Tuesday, 14 April 2009

Goldman Sachs announces $5bn fundraising

Goldman Sachs has announced plans to raise $5 billion through the issue of new shares.

The Wall Street bank will use the funds to pay back a loan to the US Treasury and is optimistic about interest from investors, having also reported pre-tax profit of $2.6 billion for the first quarter of 2009.The result is above market expectations and up almost 24% on the same period of 2008.It follows a loss of $2.12 billion for the final quarter of 2008, the first loss since the bank’s flotation in 1999.Goldman’s participation in the US Troubled Asset Relief Programme (Tarp) has left it with government debts of $10 billion in total.

Plans to repay the loan have been greeted enthusiastically by analysts and investors although US authorities will dictate the speed at which this can be achieved, applying a “stress test” to ensure capital strength is maintained.Shedding the debt will allow the bank greater freedom regarding its remuneration policy as membership of Tarp comes with imposed limits on executive pay.

Commentators suggest that if Goldman Sachs is successful in paying off its loan, other US banks will be under pressure to follow suit.

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