The Banking and Strategy Initiative

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Bank Earnings Season 2Q2015: And then there was Goldman Sachs!

Well, the rhyme, if only because they never made that move into banking a ground reality though you could get a Goldman Sachs CD in the meantime while they do!

Just like the founder Marcus Goldman was available to every trader on the street, going around with funds in his hat and doling them out in exchange for bills that went into his .. hat!

Good job, Harvey! Now on to business from the quarter’s report of Friday ( you notice for all practical purposes Goldman Sachs remains the no. 1 firm on Wall Street and follows Jamie Dimon on main street, who after earnings bonanzas has signed another small $388 mln to RMBS holders of more than $10 Billion( Lehman bros coinage worth 62 cents when allegedly palmed off to investors). A feat Goldman Sachs in fact does not want to emulate, going out in a blaze of righteous glory as the First Citizen of Wall Street in 2010.

If not for new settlements expected provisioning of $1.45 Billion, GS would have reported another $4.75 in earnings this quarter. As it happens they managed a near $2($1.98) a share in June 2015, the first half RoE as a result ducking under 10%

Investment Banking revenue was ahead of JP Morgan for the quarter by a good 15% and more ata round $2 Billion compared to $1.7 Billion for the Dimon wolfpack. The firm continues to be no.1 in announced and completed M&A. It is also the no. 1 in Global equities and IPOs but challenged in both Asia and the USA

Revenues were thus back to $9.1 Billion dollars, the first half revenues up to $19.1 Bln dollars after a good 2 years, with Net revenues of nearly $4 Billion including this quarter’s amazing $1.65 Bln another stream ahead of Jamie Dimon’s JP Morgan by more than 50% every quarter and that of every other pretender on the street.

Tier I Common ratio was higher than the celebrated Citi numbers at 11.8% with Tangible Book Value for the firm keeping pace at the $160 levels Institutional Client Services ( Non prop trading was down 34% again despite the bump in rate products (interest rates) as credit products fell into a bottomless pit (Leveraged finance revenues were lacklustre in the IB business as well as FI underwriting) . Equities revenues in Trading jumped up 24% for the firm on par with the jump at JP Morgan and the rest of the discussion follows after the call.

The provisions hide the leap in profitability in the now stable reformed operations with 450 bp at the pre tax level and 27% in Net Earnings/ higher because of buybacks in RoE and 31% increase in EPS for the half year before provisions.

The IB pipe remains down from Q1. The deals proved this quarter include BHP Billiton, Imperial Tobacco and another big pharma merger (Synageva/Alexion). New Announcements though include the $71 Billion BG deal for Royal Dutch Shell, Alterra for Intel and $3.5 bln stake sales in Sun Pharma (Dai Ichi) and AIG’s stake in AerCap. Goldman Sachs is also leading a $10 bln offering by Qualcomm

8% more people added year on year in the Asset management buisiness ( expanding ) and mostly esp in Salt Lake and Bangalore because of new regulatory requirements and the bank is comfortably placed on the comp ratio stable at 42% and the new CCAR requirements (additional 100 basis points G-SIB requirements)


This entry was posted on July 19, 2015 by in Uncategorized.


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