Goldman Sachs Had $2.3 Billion Funded Credit Exposure to Italy on Sept. 30

Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, had $2.32 billion of “funded” credit exposure to Italy’s government, financial institutions and companies as of Sept. 30.

Hedges that offset those risks result in a net funded exposure of $700 million, the New York-based company said in a quarterly filing with the Securities and Exchange Commission today. “Substantially all” of the hedges are purchased from investment-grade counterparties based outside of Greece, Ireland, Italy, Portugal and Spain, Goldman Sachs said.

Italian stocks and bonds fell today on concern Prime Minister Silvio Berlusconi’s offer to resign won’t be enough to contain the turmoil in a nation with the euro-region’s second- biggest debt. Concern that Europe’s debt crisis would spark bank losses contributed to a 19 percent tumble in the 843-company Bloomberg World Financial Index this year.

Goldman Sachs said Italy accounted for more than half of the $4.16 billion of gross funded exposure the firm had to the five European countries on Sept. 30, and less than half of the $2.46 billion in net funded exposure to those nations, according to the filing. The company also has $750 million of unfunded lending commitments to borrowers in the five countries, the filing shows.

Morgan Stanley (MS)

Morgan Stanley’s net funded exposure tied to Italy was $1.79 billion at the end of September, accounting for most of the $2.11 billion total from the five countries, the New York- based firm said in a presentation last month. The nations represented $5.69 billion in exposure before hedges, with risks linked to Italy of $4.58 billion.

Citigroup Inc. (C)’s “net current funded exposure” tied to the five countries was $7.2 billion at the end of September, more than three times the exposure to Belgium and France, the New York-based bank said last week in a filing. Total cross-border claims linked to Italy were $14.5 billion. The company said the risk of loss associated with the exposure “is likely materially lower” than the amount disclosed.

JPMorgan Chase & Co. (JPM)’s exposure to Italy from trading, lending and securities available for sale was $11.3 billion as of Sept. 30, the New York-based company said last week in a filing. Net exposure including hedging and collateral was $5.5 billion.

JPMorgan Chase

Net exposure to Italy’s sovereign debt was $2.4 billion at the end of the third quarter, more than half the $4.5 billion of net sovereign exposure it had to the five countries. JPMorgan’s credit-default swaps on the debt were bought from counterparties based outside those countries and are either investment grade or are “well-supported by collateral arrangements,” JPMorgan said.

Bank of America Corp. (BAC)’s non-U.S. exposure linked to Italy was $6.54 billion at the end of September, almost 45 percent of the total linked to the five European countries, the Charlotte, North Carolina-based lender said Nov. 3.

Of that total, $1.5 billion is in sovereign risk, most of which is hedged by credit-default protection, the bank said.

Morgan Stanley fell 6.6 percent in New York trading at 10:39 a.m., the biggest decline among the largest U.S. banks. The drop was 5.5 percent at Citigroup, 5.3 percent at Goldman Sachs, and 4.5 percent at JPMorgan. Bank of America lost 3.3 percent.

To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net; Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.