Goldman, which has largely thrived amid the turmoil elsewhere on Wall Street, is expected to report a fall in first-quarter earnings of about 50 per cent. The writedown will underline how the financial turbulence is now affecting even the most stellar performers.
The bank's $3bn writedown will be based partly on the declining value of its 4.9 per cent stake in Industrial & Commercial Bank of China (ICBC), which is held separately on Goldman's balance sheet. The share price of ICBC, which conducted the world's biggest ever initial public offering in 2006, has fallen by about 14 per cent in recent months.
Goldman invested $2.3bn for its minority shareholding in ICBC, which is listed on the Hong Kong and Shanghai stock exchanges.
Goldman will also take a hit of about $1.6bn in its leveraged loans business, which has seen a marked decline in recent months amid a dearth in demand for trading bank debt. A further $1.1bn will be written down in connection with assets owned by Goldman's principal investment area, the bank's private equity arm.
Despite the multi-billion dollar hit, Goldman will point to the fact that its exposure to the deteriorating mortgage market remains minimal, according to people close to the bank.
"These are not the kind of toxic assets which have hurt banks like UBS, Merrill Lynch and Citigroup so badly," said one analyst last night.