- The Washington Times - Tuesday, April 14, 2009

NEW YORK (AP) - Goldman Sachs Group Inc. said Tuesday it’s still cautious about the banking industry’s health even as it priced a $5 billion stock offering aimed at helping it repay government bailout money.

In a conference call with investors, chief financial officer David Viniar said there are still “headwinds” in the industry because the value of mortgage-backed securities and other assets are still falling. Viniar’s comments came a day after New York-based Goldman announced it earned $1.66 billion, or $3.39 per share, during the first quarter, beating the $1.64 per share forecast of analysts polled by Thomson Reuters.

Despite the ongoing uncertainty among financial companies, Goldman said it plans to repay the $10 billion in bailout money it received from the government as soon as possible, with help from the stock sale as well as additional reserves.

Goldman priced the $5 billion stock offering at $123 per share, a discount of 5.5 percent to Monday’s closing price of $130.15. Goldman said it has the option to sell an additional $750 million in stock to cover over-allotments.

Shares of Goldman fell $15.04, or 11.6 percent, to close at $115.11 Tuesday.

Goldman’s first-quarter performance put it in a strong enough position to plan the public stock offering that it said would be used, with additional resources, to pay back the government debt. Goldman received $10 billion in government funds during the downturn last fall as part of the U.S. Treasury Department’s program to invest directly in hundreds of banks and try to help the nearly frozen credit markets.

Viniar said that before Goldman can repay the $10 billion, the government must first complete what’s called a stress test on the bank. The government is running stress tests on the nation’s largest banks to determine if they need any additional capital based on various economic scenarios. Those tests are expected to be completed by the end of the month.

But even if the money is repaid, Viniar told investors, “given the challenging fundamental backdrop in the global economy, we continue to be cautious about the near-term outlook for our businesses.” His caution was similar to comments from Wells Fargo & Co. CFO Howard Atkins after the San Francisco-bank said last week it expects to report a record $3 billion first-quarter profit.

Unlike many other banks, Goldman has relatively little exposure to risky assets remaining on its balance sheet, Viniar noted. Goldman has long been considered one of the strongest banks amid the credit crisis and its exposure to the riskiest assets that have plagued banks since late in 2007 has been less than many of its competitors.

Viniar said Goldman’s legacy leverage loans on its balance sheet now total $2.3 billion, compared with about $52 billion during the third quarter of 2007 when markets began to unravel. Those $2.3 billion remaining on its books are marked down to an average of about 50 cents on the dollar, Viniar added.

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