Chillin' out till it needs to be funded
The banks are of course back with a bang. The big mortgage players were ahead when they reported on Friday and Citi was good for the coin on Monday. But our most successful Wall street survivor Goldman Sachs, despite the multiple ovations from analysts and the big brouhaha on Corporate governance is missing a beat or two and its not its new budding business segments like reinsurance. Note how quarterly results have lesser line details now. We are still in half a mind to extend this post later after more detailed scouring on the public information sources and a re read of the analyst call but its just not gelling together from where we were with the leader in 2012. They are doing great on revenues if you only compare last year quarter to this one in June and Earnings are thru the roof comparatively to $3.78 Trading Income though is barely up in double digits and I’ll also come to that later, they have no traction in mortgages as their famed FICC business has ended with under $2.5 Bln in topline.
The bank has improved overall revenues to $8.6 Bln in Q2 but that is still a clip below the $10 B in Q1 without conforming revenues from other banks in related business segments
The ROE for the firm is the worst among peers at 10.5%but the liquidity is doing well and obviously tight expense control and attention to detail on changing regulation is showing overall in the excellent profitability maintained with Compensation a standard 43% of the Sales in the first 6 months of the year. The firm is still the largest in equities with nearly $2 ($1.85 Bln) in Equities trading and it has extended its trading prowess in currencies, Credit and commodities with clients Despite the brouhaha about BSC, it seems to be a systems overhaul for the firm, a technology only response to risk and ethics issues while it has retreated into its shell on mortgage securities apparently as more big banks keep their mortgage business inhouse and purchase MBS portfolios to upgrade their efficient use of capital and deliver better ROE
We being one of their ardent supporters seeing the detail and painstaking effort ut int h firm’s quality o recruitment, are probably the most devastated by the turn in what we see is the firm’s effective long term plans in terms of strategy as it is not expected to slow walk its recovery and its model code for transparency should have continued to show details of its strengths and blockages to effect this analysis as it always had from 2008-12
Investment Banking remains th star performer for the firm and the bank should continue to deliver on its leadership role even as it gets more depth in its non US businesses across currencies and credit as well as across non pE trading and Investment Banking Businesses in International markets