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Mutual Funds - Mutual Funds.
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Posted by Monitor on April 14, 2009, 10:55 am
Goldman CFO still cautious about financial sector
Goldman Sachs still cautious about financial sector despite topping
earnings' forecast
NEW YORK (AP) -- Goldman Sachs Group Inc.'s chief financial officer
David Viniar said Tuesday the bank remains cautious about the
financial sector in the near term, despite reporting a first-quarter
profit that easily surpassed expectations
In a conference call with investors, Viniar said there are still
"headwinds" in the broader sector tied to declining asset values.
Viniar's caution comes a day after New York-based Goldman announced it
earned $1.66 billion, or $3.39 per share, during the first quarter.
Analysts polled by Thomson Reuters had forecast earnings of $1.64 per
share for the January through March quarter. The bank also said it
planned to raise $5 billion in stock to help it pay back government
bailout funds.
Despite the uncertainty still surrounding the financial sector,
Goldman said it plans to repay its $10 billion loan from the
government as soon as possible, with help from the stock sale as well
as additional reserves. Goldman has one of the strongest
capitalizations in the banking sector, which it could tap even amid
its cautious outlook.
"Given the challenging fundamental backdrop in the global economy, we
continue to be cautious about the near-term outlook for our
businesses," Viniar said. 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.
Goldman's profit was not boosted during the quarter by a reversal in
asset prices either. Viniar said the bank took virtually no reversals
on write-downs it had previously taken on illiquid assets as pricing
remains weak.
Viniar's cautious outlook about the banking sector is similar to the
caution Wells Fargo & Co.'s CFO Howard Atkins provided after the San
Francisco-bank said last week that it expects to report a record $3
billion first-quarter profit.
Atkins said it was still too early to conclude the economy has turned
around.
Goldman's first-quarter performance put it in a strong enough position
to plan the public stock offering of $5 billion which 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 and help alleviate the nearly
frozen credit markets.
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 $7.22, or 5.6 percent, to $122.93 in early
morning trading Tuesday.
Viniar reiterated the bank's plan to repay the $10 billion as soon as
it can. He said the government must first complete its stress test on
the bank before it can hammer out terms for a repayment with the
Treasury Department. 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 wrap up by the end of the month
http://finance.yahoo.com/news/Goldman-CFO-still-cautious-apf-14919675.html?sec=topStories&pos=5&asset=&ccode=
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