Broker analyst sees $9 billion Goldman write-downs

By Joseph A. Giannone

NEW YORK (Reuters) - A veteran banking analyst predicted on Tuesday a steeper-than-expected quarterly loss by Goldman Sachs Group Inc (GS.N), as a bad environment grew even worse last month and contributed to more than $9 billion of expected writedowns.

Richard Staite of London-based Atlantic Equities forecast on Tuesday that Goldman will post a fourth-quarter loss of $4.65 per share, or $2.3 billion. That was the biggest loss predicted among analysts and more than three times as bearish as the current average forecast of $1.46 a share.

Buffeted by plunging stocks and debt prices, Goldman could realize more than $9 billion in writedowns in the quarter, Staite estimates.

"Falling equity markets and extreme weakness in parts of fixed income is a really bad combination for Goldman," Staite told Reuters.

A Goldman spokesman declined comment as Staite and other analysts reduced their estimates.

The bank's stock fell as much as 5.7 percent on the New York Stock Exchange on Tuesday morning, and later pared losses to trade down 97 cents at $64.79.

In the weeks before Goldman releases fiscal fourth-quarter results, the consensus view is expected to fall as analysts reflect on the dramatic decline in stock and fixed income markets. Goldman is due to report earnings later this month.

UBS AG's Glenn Schorr, who on October 31 was the first sell-side analyst to predict a loss, increased his loss forecast on Tuesday to $5.50 per share -- the new low among brokerage analysts -- from a loss of 40 cents.

"Markets turned considerably worse around mid-November," Staite said. "I would expect to see a lot more analysts cutting their numbers."

What was a bad year for Wall Street grew even worse last month, as stocks resumed falling and debt spreads widened.

The U.S. Treasury's decision to abandon earlier plans to purchase hard-to-sell mortgage securities from banks pulled the rug out from under commercial and residential markets. Markets have also been hit with a series of very negative economic news, causing debt spreads to widen.

Since then, junk bonds, residential and commercial real estate securities prices all have fallen sharply. Staite expects Goldman to record $5.3 billion of mark-downs on these hard-hit assets.

The bank reported holding $38 billion of these assets at the end of August.

Goldman would also be hurt by the sharp fall in equity markets, he said, generating losses in a $26 billion portfolio of private equity investments. These losses could amount to $3.8 billion, said Staite, a 15-year veteran who began covering of Goldman about a year ago.

The bank's $7.1 billion investment in ICBC (601398.SS) suffered as shares in China's largest bank fell 29 percent during the quarter.