GOLDMAN Sachs is expected to see a bounceback in revenues when it reports its first-quarter results tomorrow, with analysts predicting that the bank’s revenues will rise to $9.3bn (£5.9bn) versus $6bn in the fourth quarter of 2011.
Analysts have been revising their price targets for Wall Street banks upwards ahead of a week of US results, with several citing “solid” capital markets activity in the first quarter of this year as likely to drive up revenues.
US research firm Bernstein said: “The first quarter performance of the brokerage firms was boosted by improving credit markets conditions, strong demand for mortgage-backed investments and solid debt capital markets.”
Nomura analysts agreed that the recovery is likely to be led by a rise in bond trading volumes and debt underwriting.
The recovery is attributed to the European Central Bank’s €1 trillion intervention, which pumped liquidity into the European banking system in December to forestall its collapse.
Deutsche Bank analysts also examined pay arrangements and concluded that “Goldman appears to be in the best position” because it has deferred the smallest amount of remuneration in the past, meaning it can adapt its cost base more readily to changing circumstances.
By contrast, JP Morgan and Morgan Stanley have deferred more pay and therefore have less “expense flexibility”, the Deutsche Bank research concludes.
Nonetheless, JP Morgan Chase beat expectations when it reported quarterly revenues of $6bn on Friday.
BANK RUN OF RESULTS
■ Today, Citigroup reports earnings. It is followed by Goldman, US Bancorp, Northern Trust tomorrow, BNY Mellon on Wednesday, Bank of America and Morgan Stanley on Thursday and independent advisory Greenhill on Friday.
■ Revenues are expected to be better due to extra liquidity in the Eurozone, but the picture on profits could be more mixed.