Wall Street's pain continues as Goldman's profit falls 70% only, average, investment, net, earlier

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Goldman Sachs Group Inc. was hit hard in the third quarter as the storied firm's net income plummeted 70% to $845 million from $2.85 billion a year earlier. The bank's $1.81 per share earning still topped analyst's average estimate of $1.71 a share, but investors dumped the stock, which was down over 14% early Tuesday to a 52-week low of $116.
Morgan Stanley and Goldman are the only two remaining large independent investment banks left on Wall Street after Lehman Brothers Holdings Inc. failed and Merrill Lynch & Co. was bought by Bank of America Corp. Monday. Market watchers have now started to speculate that the model of an independent investment bank may not be able to survive the current crisis. The Deal's Vipal Monga wrote Monday:


Some industry watchers argue that [Goldman and Morgan Stanley] will have no choice but to acquire their own depository institutions in the coming months to keep pace with the rapidly evolving financial services landscape.

"There's no business model left for these guys," said one capital markets banker on Sunday, Sept. 14, in reference to the broker-dealers. He noted three of the five largest independent securities firms, including Bear Stearns Cos., disappeared in the past six months, chiefly because they were not large enough to withstand hits from mark-to-market losses on their securities portfolios.  

Depository institutions give banks access to more capital and stable funding allowing them to better get through rough times when credit is tight. - George White