Morgan Stanley Widens Goldman Sachs Loss Forecast

Morgan Stanley widened its fourth-quarter loss estimate on Goldman Sachs, citing a fall in equity, credit and real-estate asset values in November, and rising negative marks on the firm's illiquid asset and principal investment portfolios.

Morgan Stanley's Patrick Pinschmidt now expects Goldman to report a loss of $4.45 a share for the quarter, compared with his prior view of a loss of $1.09.

Several other analysts, including Fox-Pitt Kelton's David Trone and Merrill Lynch's Guy Moszkowski, have widened their loss view on the former investment bank this week, reflecting continued price correction across many asset classes through November.

Pinschmidt said negative marks would rise to $7.4 billion from $4.1 billion.

Marks on principal investment portfolio are expected to be at $4.4 billion, hurt by a fall in global equity market valuations and significant erosion in real-estate holdings, he wrote in a note dated Dec. 4.

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Pinschmidt also cut his price target on Goldman's stock to $137 from $152, but kept an "overweight" rating.

Fixed-income trading, Goldman's most capital-intensive and lowest return-on-equity business, may be resized to produce better returns, the analyst said. Shares of Goldman Sachs closed at $67.53 Thursday on the New York Stock Exchange.

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