Goldman Sachs’ Q2 earnings are down 83%, in what the New York Times calls the “worst quarter for the giant investment bank since the depths of the financial crisis in late 2008.” More from the NYT:
The earnings include $1.15 billion in special charges — $550 million for the S.E.C. settlement and $600 million for a British bank payroll tax. Excluding these charges, earnings were $2.75 a share (Ed.: vs. 78 cents per share currently).
The (SEC) lawsuit overshadowed Goldman’s outsize profits in the first quarter, when buoyant results in trading lifted earnings to $3.46 billion. Now, as markets weaken, the focus is squarely back on the bottom line and Goldman shares are down more than 20 percent from where they were before the S.E.C’s suit was filed in April.
Tuesday’s results represent a rare miss for Goldman’s vaunted traders, who have helped make the firm Wall Street’s most powerful — and profitable — investment bank. But few traders were prepared for the sharp swings of the market in the spring, when exchanges around the world were roiled by fears about European government borrowing and the specter of a default by Greece. Closer to home, the “flash crash” in May, when the Dow dropped nearly 1,000 points in less than 30 minutes, also unnerved investors.
Bloomberg Businessweek breaks down GS’s revenues:
Equity trading revenue declined 49 percent to $1.21 billion from $2.35 billion in the first quarter. Principal investments, which includes gains and losses from Goldman Sachs’s stake in Industrial & Commercial Bank of China Ltd. as well as stakes in other companies and real estate, provided a $943 million gain in the quarter.
Investment-banking revenue dropped 23 percent to $917 million from the first quarter as advisory fees gained 2 percent, debt underwriting revenue declined 36 percent and equity underwriting revenue decreased 40 percent.
Revenue from asset management rose 3 percent to $976 million from $946 million in the first quarter as assets under management fell 5 percent to $802 million from $840 million in the first quarter. Securities services, the division that includes fees charged for providing services to hedge funds, reported $397 million in revenue, up from $395 million in the first quarter.
Odd results for a company everyone thinks has enough government backing to prop up the entire economy. Goldman, however, doesn’t seem too pessimistic–it hired 1,000 new employees last quarter. However many conspiracy theories exist about Goldman, it could just be that it was a bad quarter for investing. The Wall St. Journal quotes GS CFO David Viniar:
Investors are scared and they are staying on the sidelines. That means less business for Goldman. “Our business is driven by economic activity,” Viniar says. “This [lousy quarter] was really driven by a lack of activity by our clients….Right now, the business environment is pretty slow.” When will business bounce back? He wasn’t willing to hazard a guess.