S&P reviews credit ratings for Goldman Sachs and Lehman Brothers

by Gill Montia

Story link: S&P reviews credit ratings for Goldman Sachs and Lehman Brothers

Standard & Poor’s (S&P) is considering downgrading its ratings on Goldman Sachs and Lehman Brothers.

The credit rating agency is concerned that volatile markets will reduce profit at both investment banks this year.

S&P is predicting that in 2008, the banks could post profit that is between 20% and 30% lower than in 2007. It has already revised its ratings outlook for each bank to negative.

The agency reported: “We believe that negative rating outlooks are broadly appropriate for the independent securities firms, reflecting the potential for a more substantial decline in profitability from capital markets activities.”

The news came as Goldman Sachs announced plans to reduce staff numbers in its underperforming divisions by up to 15%. Job cuts relating to poor performance are more usually at around 5% per annum.

However, the bank will continue to recruit during 2008 and expects total staff number to rise by around 5% this year.