In a regulatory filing on Thursday, Goldman Sachs Group, Inc. (NYSE:GS) disclosed for the quarter ending March 31 a mixed bag of activities. This included hedge fund sales, losses from lawsuits and a solo day of trading losses.
Let’s take a look at their actions.
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Hedge Fund Sales
Goldman said in the filing that it sold $250 million of investments from its hedge funds during the quarter. While it is common for the firm to invest in them, alongside its clients, the sales came from an effort to comply with the Volcker Rule.
With a two-year window to comply, the Volcker Rule will attempt to curtail Wall Street risk taking by prohibiting banks from making market bets through their own money and to reduce the quantity of capital they will be able to invest in through occasionally risky products such as hedge funds. In the future, banks will be restricted to a three percent investment of their capital in hedge funds.
In Thursday’s filing, Goldman wrote, “The firm currently plans to comply with the Volcker Rule by redeeming certain of its interests in hedge funds.”
Losses from Lawsuits
Goldman also included in Thursday’s filing that its “reasonably possible” that losses from lawsuits in the quarter increased to $2.7 billion, a rise from the end of 2011’s $2.4 billion figure.
There is one new addition to the lawsuits, according to The New York Times.
In February, three cities including Houston, Reno, Nev., and a California school district named Goldman in three independent arbitration claims. The firm said they came from its activities as a broker-dealer and underwriter from the claimants’ 2004-2007 issuances of approximately $1.7 billion of auction rate securities.
The entities have also alleged that Goldman did not communicate vital information about the investments. During the financial crisis, the auction rate security market had some troubles, leaving investors with losses.
Goldman also wrote in the filing that it may need to pay counterparties an additional collateral of $2.21 billion if the company’s credit rating drops two notches. The firm is on a two-month watch by Moody’s Investors Service, along with 16 other global financial companies. With a cut, its borrowing costs could rise.
One Trading Loss
And the third point of information in Thursday’s filing was Goldman’s disclosure that it only lost money (up to $25 million) on one day in the first quarter; this represents an improvement from the previous quarter’s 17 days of losses.
How does this compare to its rivals? Morgan Stanley (NYSE:MS) had four days with losses but two days with gains in the range of $150 million to $200 million. As for Bank of America Corp (NYSE:BAC), it had a blemish-free trading quarter: no daily losses and for five days, gains came in higher than $100 million.
But Goldman’s surpasses its competitors on the money-making front by bringing in $100 million on 24 of 62 days.
Not too shabby.
Overall for Goldman, the quarter earned $2.1 billion, a 23 percent decline from the previous year but it did exceed analysts’ estimates.
So what does today’s filing reveal about Goldman? The company’s numbers are good but they’re still managing to anger some of their customers. This seems to be on the rise and in the long-run, not a good thing.