Google Groups no longer supports new Usenet posts or subscriptions. Historical content remains viewable.
Dismiss
Goldman Shows the Big Problem for Banks in the dismal Obama economy: Revenue
0 views
Skip to first unread message
Leroy N. Soetoro
Apr 19, 2016, 6:33:12 PM4/19/16
to
http://www.wsj.com/articles/goldman-results-highlight-wall-streets-pain-
1461087083
Plunge in first-quarter revenue continues trend among big lenders; can top
investment banks generate the income they used to?
Goldman Sachs Group Inc. reported sharp drops in first-quarter profit and
revenue, highlighting the fundamental problem facing Wall Street: It isn’t
making enough money.
After five of the six biggest U.S. banks posted shrinking revenue in the
quarter from a year earlier, analysts are starting to raise tough
questions about the future ability of big investment banks to generate the
same revenue they used to.
Goldman’s revenue fall of 40% was the sharpest among the banks. Morgan
Stanley on Monday posted a revenue drop of 21%, following declines of 3%
to 11% at bigger, more diversified banks that also have large consumer-
lending businesses.
Making matters worse for Wall Street-focused firms like Goldman, two huge
factors hindering their revenue of late are largely outside of their
control.
First, on trading desks, big banks are less able to take risks with their
own money, thanks to postcrisis regulations that aim to reduce the risk
that banks will contribute to future financial crises. That means banks
are dependent on outside investors for trading revenue, which can dry up
in periods where markets fall sharply as they did in January and February.
Deal makers also need companies to want to raise money in debt and stock
markets. That activity also largely dried up for Wall Street firms during
the first quarter.
“The operating environment this quarter presented a broad range of
challenges, resulting in headwinds across virtually every one of our
businesses," Goldman Chief Executive Lloyd Blankfein said.
Goldman took the expected big hit in its bond-trading business, a unit
called “fixed income, currencies and commodities” that carried Goldman’s
results in many years of the past two decades.
But it also was walloped in other areas, including “investing and
lending,” a relatively new unit in which Goldman takes stakes in private
and public companies, usually for years at a time.
The bank said net revenue in the investing and lending unit fell 95%. Last
year, the unit brought in revenue of around $1.7 billion in the first
quarter. This time around revenue was just $87 million.
Despite numerous problems for banks this year—difficult trading
conditions, a pause in deals, stubbornly low interest rates—the KBW Nasdaq
Bank Index rallied about 7% over the past week through Monday as investors
decided things weren’t as grim as analysts predicted or as many investors
feared when stocks hit their recent bottom in February.
Goldman became the latest of the big six banks to beat earnings estimates
despite sharply lower results. J.P. Morgan Chase & Co., Citigroup Inc.,
Bank of America Corp. and Wells Fargo & Co., as well as Morgan Stanley,
also topped analysts’ earnings forecasts in the past week. It was the
first time all six banks exceeded the consensus earnings estimates since
2013, according to data from Thomson Reuters.
Wall Street’s outlook for bank earnings had darkened throughout the first
quarter, and estimates continued to drop even after it ended. Goldman
shares were up about 1.7% in early afternoon trading in New York on
Tuesday, but were down about 10% so far in 2016.
The Wall Street firm’s net income fell 60% to $1.14 billion, or $2.68 a
share, from $2.84 billion, or $5.94 a share, a year earlier. That
surpassed the average estimate of analysts polled by Thomson Reuters of
$2.45 a share.
Revenue, however, dropped more than expected, falling 40% to $6.34 billion
from $10.62 billion. Analysts had projected $6.73 billion.
Trading revenue fell 37% to $3.44 billion from $5.46 billion in the first
quarter of 2015, which was a particularly strong period for Goldman. In
the past week, other large U.S. banks reported trading results that ranged
from a decline of 11% at J.P. Morgan Chase to a drop of 34% at Morgan
Stanley.
Goldman’s fixed income, currency and commodity trading revenue fell 47% to
$1.66 billion from $3.13 billion a year earlier, with all of its major
businesses in this unit performing worse. Stock-trading revenue fell 23%
to $1.78 billion from $2.33 billion, mostly because of weakness in cash
equities and equity derivatives.
The firm has zeroed in on cost-cutting efforts to try to keep profits as
high as possible through the slump in revenue. Total expenses fell 29% to
$4.76 billion mostly thanks to a 40% reduction in compensation and
benefits costs. Goldman said total expenses were at a seven-year low,
excluding compensation costs. One unit that has been hit hard is fixed-
income trading, where about 8% of employees have been trimmed this year, a
person familiar with the matter said.
Analysts’ initial focus was on the sharper-than-expected revenue drop.
“Relative to their peers, it’s a disappointing quarter,” said Steve
Chubak, an analyst with Nomura Holdings Inc. “While they did do a good job
managing costs, the revenue miss was really the disappointment to us.”
Mr. Chubak noted that Goldman used a lower tax rate than expected, and
took a gain related to the buyback of some of its preferred shares. Absent
those factors, Goldman would have earned about $2.23 a share, or 45 cents
less than its reported number, Mr. Chubak said.
Investment-banking revenue fell 23% to $1.46 billion from $1.91 billion in
the first quarter of 2015. Goldman, Wall Street’s top adviser on mergers
and acquisitions, reported revenue of $771 million from that business
during the first quarter, down 20% from $961 million a year earlier.
Debt-underwriting revenue rose 24% to $509 million from $411 million. Fees
on initial public offerings and other stock sales decreased 66% to $183
million from $533 million, as many IPOs were put on hold because of the
declining stock market in January and February.
Looking ahead, Goldman said its investment-banking backlog was lower than
it was at the end of 2015, a sign the firm’s bankers may not be able to
help pick up the slack for traders as much as they did last year.
Goldman’s investment-management business had revenue of $1.35 billion,
down 15% from $1.58 billion a year earlier because of sharply lower
incentive fees.
Banks including Goldman said trading conditions had improved in March and
April, giving some home to investors who had bet on bank shares of late.
“Given that we operate in a cyclical industry, it shouldn’t be surprising
that there will be difficult quarters,” noted Goldman Chief Financial
Officer Harvey Schwartz. “The first quarter of 2016 was challenging.”
--
Obama increased total debt from $10 trillion to $19 trillion in the six
years he has been in office, and sold out heterosexuals for Hollywood
queer liberal democrat donors.
Barack Obama, reelected by the dumbest voters in the history of the United
States of America. The only American president to deliberately import a
lethal infectious disease from Africa, Ebola.
Loretta Fuddy, killed after she "verified" Obama's phony birth
certificate.
Nancy Pelosi, Democrat criminal, accessory before and after the fact to
improper vetting of Barry Soetoro aka Barack Hussein Obama, a confirmed
felon using SSAN 042-68-4425, belonging to a dead man.
Obama ignored the brutal killing of an American diplomat in Benghazi, then
relieved American military officers who attempted to prevent said murder
in order to cover up his own ineptitude.
Obama continues his muslim goal of disarming America while ObamaCare
increases insurance premiums 300% and leaves millions without health care.
--- news://freenews.netfront.net/ - complaints: ne...@netfront.net ---
1461087083
Plunge in first-quarter revenue continues trend among big lenders; can top
investment banks generate the income they used to?
Goldman Sachs Group Inc. reported sharp drops in first-quarter profit and
revenue, highlighting the fundamental problem facing Wall Street: It isn’t
making enough money.
After five of the six biggest U.S. banks posted shrinking revenue in the
quarter from a year earlier, analysts are starting to raise tough
questions about the future ability of big investment banks to generate the
same revenue they used to.
Goldman’s revenue fall of 40% was the sharpest among the banks. Morgan
Stanley on Monday posted a revenue drop of 21%, following declines of 3%
to 11% at bigger, more diversified banks that also have large consumer-
lending businesses.
Making matters worse for Wall Street-focused firms like Goldman, two huge
factors hindering their revenue of late are largely outside of their
control.
First, on trading desks, big banks are less able to take risks with their
own money, thanks to postcrisis regulations that aim to reduce the risk
that banks will contribute to future financial crises. That means banks
are dependent on outside investors for trading revenue, which can dry up
in periods where markets fall sharply as they did in January and February.
Deal makers also need companies to want to raise money in debt and stock
markets. That activity also largely dried up for Wall Street firms during
the first quarter.
“The operating environment this quarter presented a broad range of
challenges, resulting in headwinds across virtually every one of our
businesses," Goldman Chief Executive Lloyd Blankfein said.
Goldman took the expected big hit in its bond-trading business, a unit
called “fixed income, currencies and commodities” that carried Goldman’s
results in many years of the past two decades.
But it also was walloped in other areas, including “investing and
lending,” a relatively new unit in which Goldman takes stakes in private
and public companies, usually for years at a time.
The bank said net revenue in the investing and lending unit fell 95%. Last
year, the unit brought in revenue of around $1.7 billion in the first
quarter. This time around revenue was just $87 million.
Despite numerous problems for banks this year—difficult trading
conditions, a pause in deals, stubbornly low interest rates—the KBW Nasdaq
Bank Index rallied about 7% over the past week through Monday as investors
decided things weren’t as grim as analysts predicted or as many investors
feared when stocks hit their recent bottom in February.
Goldman became the latest of the big six banks to beat earnings estimates
despite sharply lower results. J.P. Morgan Chase & Co., Citigroup Inc.,
Bank of America Corp. and Wells Fargo & Co., as well as Morgan Stanley,
also topped analysts’ earnings forecasts in the past week. It was the
first time all six banks exceeded the consensus earnings estimates since
2013, according to data from Thomson Reuters.
Wall Street’s outlook for bank earnings had darkened throughout the first
quarter, and estimates continued to drop even after it ended. Goldman
shares were up about 1.7% in early afternoon trading in New York on
Tuesday, but were down about 10% so far in 2016.
The Wall Street firm’s net income fell 60% to $1.14 billion, or $2.68 a
share, from $2.84 billion, or $5.94 a share, a year earlier. That
surpassed the average estimate of analysts polled by Thomson Reuters of
$2.45 a share.
Revenue, however, dropped more than expected, falling 40% to $6.34 billion
from $10.62 billion. Analysts had projected $6.73 billion.
Trading revenue fell 37% to $3.44 billion from $5.46 billion in the first
quarter of 2015, which was a particularly strong period for Goldman. In
the past week, other large U.S. banks reported trading results that ranged
from a decline of 11% at J.P. Morgan Chase to a drop of 34% at Morgan
Stanley.
Goldman’s fixed income, currency and commodity trading revenue fell 47% to
$1.66 billion from $3.13 billion a year earlier, with all of its major
businesses in this unit performing worse. Stock-trading revenue fell 23%
to $1.78 billion from $2.33 billion, mostly because of weakness in cash
equities and equity derivatives.
The firm has zeroed in on cost-cutting efforts to try to keep profits as
high as possible through the slump in revenue. Total expenses fell 29% to
$4.76 billion mostly thanks to a 40% reduction in compensation and
benefits costs. Goldman said total expenses were at a seven-year low,
excluding compensation costs. One unit that has been hit hard is fixed-
income trading, where about 8% of employees have been trimmed this year, a
person familiar with the matter said.
Analysts’ initial focus was on the sharper-than-expected revenue drop.
“Relative to their peers, it’s a disappointing quarter,” said Steve
Chubak, an analyst with Nomura Holdings Inc. “While they did do a good job
managing costs, the revenue miss was really the disappointment to us.”
Mr. Chubak noted that Goldman used a lower tax rate than expected, and
took a gain related to the buyback of some of its preferred shares. Absent
those factors, Goldman would have earned about $2.23 a share, or 45 cents
less than its reported number, Mr. Chubak said.
Investment-banking revenue fell 23% to $1.46 billion from $1.91 billion in
the first quarter of 2015. Goldman, Wall Street’s top adviser on mergers
and acquisitions, reported revenue of $771 million from that business
during the first quarter, down 20% from $961 million a year earlier.
Debt-underwriting revenue rose 24% to $509 million from $411 million. Fees
on initial public offerings and other stock sales decreased 66% to $183
million from $533 million, as many IPOs were put on hold because of the
declining stock market in January and February.
Looking ahead, Goldman said its investment-banking backlog was lower than
it was at the end of 2015, a sign the firm’s bankers may not be able to
help pick up the slack for traders as much as they did last year.
Goldman’s investment-management business had revenue of $1.35 billion,
down 15% from $1.58 billion a year earlier because of sharply lower
incentive fees.
Banks including Goldman said trading conditions had improved in March and
April, giving some home to investors who had bet on bank shares of late.
“Given that we operate in a cyclical industry, it shouldn’t be surprising
that there will be difficult quarters,” noted Goldman Chief Financial
Officer Harvey Schwartz. “The first quarter of 2016 was challenging.”
--
Obama increased total debt from $10 trillion to $19 trillion in the six
years he has been in office, and sold out heterosexuals for Hollywood
queer liberal democrat donors.
Barack Obama, reelected by the dumbest voters in the history of the United
States of America. The only American president to deliberately import a
lethal infectious disease from Africa, Ebola.
Loretta Fuddy, killed after she "verified" Obama's phony birth
certificate.
Nancy Pelosi, Democrat criminal, accessory before and after the fact to
improper vetting of Barry Soetoro aka Barack Hussein Obama, a confirmed
felon using SSAN 042-68-4425, belonging to a dead man.
Obama ignored the brutal killing of an American diplomat in Benghazi, then
relieved American military officers who attempted to prevent said murder
in order to cover up his own ineptitude.
Obama continues his muslim goal of disarming America while ObamaCare
increases insurance premiums 300% and leaves millions without health care.
--- news://freenews.netfront.net/ - complaints: ne...@netfront.net ---
Beam Me Up Scotty
Apr 19, 2016, 8:11:00 PM4/19/16
to
doing nothing and Stock buy backs dry up. Then in 2 years the higher
cost of interest on that $20 trillion will raise deficits as did the
lack of revenue (the 40% loss by the giant wall street firms) by the BIG
movers and shakers in the Stock Market. Things look pretty much like I
have been saying they look. The next few years will see stagnation and
volitility. UP and down but go no where.
--
One man's Affirmative Action law is another man's Jim Crow law.
That's Karma
Beam Me Up Scotty
Apr 19, 2016, 8:19:11 PM4/19/16
to
On 04/19/2016 06:33 PM, Leroy N. Soetoro wrote:
The prelude to all the stocks dropping 40% as the economy sucks along
doing nothing and Stock buy backs dry up. Then in 2 years the higher
cost of interest on that $20 trillion will raise deficits as did the
lack of revenue (the 40% loss by the giant wall street firms) by the BIG
movers and shakers in the Stock Market (they didn't pay as much tax so
doing nothing and Stock buy backs dry up. Then in 2 years the higher
cost of interest on that $20 trillion will raise deficits as did the
lack of revenue (the 40% loss by the giant wall street firms) by the BIG
the next budget will have larger deficits). Things look pretty much
like I have been saying they look. The next few years will see
stagnation and volatility. UP and down but go no where as debt and GDP
get worse.
--
That's Karma
*Rumination*
#49 - I'll die protecting my freedom.... will you die protecting your
Socialism?
0 new messages