Goldman Sachs suffers earnings slide
GOLDMAN Sachs Group posted lower second quarter earnings – hit by its settlement of US Securities and Exchange Commission civil fraud charges and the UK tax on bank executive bonuses.
The bank, which resolved a major headache last week by paying $550m (£362m) to settle the SEC case, fell short of analysts’ expectations.
Earnings applicable to common shareholders fell to $453m, or 78 cents a share, from $2.7bn, or $4.93 a share.
Revenue fell to $8.84bn from $13.76bn a year earlier.
The firm’s results were hampered by weaknesses in its trading and investment banking divisions – a sign of the obstacles still facing Wall Street’s dominant bank.
“It’s a pretty significant slowdown in their overall business,” said Walter Todd, portfolio manager with Greenwood Capital Associates.
“We’ve grown accustomed to Goldman bucking the trends in these businesses, but this quarter it seems like maybe they’re more susceptible to broader industry issues. Maybe Superman is turning into Clark Kent.”
The civil fraud charges stemmed from Goldman’s marketing and packaging of the Abacus collateralized debt obligation. The bank agreed to settle the case last Thursday.
Goldman said earnings were impacted by a $600m in relation to the UK tax.
Goldman’s fixed income trading revenue, which powered the bank’s rebound from the financial crisis, fell to $4.4bn from $6.8bn a year earlier.
Investment banking revenue declined to $917m from $1.4bn.
As Goldman’s earnings swung lower, so did its set-aside for compensation. The firm slashed its compensation and benefits expense to $3.8bn, down from $6.6bn a year ago.
Goldman shares were down 2.3 per cent to $142.26 in pre-market trade. US stock index futures extended declines after the Goldman results.