Reply #12: Goldman Sachs Shares Morgan Stanley’s Pain as Prospects Darken

[ozymandius]

Dec. 15 (Bloomberg) -- Goldman Sachs Group Inc. and Morgan Stanley may find that cutting more than 11,500 jobs, eliminating executive bonuses and reining in risk won’t help shareholders enough as the companies face another year of slumping revenue.

The Wall Street that the two New York-based firms dominated for decades vanished in September, when Lehman Brothers Holdings Inc. went bankrupt and Merrill Lynch & Co. sold itself to Bank of America Corp. Goldman Sachs and Morgan Stanley became banks and took $10 billion each from the U.S. government. Reversing their revenue slide next year will be difficult as the worst financial crisis since the Great Depression limits demand for investment banking services.

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After plunging an estimated 43 percent in 2008, Goldman Sachs’s revenue from its core capital markets activities, including underwriting and merger advice, will drop another 8 percent in 2009, Michael Mayo, an analyst at Deutsche Bank AG in New York, wrote in a Dec. 9 report. Brad Hintz, an analyst at Sanford C. Bernstein & Co., expects the volume of announced mergers and acquisitions to drop 25 percent next year and a further 15 percent in 2010.

The fourth quarter has capped a disastrous year, in which Goldman Sachs and Morgan Stanley lost more than two-thirds of their market value. In the first nine months of the fiscal year, revenue at Goldman Sachs fell 32 percent from a year earlier and net income tumbled 47 percent to $4.44 billion. Morgan Stanley’s revenue dropped 20 percent in the same period, and earnings fell 41 percent to $3.96 billion.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a5K1c5FB7GRE&refer=home