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PR problems at Goldman Sachs don't keep away clients

April 6, 2010 | 12:26 pm

As Goldman Sachs’ public relations problems have reached epic levels, everyone, including the company, has been waiting for the bad image to scare off clients.

Well, the wait will continue. New rankings from the first quarter of 2010 suggest that at the same time that Goldman’s PR problems hit a peak, it also had more success than any other bank in attracting clients.

The rankings from the data firm Dealogic show that Goldman was the most popular bank for advising clients involved in mergers and acquisitions -- up from No. 3 last year. Goldman came in second in the rankings of banks involved in capital markets, which includes underwriting stocks and organizing initial public offerings. That was an improvement from a ranking of eighth last year.

Dick Bove, a banking analyst at Rochdale Securities, said that the results show that despite all the gnashing of teeth, companies in need of a banking relationship are unlikely to put issues of public image above the bottom line – and while Goldman might not be PR savvy, it does know banking.

Bankers “Nobody is going to stop doing business with Goldman Sachs,” Bove said. “They’re just not going to do it --  because Goldman is just better than everybody else. And that’s the bottom line.”

A spokesman for Goldman did not respond to a request for comment on the rankings.

The new rankings come just as the latest sign of Goldman’s public relations problems emerged. A new survey from Harris Interactive  indicates that Goldman has one of the worst reputations with the wider public of any big company in the United States. Among the 60 companies tested, Goldman was ranked ahead of only four companies -- all of which nearly failed in the financial crisis, including AIG and Citibank.

Goldman came through the crisis with flying colors financially. It earned record profits in the fourth quarter of 2009 and has retained its reputation as the most elite of the white-shoe investment firms on Wall Street. But at the beginning of the year, Goldman appeared to be contending with its public image problems after endless reams of newspaper articles spotlighted its role in various controversial deals during the financial crisis and a Rolling Stone columnist called the company “a great vampire squid wrapped around the face of humanity.”

In its annual report to the Securities and Exchange Commission in March the firm listed bad publicity as a business risk for the first time. The firm wrote that negative press could “have a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations.” . . .

While there has been little sign of the adverse effects, much was made of the Treasury Department’s decision a few weeks ago to use Morgan Stanley -- one of Goldman’s top competitors -- to sell the government’s stock in Citigroup.

The Dealogic tables, though, suggest that a broad array of clients have continued to seek out Goldman. It was involved in six of the 10 largest mergers and acquisitions of the first quarter of 2010 -- including the largest one, the sale of one of AIG’s largest insurance businesses. Goldman was involved in 61 deals all together and won 10% of the revenue in the sector. Morgan Stanley came in fourth, after Credit Suisse and Citigroup.

JPMorgan Chase & Co., which has come through the crisis with its generally good reputation intact, fell from first to fifth in the mergers and acquisitions rankings.

JPMorgan retained its top spot in the capital market rankings, which has been the more lucrative side of investment banking. Goldman’s ascent in the capital market rankings came from its even success in Asia, Europe and the United States.

Dealogic Global Mergers and Acquisitions Rankings (1st quarter 2010)

1. Goldman Sachs

2. Credit Suisse

3. Citigroup

4. Morgan Stanley

5. JPMorgan Chase

6. Lazard

7. Deutsche Bank

8. UBS

9. Barclays Capital

10. Blackstone

--Nathaniel Popper

Photo: Goldman Chairman Lloyd Blankfein and JPMorgan Chairman Jamie Dimon testifying before the Financial Crisis Inquiry Commission in January. Credit: Brendan Hoffman / Bloomberg News