March 1, 2013 2:55 pm

Goldman cuts legal loss estimate by $100m

Goldman Sachs has cut its estimate of potential losses from lawsuits and other legal matters, in a fresh sign that it is slowly recovering from the series of scandals that has dogged it in the years following the financial crisis.

The investment bank’s estimate of “reasonably possible” aggregate losses from legal disputes has fallen by $100m to $3.5bn, according to a regulatory filing on Friday.

The bank did not disclose the reason for the decrease in its estimate.

Goldman scored a number of legal victories last year, including the termination of a high-profile investigation by the US Department of Justice and the dismissal of a lawsuit filed by shareholders against the bank’s top executives.

Despite the lower estimate, the bank is still embroiled in at least 20 legal disputes, ranging from a lawsuit filed by former employees accusing it of gender-based discrimination, to another related to the bank’s infamous Abacus deal.

It is also involved in US regulators’ investigation of insider trading ahead of Berkshire Hathaway’s $23bn acquisition of ketchup maker Heinz. Goldman has said it is co-operating with the investigation by the Securities and Exchange Commission.

Analysts have questioned whether the bank is shying away from risk-taking and quietly tweaking its business model in the aftermath of the crisis and ahead of new regulation that crimps its ability to make money. Goldman reported profits of $2.8bn for 2012 – its highest earnings in three years.

Value-at-risk – an estimate of the amount of money the bank could lose from trading in a given day – slumped for a third year to $86m in 2012. That is the lowest in seven years and less than half the $218.5m it reported back in 2009.

With the apparently lower risk appetite, Goldman lost money on 16 days last year – down from 54 days in 2011, when worries over the eurozone were roiling international markets. The bank did not exceed its value-at-risk estimate at all last year, compared with one day in 2011 and 2010 and 13 days in 2008.

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