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Goldman's news is good and bad

June 18, 2008|Walter Hamilton

Goldman Sachs Group Inc. gave to the market with one hand Tuesday -- and took away with the other.

The investment banking titan comforted investors early on by reporting much-better-than-expected fiscal second-quarter earnings. That helped ease concerns about the financial sector that were aggravated last week by Lehman Bros. Holdings Inc.'s warning of a huge loss.

But later in the day a team of Goldman analysts helped spark another sell-off in financial shares with a prediction that commercial banks might have to raise $65 billion more in capital this year to rebuild their balance sheets amid the ongoing stream of credit-related write-downs.

Goldman held out little hope for a snapback in the stocks soon. "We believe that a broad-based rally in bank shares is unlikely in coming months," analyst Richard Ramsden wrote.

Meanwhile, if there's to be a survivor in the financial sector overall after this mess, Goldman is a likely candidate. The company's profit in the quarter ended May 30 was down 11% from a year earlier but still handily beat analysts' estimates -- a tribute to the breadth of its businesses.

-- Walter Hamilton

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