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TEXT-Fitch affirms Goldman Sachs Group ratings

(The following statement was released by the rating agency)

Oct 10 - Fitch Ratings has affirmed The Goldman Sachs Group, Inc.'s

(Goldman) IDRs at 'A/F1'. Fitch also affirms Goldman's Support Rating at '1', Support Floor at 'A' and Viability Rating (VR) at 'a'. A complete list of ratings follows at the end of this release.

Today's rating action was taken in conjunction with Fitch's Global Trading and Universal Bank (GTUB) periodic review. Fitch's outlook for the industry is stable on balance. The positive rating drivers include improved liquidity, funding, capitalization and more streamlined businesses, all partly driven by regulation. Offsetting these positive drivers are substantial earnings pressure, regulatory uncertainty and heightened legal and operational risk.

RATING ACTION RATIONALE

Goldman's ratings continue to be supported by its leading investment banking franchise, strong risk management, solid liquidity position, and better-than-average capital position. Ratings have limited upward potential, given Goldman's business focus on the capital markets.

Goldman has higher reliance on capital market operations than many global trading and universal banks (GTUBs). Fitch recognizes that capital market revenues are inherently volatile and susceptible to declines in difficult market periods. Concerns over this inherent volatility are tempered by management's successful track record in managing through difficult periods.

Goldman has demonstrated favorable risk management during the financial crisis and its aftermath. Fitch believes that Goldman has a comparatively strong risk management organization and systems to manage and monitor risk. Positively, Goldman has far less exposure to the U.S. real estate market than most U.S. banks, given its focus on capital markets activities and asset management.

Liquidity remains at conservative levels. Cash and unencumbered highly liquid securities totaled $175 billion (18% of total assets) at mid-year 2012. Conservative liquidity management reduces Fitch's concerns regarding reliance on wholesale funding. To reduce wholesale funding risk, reliance on unsecured short-term funding remains at modest levels and the weighted average maturity of secured funding has been increased (particularly repos associated with less liquid collateral).

Goldman's capital position continues to improve and remains comparatively strong. At mid-year 2012, Fitch Core Capital to risk-weighted assets of 14.7% was significantly above average. In addition, Goldman maintains comfortable capital in a stress scenario.

Regulatory and legal issues appear manageable but costly. Goldman and peers face new capital markets regulations such as the Volcker Rule and implementation of Basel III capital and liquidity standards. Goldman is projected to meet new requirements well within allowable time frames.

RATING DRIVERS & SENSITIVITIES - VR, IDRs & SENIOR DEBT

Goldman's VR continues to be underpinned by a strong risk management track record and leading investment banking franchise. The VR factors in Fitch core capital in line with current levels and the management of capital comfortably above Basel III capital minimums. Downward pressure on the VR would result from a material loss, reduction in capital ratios or significant deterioration in liquidity levels. Likewise, any unforeseen outsized fines, settlements or other charges could also have adverse rating implications. IDRs and Senior Debt ratings are equalized with Goldman's VR, but are further underpinned by the prospect of U.S. government support in the event of need.

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

Goldman's current 'A' Long-term IDR is equalized with its VR, but benefits from support as well. Fitch's '1' Support Rating for Goldman and 'A' Support Rating Floor factor in government support in the event of need. Fitch's rating action continues to embody a view of support in the IDRs of Goldman and other U.S. Global Systemically Important Financial Institutions (G-SIFIs) over the near-to-intermediate term. This viewpoint was broadly discussed in Fitch's special report titled 'U.S. Banks - Sovereign Support: When Does it End' dated Dec. 15, 2011. Fitch could reassess its support ratings for U.S. G-SIFIs if global market conditions normalize and resolution regimes become more harmonized across international jurisdictions.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by Goldman and by various issuing vehicles are all notched down from Goldman's VR in accordance with Fitch's assessment of each instrument's respective nonperformance and relative loss severity risk profiles. Their ratings are primarily sensitive to any change in Goldman's VR.

HOLDING COMPANY RATING DRIVERS AND SENSITIVITIES

Goldman's IDR is equalized with those of its operating companies and banks, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries, as well as the use of the holding company to fund subsidiary operations.

SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES

IDRs of major rated operating subsidiaries are equalized with Goldman's IDR reflecting Fitch's view that these entities are core to Goldman's business strategy and financial profile.

Goldman is a top global bank with four business segments: investment banking, institutional client services, investment management, and investing and lending.

Fitch affirms the following ratings with a Stable Outlook

Goldman Sachs Group, Inc. --Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Viability Rating at 'a'; --Short-term IDR at 'F1'; --Commercial paper at 'F1'; --Support at '1'; --Support Floor at 'A'.

--Market linked securities at 'Aemr';

--Subordinated debt to 'A-';

--Preferred equity at 'BB+'.

Goldman Sachs Bank, USA --Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Long-term deposits at 'A+';

--Short-term IDR at 'F1'; --Short-term debt at 'F1';

--Short-term deposits at 'F1';

--Senior unsecured debt FDIC at 'AAA' and withdrawn;

--Support at '1'. Goldman, Sachs & Co. --Long-term IDR at 'A'; --Short-term IDR at 'F1';

--Long-term senior debt at 'A';

--Short-term debt at 'F1'. Goldman Sachs International

--Senior secured long-term notes at 'A';

--Senior secured short-term notes at 'F1';

--Short-term debt at 'F1'.

Goldman Sachs Bank (Europe) plc

--Senior secured guaranteed debt at 'A';

--Short-term secured guaranteed debt at 'F1';

--Short-term debt at 'F1'.

Goldman Sachs Paris Inc. et Cie.

--Long-term IDR at 'A'; --Short-term IDR at 'F1'. Ultegra Finance Limited

--Long-term senior debt at 'A';

--Short-term debt at 'F1'. Global Sukuk Company Limited

--Long-term senior unsecured at 'A';

--Short-term senior unsecured at 'F1'.

Goldman Sachs Financial Products I Limited

--Long-term senior unsecured at 'A'.

Goldman Sachs Capital I

--Trust preferred at 'BBB-'.

Goldman Sachs Capital II, III

--Preferred equity at 'BB+'.

Murray Street Investment Trust I

--Senior Guaranteed Trust Securities 'A'.

Vesey Street Investment Trust I

--Senior Guaranteed Trust Securities 'A'.

(Caryn Trokie, New York Ratings Unit)

((Caryn.Trokie@thomsonreuters.com; 646-223-6318; Reuters Messaging: rm://caryn.trokie.reuters.com@reuters.net))

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