- The Washington Times - Wednesday, September 17, 2008

NEW YORK | Goldman Sachs Group Inc., the larger of the nation’s two remaining major independent investment banks, on Tuesday reported its worst slump in profits since going public in 1999.

The world’s largest investment bank reported third-quarter profit plunged 71 percent from the year-ago period, an almost unthinkable drop for a firm widely described as the smartest on Wall Street. Goldman’s results reflect continuing damage from the ongoing credit crisis that has already vanquished three of its rivals.

Goldman and Morgan Stanley remain the only major independent investment banks on Wall Street after a major shake-up of the investment banking industry. Lehman Brothers Holdings Inc. filed for bankruptcy Monday after succumbing to distressed real estate holdings, while Bear Stearns Cos. and Merrill Lynch & Co. were swallowed by commercial banks in emergency sales.

After two years of record profits, Chairman and Chief Executive Lloyd Blankfein has been the only CEO to navigate his firm through the market dislocation without posting a loss or major write-downs.

He said “this was a challenging quarter” marred by a “decrease in client activity and declining asset valuations.”

That was reflected in the numbers. The New York-based investment bank posted a profit of $810 million, or $1.81 per share after paying preferred dividends compared to $2.81 billion, or $6.13 per share, a year earlier. Revenue for the three months ended Aug. 29 skidded 51 percent to $6.04 billion from $12.3 billion a year ago.

The results still beat Wall Street projections for $1.71 per share, according to analysts polled by Thomson Reuters. Revenue fell short of the $6.23 billion expected by analysts.

The financial market turmoil is one of the low points in Goldman’s 139-year history. Though it has avoided the kind of bruising results turned in by many of its rivals, Goldman’s shares are still down almost 50 percent from its 52-week high of $250.70.

On Tuesday, the stock slid $2.49, or 1.8 percent, to $133.01 after sinking to a new 52-week low of $116.13 earlier in the session.

Goldman’s performance from some of its renowned businesses reflected the market’s dislocation since the credit crisis began one year ago. Investment banking revenue tumbled 40 percent, and trading and investments notched 67 percent lower.

The fall of Bear Stearns in March when it was sold to JPMorgan Chase & Co. helped Goldman’s results during the third quarter. Goldman’s prime brokerage, which trades securities for major institutional clients, reported a 20 percent surge in revenue. That helped lift Goldman’s asset management and securities services unit’s revenue higher by 4 percent from the year-ago period.

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