Goldman CEO doesn't see significant write-downs

NEW YORK (Reuters) - Goldman Sachs Group Inc (GS.N) does not expect to take any significant asset write-downs, its chief executive said on Tuesday, easing investor fears of a worsening credit crisis and sending financial shares soaring.

Asked if he expected significant write-downs, Goldman CEO Lloyd Blankfein offered a one-word answer: "No."

"We're convinced we have a pretty good grip on these valuations," Blankfein said at the Merrill Lynch Banking and Financial Services Conference.

After weeks of speculation that Goldman would be the next bank to report big credit markets losses, Blankfein's comments boosted Goldman shares, rising $18.33, or 8.5 percent, to close at $233.04 on the New York Stock Exchange. It was Goldman's biggest one-day gain in six years.

Rivals have been less fortunate. In the past month, rivals ranging from UBS (UBSN.VX) and Morgan Stanley (MS.N) to Merrill Lynch MER.N and Citigroup (C.N) have announced about $45 billion in losses and write downs.

The losses reflect the meltdown in mortgage securities and broader breakdown in markets for collateralized debt obligations and corporate loans that have triggered a deep sell off in financial shares.

Blankfein's comments helped fuel a rally in financial services stocks, which have plunged in recent weeks on concern the damage of the mortgage meltdown was getting worse. The Amex Securities Broker Dealer index .XBD rose 5.8 percent.

Blankfein addressed skepticism in the market that Goldman's blowout third-quarter results, which stood in stark contrast to the losses posted by rivals, were the result of unrealistic valuations.

Goldman's portfolio of level 3 assets, which under accounting rules are the least liquid and the hardest to price, includes private equity stakes, real estate and leveraged loans. A separate group of employees, rather than traders, are charged with assigning value to positions, Blankfein said.

If Goldman isn't sure about an estimated value, traders execute test trades to help establish market value that it can apply, he said.

"People are convinced that Goldman has been honest regarding their mortgage problems and are buying calls aggressively, anticipating continued upward stock movement," said William Lefkowitz, an options strategist at brokerage firm vFinance Investments in New York.

MORTGAGE WEAKNESS

Blankfein also reaffirmed Goldman's bearish view on U.S. mortgage markets, where rising default rates and the lack of buyers has erased much of the value of mortgage securities and derivatives such as collateralized debt obligations.

At the end of the third quarter, when Goldman reaped windfall gains by betting against the mortgage market, it warned that market conditions would get worse. On Tuesday, Blankfein said Goldman continued to bet mortgages would weaken.

"We are net short in these markets," Blankfein said. "We continue to be bearish," he said, noting credit spreads have widened since its results were reported in September.

(Additional reporting by Doris Frankel, Dan Wilchins, Ed Leefeldt and Michael Flaherty; Editing by Gary Hill and Tim Dobbyn)