Moody's lowers Goldman outlook to negative

Moody's Investors Service said it assigned a negative outlook to the long-term ratings of Goldman Sachs Group, Inc. (senior debt at Aa3) and its subsidiaries. All short-term ratings were affirmed at Prime-1.

The negative outlook reflects Moody's expectation of an extended downturn in capital market activity, which will reduce Goldman Sachs' revenue and profit potential in 2009 if not beyond, and the challenges presented by the vulnerabilities to the investment banking business model exposed in the current market environment. Goldman Sachs will also need to adapt the firm's business activities and balance sheet to operate in a bank holding company structure, the agency said, and this could limit profit opportunities.

Goldman Sachs' Aa3 long-term ratings remain anchored on superior performance, proven risk management discipline, the reduction of leverage, a conservative liquidity profile, as well as a level of systemic support that is factored into the rating, Moody's said.

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