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Monday, 26 November 2012

Goldman Sachs Group Inc., the No. 1 stock underwriter in Europe, turned down roles in offerings by banks in Spain and Italy this year, the only top U.S. securities firm not to take part in the fundraisings by southern European lenders as the region’s debt crisis stretches to a fourth year.

The firm declined a role in Banco Popular Espanol SA’s 2.5 billion-euro ($3.2 billion) rights offering this month because it wanted greater protection to avoid potential losses on the sale, two people familiar with the talks said. JPMorgan Chase & Co. (JPM) and Morgan Stanley are helping to guarantee the deal. Goldman also didn’t underwrite this year’s share sales by Italy’s UniCredit SpA and Portugal’s Banco Espirito Santo SA (BES), which drew Bank of America Corp. and Citigroup Inc.

Goldman Sachs, which got 55 percent of its revenue this year from sales and trading, is passing on underwriting fees that could be at risk should the stock drop, as happened with insurer Fondiaria-SAI SpA this year. Goldman Sachs President and Chief Operating Officer Gary D. Cohn said a month ago that he sees only a “small” probability that the euro area will stick together, while the firm’s equity strategists are warning investors to be wary of companies that rely on southern Europe.

“Goldman can choose to be selective and make strategic choices about which deals they want to be in,” said Christopher Wheeler, a bank analyst at Mediobanca SpA in London and former equity capital markets banker. Its market position will allow the firm to return to those clients if it chooses, he said.

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