NEW YORK (Reuters) – Goldman Sachs Group Inc (GS) shares fell Tuesday on speculation the bank’s fourth-quarter loss could be much larger than expected — more than $2.5 billion — fueled by the plunging value of many Goldman investments.
The shares fell as much as 6 percent, rose briefly in volatile trading, then settled at $64.78, off 1.5 percent. They are down 70 percent this year.
For the past month, Goldman has been widely expected to post its first quarterly loss since going public in 1999. But poor market conditions got even worse last month as the U.S. Treasury abandoned its proposal to buy hard-to-trade mortgage securities and other debt from hard-hit banks.
Atlantic Equities analyst Richard Staite on Tuesday widened his loss forecast for Goldman to $4.65 a share, or $2.3 billion, for the fiscal fourth quarter ended Nov. 28. Staite forecast that falling equity and debt values will trigger more than $9 billion of writedowns.
Within hours, veteran UBS brokerage analyst Glenn Schorr forecast an even bigger loss — $5.50 a share, or $2.7 billion — driven by writedowns approaching $5 billion. S&P Equity Research cut its forecast to a loss of $3.25 a share.
That’s a big change from a month ago, when the average Wall Street forecast was a profit of $2.34 a share; six months ago, the average estimate was a profit of more than $5.40 a share.
Currently, analysts’ average forecast is a loss of $1.46 a share excluding one-time items, according to Reuters Estimates. Individual forecasts range from a profit of 23 cents at Wachovia Securities to a loss of $5.50 at UBS.
The average loss forecast will only deepen as Wall Street analysts try to estimate the impact of market weakness on a range of assets held in Goldman’s investment portfolio and by its traders.
Goldman has long been the industry’s most aggressive player in deploying its capital into everything from power plants and Japanese golf courses to ethanol makers and distressed debt.
As a group, analysts turned bearish on Goldman at the end of October, with industry watchers like UBS’ Schorr and Merrill Lynch’s Guy Moszkowski predicting small losses.
By Joseph A. Giannone
(Editing by John Wallace)