The Banking and Strategy Initiative

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2015 Bank Earnings Season: Goldman Sachs survives a $1.5 Bln cut in profit


The year was obviously made stupendous by the firm’s sterling domination of the M&A advisory business worldwide. The firm entered as advisor for more than $1 Trillion of M&A.  Add to that $3 Billion, the firm’s continuing efforts to deliver a diversified banking business and you have the success of a firm rewritten from back to front in the 8 crisis years that were basically following the Goldman IPO in 2006. Ian Harvey stays glued to restructuring and creating the technology and back room meme for the never process light firm even as they exit attempts at Insurance early in 2015.

However, the recovery is incomplete after the fines at the beginning and the end for the firm. That is because the FICC business is not coming back in a hurry. Meanwhile the firm maintains a slow and steady decrease in Compensation ratios and keeps its business model intact without ill references to the clients and with enforced weekends for its young overworked principals.

2015 results , continue to reflect the last three quarters’ outperformance by Goldman Sachs again, while focus shifts to verifying if indeed the firm’s traders stripped of alpha desks and OTC instruments can still be relied on to deal with fact and respect for the law, and probably with onerous responsibility for HR at the firm without Legal standing talll over the HR teams. Their on site and offshore investments in Back office and technology are not the primary concern for the firm’s future and I believe Harvey Schwartz should come out of that stupor and move forward with those ROA rich strategies in which the firm outshines anyone else on Wall Street. And, have no more run ins with the White House, Senae committees and the RMBS working group, for deeds done or yet to be planned.

My newest insight from this thankless exercise for the last 7 years:  That most Financial reporting around the big four has become the humdrum exercise it was before 2006. and that is a good reason we can now call off the crisis watchdogs and call the 3.5% global growth a new global normal, which means from me, Yellen and Fisher and the rest should continue increasing rates ths year without stopping for any further recovery. This is how it will be the rest of the century. (except that China is going to go lower in GDP growth scores before coming back to 7% and higher.  Look out for that market open, banks are also unlikely to outperform the market for a coupe of months as no one ventures a forecast for stocks for 2016, that stands in the meantime.

Also, while you wait for updates from the conference that will come later at around noon, you should check into Netflixthat posted amazing results yesterday and is ready to take on some aggressive custo attrition after mollycoddling them for two years on their old rate plans. Nothing like that here in Goldman Sachs for clients, employees, management or analysts following GS(unless @zerohedge has some personal plans or @motleyfool’s #motleyfool plan on twitter’s nth doomsday  and @realDonaldTrump / @donaldtrumpdbag) .


 The firm would have improved its Q4 EPS to $4.68 except for the awaited settlement that includes $875 mln odd in Cash and cost them $3.41 in EPS for a positive $1.27 for the quarter.

The revenues are a simple $7.27 Billion, down marginally over Q4of 2014.

The EPS for the year is down $5 to $12.14 riding a $7 billion Investment Banking topline for the entire year.

The Investment Bank topline includes $3.47 Bln from M&A and $3.56 Bln from Underwriting. Fixed Income was better in Q4

Institutional Client Services (trading) saaw FICC floating again for the year, 15% shy of the 2014 mark, caused by early Wall Street bets on rates rising.

Investment Management business was stable at $6.21 Billion and Investing and Lending business was subdued after the sale of Metro this time around, and as remaining on book PE stayed quiet through the year

Comp ratio was stable at 37.5% promsed levels even as staffing rose 8% to match business activity

Higher expenses reflect settlement expenses and provisions and lower impairment charges after hiving off Metro ith litigation and provisions climbing to $1.95 Billion in December 2015.




This entry was posted on January 20, 2016 by in Uncategorized.


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