Goldman views a second rights issue
GOLDMAN SACHS is considering its second multi-billion dollar rights issue in the space of nine months to help it repay more than $10billion (£6.8billion) of bailout money it has received from US authorities.
The repayment would free the bank from Government restrictions on pay and hiring, fuelling fears that the bonus culture, which helped cause the credit crunch, will make an unwelcome return to Wall Street.
The rights issue, which could be unveiled as early as Tuesday alongside first-quarter results, comes as the US Federal Reserve is this weekend in the final stage of a stress test of the balance sheets of Goldman and 18 other banks. It is understood that Washington will demand that the banks raise more money to boost their capital buffers.
Before it can proceed with the issue, however, Goldman Sachs needs to secure US government permission to repay the bailout funds it received under a programme called TARP; that permission hinges on the result of the stress test. It also needs the green light from its shareholders to repay this money.
This week will also see first-quarter results from JP Morgan and Citigroup, which is 36 per cent owned by the US taxpayer. Citigroup is in the sights of the Obama administration as it is unhappy with the pace of the firm’s efforts to split itself into “good” and “bad” banks.
“Citigroup will be forced to separate more aggressively than it has done already,” one source said.
As part of its attempts to clean up the financial system the US government is also pressing ahead with the break up of insurance giant AIG. It plans to float AIG’s Asian business AIA on the Hong Kong stock exchange.
LLOYDS Banking Group will this week kick off the process that will result in the loss of 25,000 jobs when it is expected to reveal that hundreds of jobs are to go from its funds division.
Taxpayer-owned Lloyds has two fund management firms, Scottish Widows Investment Partnership (SWIP) and Insight, which employ 1000 people between them in the UK.
It is understood that Lloyds will make an internal announcement about its plans to integrate the two on Wednesday, which is likely to result in the loss of hundreds of jobs. The bulk of the job losses are expected to come from SWIP, which is based in Edinburgh.
Lloyds currently employs 140,000 people across its various divisions.