Goldman Sachs profit estimate cut by BarCap

25 June 2010

An earnings forecast for investment bank Goldman Sachs has been reduced due to uncertainty in the financial markets seen during the second quarter, analysts have said.

According to Barclays Capital (BarCap), EPS for the financial services provider now stands at $1.95 - lower than the $5.35 previously estimated.

The price target on stock held by Goldman Sachs was also cut from $195 to $175 by the financial commentator.

Roger Freeman, analyst at the financial institution, was quoted by the Wall Street Journal as saying: “Financial market conditions have
deteriorated notably since 1Q10, evidenced by sharply wider credit spreads, cash-derivative basis, declines in structured finance indices, sharply higher volatility and a 'flight-to-safety' trade in less risky assets.”

“This market dislocation, while certainly smaller than the dislocations seen in 2008 and early 2009, has impacted broker-dealer revenue generation in terms of client activity levels, trading revenue and investment banking results.”

Meanwhile, a judge in New York has agreed to provide Goldman Sachs with an extension to allow it more time to formulate a response to allegations of misleading investors.

Earlier in the year the Securities and Exchange Commission filed a lawsuit against the bank claiming it failed to provide investors with full details of securities linked to subprime mortgages in the US.

By Jim Ottewill

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