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Monday 01st of December 2008
September 18, 2008

Fears for the future of Goldman Sachs and Morgan Stanley


by Kay Murchie
Fears for the future of Goldman Sachs and Morgan Stanley

The remaining two independent investment banks on Wall Street are today surrounded by merger speculation after shares in the two organisations plummeted over recent days.

Despite assurances from Goldman Sachs and Morgan Stanley, investors have still abandoned ship.

Monday saw the collapse of Wall Street giant, Lehman Brothers, which was forced to file for bankruptcy after announcing it had failed to find a solution to its problems after a weekend of rescue talks with Barclays and Bank of America.

On the same day, Bank of America confirmed its intention to acquire Merrill Lynch in a deal worth $50 billion (£28 billion).

Morgan Stanley is being forced into a merger to stay afloat after shares fell 24% last night and is believed to be holding merger discussions with Wachovia, America’s fourth-largest bank.

Goldman Sachs saw 14% wiped off its share value last night and according to analysts, it may have to consider a merger and will be closely monitoring the markets over the next 2 days.

Earlier this week, Goldman Sachs posted a 70% decline in third-quarter earnings. The fall is the largest since the company went public in 1999.

Goldman revealed net income of $845 million (£473 million), down from $2.85 billion compared with the previous year, while net revenue fell to $6.04 billion from $12.3 billion.

In the UK, Lloyds TSB today revealed the terms of its £12.2 billion takeover of HBOS, however, the agreement could result in thousands of job losses.

HBOS owns Bank of Scotland and Halifax, which is the UK’s largest mortgage lender, while Lloyds TSB is the parent company of Cheltenham & Gloucester, the UK’s third biggest lender in terms of outstanding mortgages.

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