer because of the market performance, Moszkowski said.

``Goldman Sachs is particularly exposed to global equity market corrections due to its large corporate private equity portfolio, equity prop trading business and exposure to Chinese equities,'' he wrote. ``Both ICBC and the global markets have corrected around 30 percent in the last few weeks, likely driving a $2 billion-plus mark in these positions.''

Moszkowski also estimates Goldman will write down its leveraged loan portfolio by $1.3 billion in the quarter because of a drop in that market.

Goldman's stock price target was cut to $100 from $159 because return on equity at Goldman may be no better than 10 percent next year, Moszkowski wrote.

Morgan Stanley, the second-biggest U.S. securities firm after Goldman before both converted to bank holding companies in September, had its fourth-quarter earnings per share estimate lowered to 36 cents from 72 cents by Moszkowski in the same note.

``While Morgan Stanley is by no means immune to the stressed equity environment of the last two months, it should be in a relatively better position on this score than Goldman Sachs, because of business mix: limited private equity and very little prop equity trading,'' Moszkowski wrote.