The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Bank Earnings Season 2Q 2014: Goldman Sachs , No Blankfein on call? Harvey makes another pitch for Tech review

We missed the date of course. We were kinda busy. It  is just one man and so I should correct my English but i guess with the urge to write, I cannot really afford to be remiss. I apologise. But I do not apologise for Goldman Sachs. They are not sorry. They agreed long back in 2010 it is a bad time for trading and Harvey as CFO has been holding the fort since, informing investors on the great improvements in compliance mechanisms and technology and cost control since. Things are bad. That means at Goldman Sachs $9 Bln in quarterly revenues. We have been remiss about that, but that does not change their business situation or their Legal and HR sway over things like attention to the media and the global citizen at large. It actually enforced a great weekends off work rule earliest in the Industry. To us they remain no. 1

Earnings (we always consider the diluted numbers) were up to $4.1 per share, in itself a crowning achievement for a #1 franchise which has beaten JP Morgan hands down in Investment Bank advisory also now continuously even without their PE and alpha opportunity Principals

The firm, unhindered by a smelly mortgage revue, comes to the party as always with a Tier I Capital of 11% almost on par with the US Bancorp we start covering from this quarter. US Bancorp is one-fourth the size but they can actually lend an almost unlimited first purchase portfolio to homeowners without active day-to-day Tier I Capital management or any other Basel 3 parameters. It helps them. A JP Morgan because of its size as is Goldman Sachs are equally interested in First Purchase mortgages and Market purchases of Mortgage portfolios. To a limited extent even US Bank does that. As banks settle into the new Mortgage Banking mode, Goldman Sachs can probably find the right strategy to make the book with Bond yields trading up , their biggest challenge out the door and probably done in another 18 months. They probably will have market power with this Capital to swing a few big secondary deals in Mortgages and a few new listed Derivatives they want to share with the market. Trading income is unlikely back till the Bond yield trade ups complete sometime next year with the high yield markets saturated and Goldman Sachs as provider will be in demand as underwriting loses charm except for business from cash rich biggies of the Bank world. We introduce mid sized US banks a couple of years back

Going out of the media glare takes courage and the process is almost complete. FICC revenues and Equities as at JP Morgan slid down by just 10% and 13%

Secured Client Financing was dropped in many cases, as a segment it reduced assets by a further $56 Bln to $860 Bln

Meanwhile 144A markets are helping JP Morgan keep revenues healthy with GS unlikely to be stuck in the mud for it

With trading profits dwindling, more dealers than ever are fighting for assignments managing U.S. corporate-bond sales, one of the few bright spots in fixed income. Companies from the most-creditworthy to the most-indebted have been selling trillions of dollars of debt, locking in record-low borrowing costs ahead of the anticipated rise in interest rates.


This entry was posted on July 16, 2014 by in Uncategorized.


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