Goldman Sachs Group Inc. (GS) sold $2.75
billion of bonds after reporting second-quarter earnings that
lagged behind analysts’ estimates.

The bank issued 5.25 percent, 10-year notes that yield 230
basis points more than similar-maturity Treasuries, according to
data compiled by Bloomberg. The offering, which was increased by
$250 million, follows Morgan Stanley (MS)’s $2 billion sale yesterday
that included $1.5 billion of 5.5 percent, 10-year notes that
were priced at a 250 basis-point spread.

Goldman Sachs, the fifth-largest bank in the US by
assets, said on July 19 its net income in the quarter was $1.09
billion, or $1.85 per share, short of the $2.30 per-share
average estimate of 23 analysts surveyed by Bloomberg. Bond
investors shouldn’t be fazed by the disappointing quarter, said
Marilyn Cohen, who oversees $320 million as chief executive
officer of Envision Capital Management in Los Angeles.

“They’re still Goldman and they still have an uncanny way
of making money,” said Cohen, who bought some of the bank’s
bonds after the earnings report. “Even though they are reviled
by the media and by most people on Main Street, the
institutional investor knows that Goldman has the ability to
crank it out every year.”

Michael DuVally, a spokesman for New York-based Goldman
Sachs, declined to comment.

The sale was the bank’s first US debt offering of at
least $500 million since April.

Bonds Fall

The bank’s $3.85 billion of 3.625 percent notes due
February 2016 fell to 100.3 cents on the dollar on July 20 after
the earnings announcement, from 101.2 cents at the beginning of
the week, according to Trace, the bond-price reporting system of
the Financial Industry Regulatory Authority. The securities rose
to 100.5 cents at 10 am today in New York.

Goldman Sachs is joining banks raising money in the US
bond market even as relative yields on their debt climb. Banks
issued at least $24.9 billion of debt this month through
yesterday, almost triple the $8.95 billion of sales in the same
period in June, Bloomberg data show.

Average spreads on bank bonds have increased 10 basis
points to 213 basis points, or 2.13 percentage points, since
June 30, according to Bank of America Merrill Lynch index data.
The average yield has dropped to 3.78 percent from 3.83 percent
during the same period.

Goldman Sachs last issued 10-year notes in a size of at
least $500 million in July 2010, selling $750 million of
securities with a 5.2 percent yield, Bloomberg data show. The
bank issued $1.35 billion of five-year notes on April 28 in an
add-on to an existing offering.

To contact the reporter on this story:
Zeke Faux in New York at
zfaux@bloomberg.net

To contact the editor responsible for this story:
Alan Goldstein at
agoldstein5@bloomberg.net

Siam Commercial Bank is putting more focus on the mass market for mortgage loans to maintain its market leadership amid greater competition, yet it needs to be stricter about screening clients repayment ability, says executive vice-president Pikun Srimahunt.

She said the bank only entered the mass-market segment late last year for housing priced as low as 500,000 baht, with minimum homebuyer income of 7,000 baht per month.

SCB projects new housing lending of 73-75 billion baht throughout this year with the low-income segment increasing to 20% of the total by year-end. Currently the segment represents 10% of the banks new lending at 43 billion baht for the first six months of the year.

The bank is the countrys fourth-largest by total assets and is the top commercial bank for housing loans representing 30% of the 310-billion housing loan market. It traditionally has focused on middle-income clients with an average house price of 3 million baht.

Ms Pikun noted that state-owned banks were becoming more competitive under the governments special loan programme, lowering SCBs narrowing margin to under 1%.

Despite entering the low-income market, SCB wants to maintain its criteria for loan approval to keep non-performing debts at or below their existing level of 2.2% by year-end.

A customer should have a debt burden no more than 50% of total income per month, she explained.

Also, the bank should expand loan maturity to 30 years for this new segment, as 25 years was previously the longest maturity for loans, she said.

SCB will continue to offer no interest for the first year of mortgages even as interest rates rise. For some special loan programmes in participation with property developers, the bank can provide zero-rate mortgages for three years, she said.

The Government Housing Bank (GH Bank) can offer a zero-rate for five years under a state-backed programme. GH Bank is a major competitor for SCB, especially in the low-income market.

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