Lehman, Goldman Facing More Writedowns

Includes: GS, LEH
by: Ron Haruni

Writedowns continue to pose an ongoing threat to the relative stability of the financial sector. From regional banks to major financial institutions, firms are owning up to significant losses and are doing everything in the process to limit the severity of the crisis. A crisis, I might add, that doesn’t seem to go away. Regulators, meanwhile, including various standard-setting bodies, are focusing on further developing the necessary tools and methodologies with the purpose to closely and better monitor and better assess (if that’s possible) the financial sector by conducting and designing appropriate policy responses. Certainly, there have been, relatively speaking, some positive results in terms of crisis-containment. However, that hasn’t stopped the fact that more writedowns are projected ahead.

According to Reuters, Patrick Pinschmidt, an analyst at Morgan Stanley, is projecting that Lehman Brothers Holdings Inc. (LEH), could post a loss of $3.5 billion in the 3Q’08 on likely pre-tax writedowns, while Goldman Sachs Group Inc. (NYSE:GS) may sustain $1.5 billion in writedowns. Subsequently, Pinschmidt cut his third-quarter earnings outlook on Goldman to $1.65 a share from $3. Pinschmidt did also forecast a third-quarter loss of $2.80 a share for Lehman against a projected earlier profit of $0.08 cents a share.

Reuters, on the other hand, is projecting earnings of $2.62 a share for Goldman, while Lehman is seen posting a loss of $1.89 a share for 3Q’08.

As we can see from projections out of different financial services, Wall Street still remains skeptical of the financial sector ahead of yet another tough quarter for U.S. investment banks. The sector continues to be marked by additional writedowns amid a constantly weak operating environment.

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