Banks
S&P Lowers Outlook on Lehman, Goldman
TSC Staff
03/21/08 - 10:06 PM EDT
In another sign of flagging confidence in the financial sector, Standard & Poor's Friday lowered its outlook on Goldman Sachs(GS) and Lehman Brothers(LEH) to negative from stable.
The change doesn't affect the debt ratings S&P has assigned to the two investment banks, but it does mean S&P could cut those ratings over the next two years if the companies' financial performance weakens even more than S&P is expecting.
The ratings agency currently expects net revenue at the banks to fall 20% to 30% annually.
The financial sector is suffering in the wake of the subprime meltdown and related credit crisis. Last week, the collapse of Bear Stearns'(BSC) stock price after a run on the bank illustrated just how dicey things are for big brokers. In a deal sanctioned by the Federal Reserve, JPMorgan Chase(JPM) agreed to rescue Bear Stearns by purchasing it, but at the bargain-basement price of $2 a share.
Market participants have wondered whether Bear Stearns' fate would befall another financial firm, although recent actions by the Fed -- including more interest rate cuts and the opening of the Fed's discount window to Wall Street securities firms -- have restored confidence in the markets somewhat.
Shares of Goldman Sachs finished Thursday up $13.14 at $179.63. Shares of Lehman Brothers ended the session up $6.42 at $48.65. U.S. stock markets were closed Friday in observance of Good Friday.