Morgan Stanley sees 4Q loss at Goldman Sachs

Shares dropped $6.71, or 7.7 percent, to close at $80.72, after falling as low as $79.41 earlier in the session. The stock traded as high as $240.05 a year ago.

In a note to clients released Wednesday, Pinschmidt chopped his estimate for the bank's fiscal fourth quarter, which ends Nov. 30, to a loss of $1.09 per share from a profit of $3.21 per share.

Analysts polled by Thomson Reuters, on average, expect earnings of $1.62 per share.

Pinschmidt said the chief reason for his lowered estimate is a projected $2.6 billion loss in the firm's investment portfolio, due to steep declines in the stock market so far this quarter. He also increased his estimate for asset write-downs to $1.5 billion from $800 million.

A spokesman for Goldman Sachs declined to comment on the report.

Earlier this week, Merrill Lynch analyst Guy Moszkowski also predicted that Goldman would report a loss for the fourth quarter.

During its fiscal third quarter, which ended Aug. 31, Goldman's profit fell 71 percent, but that performance was still better than many of its competitors, which have reported quarterly losses throughout much of the year.

Still, September was considered one of the worst months during the credit crisis as banks essentially stopped lending money to each other for fear loans would not be repaid. Problems intensified when Lehman Brothers Holdings Inc. filed for bankruptcy and the government loaned insurer American International Group Inc. $85 billion to help it stay afloat.

Goldman and fellow independent investment bank Morgan Stanley have since received approval to become bank holding companies, which will allow them to grow a large deposit base to help fund operations.