Goldman Sachs Earnings: How Does it Compare to JPM, WFC and STT

Goldman Sachs Earnings: How Does it Compare to JPM, WFC and STT

Goldman Sachs Group, Inc. (NYSE:GS) today reported much awaited second-quarter results. It reported a fall of 11 percent in profit due to sluggish demand for deal making amid the entire crisis.

Goldman’s total investment banking revenue stood at $1.21 billion, down 17% from a year ago but up 4.2% from the first quarter. Its strongest fixed income division which had previously contributed immensely to its growth, totaled $2.19 billion, up 37% from a year earlier, but down 37% from the first quarter. Goldman posted a profit of $962 million against an earlier profit projection of $1.09 billion. Earnings per share including the payment of preferred dividends also fell to $1.78 from $1.85 a year earlier. Net revenue though fell by 9% to $6.63 billion, beating the analysts’ estimates of $6.28 billion.

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Goldman’s traditionally strong trading and investment banking arms have been struggling for the past couple of years, as investors have shied away from making big bets in the markets, and corporate chiefs hoard cash instead of making deals. Announced mergers in the second quarter were at the lowest level since the third quarter of 2009, according to Dealogic.

The Investment banker is also facing regulatory concerns in the face of Dodd-Frank legislation, the Volcker rule that is blocking its way for growth. Because of these concerns it is unable to make bets, take a view about the markets, or invest its own money. Along with these, there are international rules, which will increase the amount that has to be set aside against potential losses. Three executives from its merchant-banking business retired in June to accommodate for new regulations. Last month, Goldman’s long-term rating was downgraded two levels by Moody’s  Corporation Investors Service (NYSE:MCO), to reflect declining profitability in the industry.

Only last week, Wells Fargo & Company (NYSE:WFC) released second quarter earnings, reporting a record net income of $4.6 billion on earnings per share of $0.82; up 17% from the same point last year. Unlike Goldman, Wells Fargo maintained a healthy bottom line, despite facing the downgrade by Moody’s Corporation (NYSE:MCO). JPMorgan Chase & Co. (NYSE:JPM) also announced its second quarter results last week, reporting the net profit of $5 billion which is 9 percent down from the same quarter a year ago. Overall, the revenues in April-June quarter stood at $22.9 billion. For JPMC despite reporting fall in revenues and profits, they were better than what analysts had estimated.

Just before the release of earnings for Goldman Sachs Group, Inc. (NYSE:GS), State Street Corporation (NYSE:STT) announced that it will acquire the Administrations Services of the hedge fund administrator Goldman Sachs for $550 million in cash. It will be good for the Investment banker, as it will help it to concentrate on their core business.

Absorbing the news, Shares rose 1.4% to $99 in premarket trading.