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Bank results season: A 53% drop in Fixed Income revenue a 33% drop in Profits for Goldman Sachs

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The street comes close to celebrating BofA beating expectations with the hefty $9bln loss sounded less than a $1 for all its sins and signaling a turning point for all Mortgage banks out there.

Overall expenses were down 23% for Goldman Sachs making the lower $7.28 bln eke out profits of $1.09 bln with comp and non comp expenses down

Goldman Sachs pointed to its open buyback program which can even go beyond the revenues of the next quarter if the stock suffers any deeper response to analyst question (post JPM/Meredith Whitney)

On the other hand, Goldman Sachs $7.28 bln in revenue were not a patch on its record with a $1.09 bln profit (MKTWATCH) falling from $1.64 bln in the year ago quarter (before SEC settlements of $550 mln but after the UK payroll tax of $600 mln in 2010 in Q2) The M&A desk counts Sealed Air and Skype (Microsoft) in its completed deals for the quarter’s #1 position

The EPS of $1.85 beat estimates downward with the suspected 40% drop in Fixed Income revenue ballooning to 53% and Investment Banking Income jumping 54% higher . The street’s revenue estimate was also beaten down but remained a $8 bln before results were announced an hour back. The Bank is focussing on cutting out excess in its Trading department and has limited its Trading ahead of the ban on Prop Trading instead of deploying PR and Marketing strategies to win back its politics with the White House/Congress

The Investment Banking revenue jumped to $1.45 bln on a Financial Advisory component of $640 mln including its completed M&As for the quarter for which ist is no. 1 in the Deal book rankings. The firm is also a leader in Equities in the quarter

Institutional Client Services, its Client Trading Division dropped 47% from Q1 on the topline to end at a miserable $3.52 bln of which a largish $1.90 bln came from Equities Trading leaving FICC with $1.6 bln Trustee services (Securities Services) revenues also increased for the bank

Asset Management / Investment Management revenues were unchanged at $1.27 bln

The Compensation ratio for the bank for the 6 months of 2011 is down to 44%. Non compensation expenses were also lower from Q1 by 6% Other revenues seem to have stood in comparison with Q1 numbers and risen marginally over June 2010

The Ocwen sale of $260 mln does not materially impact second quarter earnings but will now provide the bank access to 3 Mort servicing offices from Ocwen and taking care of the remaining run offs

It also spent $1.5 bln on buybacks amounting to 10 bln shares outstanding/ Its press conference starts in a n hour Total Assets stayed under a trillion at $937 bln and Core Liquidity at $166 bln A 35 cent common dividend is due on September 29, 2011

Goldman Sachs has a common shareholders equity of 69 bln ( from press release) on 569 mln shares outstanding keeping its shares currently below its book value of $131 per share but unlikely for long. Goldman Sachs pointed to its open buyback program which can even go beyond the revenues of the next quarter if the stock suffers any deeper response to analyst question

Fixed income spreads improving in the first few days of Q3 but it is too early to say.

Lincoln on U.S. one cent

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This entry was posted on July 19, 2011 by in Amitonomics, Banking, US and tagged , , , , , , , , .


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