The Banking and Strategy Initiative

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Bank Results Season: Goldman Sachs, The emperor leaves profit town..

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Goldman Sachs released Q3 2011 results staggering expectations of its first loss since the crisis began. It reports a $0.84 cents loss in EPS this morning, a full $3.82 per share reduction from its heady $2.98 per share profit in Q3 2010 and a $2.69 reduction from its $1.85 EPS reported in June 2011

Its June 2011 profit of $1 bln turned to a $393 mln loss as the bank hung on to leadership in the DEal tables in M&A and Equity Underwriting in the worst ever trading quarter in the histroy of the US Markets. Since he crisis began and Lehman went down in 2008 September, this is the first quarterly loss reported by the bank, indisuptably regarded as the #1 on Wall Street and targeted by the SEC and the Congress hungry for blaming the big banks for the over spending crisis now engulfing the US for another decade or so. As Goldman Sachs CEO Llloyd Blankfein puts it:


Investment Banking revenues plunged to $781 mln a 46% drop from June, of which $523 mln came from Advisory business and only $90 mln and $168 mln from Equities and Fixed Income underwriting as the IPO markets remained dry

Client Services improved 16% to $4.06 bln even as trading in Commodities and Interest Rate products increased , keeping the FICC revenues limited to $1.7 bln

Investment Losses

The Bank reported investment losses of $2.4 bln from its sales of ICBC equity and debt

Controlling Employee Costs

The banks total revenues were halved at $3.581 bln from $7.278 bln in June 2011. Expenses were also down 24% from June to $4.32 bln

Total staff levels decreased 4% from the year ago period. Total Compensation Expenses were restricted to 44% for the year, the quarter’s $1.59 bln half of the $3.2 bln accrued in June 2011

FICC revenues are down 37% to $7.7 bln for the nine months this year compared to $12.5 bln in the first nine months of 2010. Total revenues for nine months added to $22.7 bln of which $4 bln was Net Interest Income a much lower component than other banks. Goldman Sachs may consider exiting its bank licence if regulatory costs mount for it in the new regime. Excluding Series G dividend of $1.64 bln, its prfits YTD exceed $3 bln

The loss in the investing and lending business is one time booking and the $50 bln portfolio in investing and lending is likely to yield much more than 10% in the longer term ( David Viniar, in response to Deutsche Bank analyst question)


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