TEXT-S&P rates Goldman Sachs International Bank 'A/A-1'
Overview -- Goldman Sachs International Bank (GSIB) is the largest European bank subsidiary of The Goldman Sachs Group Inc. (GS; A-/Negative/A-2). -- We consider GSIB to be "core" to GS under our group ratings methodology. -- We are assigning our 'A/A-1' counterparty credit ratings to GSIB, in line with GS' other core operating entities. -- The negative outlook reflects the outlook on GS. Rating Action On Nov. 12, 2012, Standard & Poor's Ratings Services assigned its 'A/A-1' long- and short-term counterparty credit ratings to Goldman Sachs International Bank (GSIB). The outlook is negative. Rationale The ratings on GSIB reflect our view of its "core" status to GS. Our assessment is based on GSIB's position as the group's largest European banking entity, the high level of operational integration with other U.K. entities and the group, and our view that offering securities and banking services in Europe and Asia remain central to GS' long-term strategy. As a result of assigning "core" status, we align the ratings on GSIB with those on the other "core" operating companies of GS, which includes the other rated U.K. entity, Goldman Sachs International (GSI; A/Negative/A-1). As the group holding company, GS is rated one notch lower than these operating companies due to its structural subordination. GSIB serves the international clients of GS in Europe, as well as in Asia, through GSIB's Korean branch. GSIB's activities include European government bond trading, loan origination and secondary loan trading, and securities lending. The European government bond trading business was recently transferred to GSIB from GSI, a sister company. GSI is the group's primary broker-dealer entity outside of the U.S. GS has a history of providing capital support to GSIB, and we believe it is committed to maintaining adequate capital at the subsidiary for business and regulatory purposes. GSIB reported pretax profits of $10.6 million in 2011 on revenues of $62.8 million. While profit will to some extent follow fluctuations in market volume, we expect profit at year-end 2012 to better reflect the transfer of the government bonds business, which happened only late in 2011. Outlook The outlook is negative, reflecting that on GS. We expect the ratings to move in line with those on GS. We could also lower the ratings if we no longer consider GSIB to be "core" to GS. While an unlikely prospect, this could result from a period of sustained very weak operating performance at the subsidiary level, or evidence that securities and banking activity in Europe is no longer part of the group's global strategy. Related Criteria And Research All articles listed below are available on RatingsDirect on the Global Credit Portal, unless otherwise stated. Related criteria -- Banks: Rating Methodology And Assumptions, Nov. 9, 2011 -- Group Rating Methodology And Assumptions, Nov. 9, 2011 Related research -- EARNINGS UPDATE: The Goldman Sachs Group Inc. Ratings Unaffected By Good Third-Quarter Results, Oct. 16, 2012 Ratings List New Rating; CreditWatch/Outlook Action Goldman Sachs International Bank Counterparty Credit Rating A/Negative/A-1 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.