NEWS
Goldman Sachs Posts Record Profit, Beating Estimates
Monday 13 July 2009
by: Christine Harper | Visit article original @ Bloomberg
Goldman Sachs Group Inc. surpassed estimates and posted record second-quarter profits.
Goldman Sachs Group Inc. posted record earnings as revenue from trading and stock underwriting reached all-time highs less than a year after the firm took $10 billion in U.S. rescue funds.
Second-quarter net income was $3.44 billion, or $4.93 a share, the New York-based bank said today in a statement. That surpassed the $3.65 per-share average estimate of 22 analysts surveyed by Bloomberg and was 65 percent higher than last year's second quarter.
Chief Executive Officer Lloyd Blankfein, after repaying the government's bailout money along with $426 million in dividends to taxpayers, is reverting to a business model analysts deemed irretrievably broken during the global credit crisis. While rivals including Morgan Stanley have pared risks, Goldman Sachs has increased them this year.
Also see below:
Goldman Executives Sold $700 Million of Stock •
Nils Pratley | Bankers' Rewards More Shocking Than Ever •
"The wind is at their back, so their earnings numbers are going to be very strong," said Jon Fisher, a portfolio manager at Fifth Third Asset Management in Minneapolis, which oversees about $18 billion. "I think numbers are going up. I think they repeat this quarter next quarter and the quarter after that." Fisher said Fifth Third doesn't own the shares now and will probably buy them in the next few weeks.
Repaying Treasury
Last year's credit freeze led Blankfein to convert the firm to a Federal Reserve-regulated bank, accept government funds and report the first quarterly loss as a public company. This year Goldman Sachs has issued new shares, repaid the U.S. Treasury and reaped higher fees from selling stocks and bonds.
It's also paying its employees more money. The company set aside $6.65 billion for compensation and benefits in the period, or 48 percent of revenue, compared with $4.71 billion in the first quarter. The number of employees fell 1 percent to 29,400 from 29,800 at the end of March.
Senator Sherrod Brown, an Ohio Democrat, said Goldman Sachs should "show some restraint" on compensation after criticism that outsized pay packages contributed to the financial crisis by encouraging excessive risk-taking.
James Reynolds, chief executive officer of Loop Capital Markets LLC in Chicago, said criticism of Goldman Sachs's success was misplaced.
Government's Intention
"This is what the government investment was meant to do," Reynolds said in an interview. "I just don't understand why the country, or a working person in Michigan, Ohio or Kansas, would cheer against Goldman doing well just because the government invested in Goldman at a time when the financial markets were in chaos."
Goldman Sachs, the fifth-biggest U.S. bank by assets, climbed 77 percent in New York Stock Exchange trading this year through yesterday. It fell 13 cents to $149.31 in composite trading at 12:18 p.m. Goldman Sachs has struggled to climb back above $150 since the stock fell below that level after Lehman's bankruptcy in September.
The difference between the yield on Goldman Sachs's bonds and U.S. Treasuries, known as the spread, has narrowed this year, indicating investors have regained comfort in lending to the company. The spread on $3.2 billion of 5.95 percent senior unsecured notes maturing in 2018 was 268 basis points yesterday, compared with 472 basis points on March 31. A basis point is one-hundredth of a percentage point.
Government Backing
Chief Financial Officer David Viniar said on a conference call with analysts today that there are no call provisions on the $30 billion of government-guaranteed debt that Goldman issued between November and March so the firm isn't able to buy it back.
"While markets remain fragile and we recognize the challenges the broader economy faces, our second-quarter results reflected the combination of improving financial market conditions and a deep and diverse client franchise," Blankfein, 54, said in the statement.
The results follow the U.S. bank-rescue effort that funneled about $200 billion from taxpayers to financial firms, including $10 billion to Goldman Sachs, after the bankruptcy of Lehman and near-failure of American International Group Inc.
Revenue in the three months ended June 26 was $13.8 billion, compared with $9.43 billion in the first quarter and $9.42 billion in the second quarter a year earlier. The company's second quarter ended in May until Goldman Sachs changed its fiscal year last quarter.
Book Value
Book value per share rose to $106.41 at the end of June compared with $98.82 at the end of March. Return on equity, a gauge of how effectively the firm invests earnings, was 23 percent in the second quarter compared with 14.3 percent in the first quarter and 20.4 percent in last year's second quarter, the company said.
Revenue from fixed-income, currencies and commodities, the company's biggest unit, was a record $6.8 billion in the second quarter, which compared with $6.56 billion in the first quarter and $2.38 billion in last year's second quarter.
Goldman's earnings included $1.4 billion of writedowns related to commercial real estate, including $700 million of fixed-income writedowns, $500 million lost on equity investments and $170 million of impairment charges, Viniar said in an interview with Bloomberg.
The figures also included about $300 million of writedowns related to the narrowing of the firm's own credit spreads during the quarter, Viniar said.
Equity Revenue
Equities revenue of $3.18 billion in the quarter compared with $2 billion in the first quarter and $2.49 billion in last year's second quarter.
Value-at-risk, a statistical measure of how much the firm's trading operations could lose in a day, rose to an average of $245 million in the quarter from $240 million in the first quarter. In the second quarter of 2008, VaR averaged $184 million.
"Our model really never changed, we've said very consistently that our business model remained the same," Viniar said.
Revenue from equity underwriting jumped to $736 million from $48 million in the first quarter and compared with $616 million a year ago.
"There are still a lot of corporations around the world that need to rebuild their balance sheets," Viniar said on a conference call with analysts. "If markets stay OK and stay receptive, I think there will be a lot of equity offerings" in the second half, he said.
Debt Underwriting
Debt underwriting revenue was $336 million compared with $248 million in the prior period and $269 million in last year's second quarter. Financial advisory, which includes fees for takeover advice, fell to $368 million from $527 million in the first quarter and $800 million a year ago.
Principal investments, which include the value of Goldman Sachs's stakes in other companies and real estate, generated $811 million of gains after losing $1.41 billion in the first quarter.
Asset-management revenue declined to $922 million from $949 million in the first quarter and compared with $1.16 billion a year earlier. Revenue from securities services, the company's prime brokerage business that serves hedge funds, rose to $615 million from $503 million in the first quarter.
Investors will receive earnings reports later this week from JPMorgan Chase & Co., Citigroup Inc., and Bank of America Corp. Morgan Stanley, which was the second-biggest U.S. securities firm behind Goldman Sachs before both firms converted to banks last year, said it will report next week.
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Goldman Executives Sold $700 Million of Stock
Monday 13 July 2009
by: Greg Farrell | Visit article original @ The Financial Times
Executives at Goldman Sachs sold almost $700 million worth of stock following the collapse of Lehman Brothers last September, according to filings with the Securities and Exchange Commission.
Most of the sales occurred during the period in which the investment bank enjoyed the support of $10bn from the troubled asset relief programme.
The surge in selling among Goldman partners, at a time when the US government had thrown a lifeline to Wall Street, is likely to draw criticism from lawmakers on Capitol Hill. Having survived the crisis, the bank is expected to report strong second-quarter earnings on Tuesday on rebounding trading profits.
For the eight-month period for which figures are available, Goldman partners sold more than $691 million in company stock, even as the firm expanded its public float from 395 million to 503 million shares in several capital raises.
For the comparable period between September 2007 and April 2008, when the average share price was substantially higher, Goldman partners sold about $438 million in stock.
A spokesman declined to comment on the sales, other than to note that Goldman partners receive a big share of annual bonuses in stock, and that for many, stock sales are an effort to diversify their holdings.
Some of the sales could have been motivated by margin calls, which are said to have afflicted a number of Goldman executives who used company stock as collateral for loans.
Stock sales by partners have been a sensitive topic at Goldman Sachs, but never more so than since last September after the collapse of Lehman's. According to a disclosure in Goldman's most recent proxy statement in March, the bank took the unusual step of buying back investments in illiquid employee funds made by Jon Winkelried, former co-chief operating officer, and Gregory Palm, general counsel, for $19.7 million and $38.3 million respectively.
Goldman agreed to the unusual buy-backs last September to obviate the need for the two officers to sell stock on the open market, the company said in March. "Stock sales would easily have covered their requirements but, given the turbulent market conditions, we and they were concerned that such sales would be misconstrued by the market as indicating a lack of confidence in Goldman Sachs."
Employee ownership has been an important component of Goldman's "partnership" culture, a vestige of the investment bank's history as a privately held firm. It went public in 1999.
But Goldman's culture was severely tested last year. For the period during which executive sales were allowed, from September 17 to October 24, Goldman partners sold some $250 million worth of stock.
A bigger wave of selling occurred during the window between December 2008, after Goldman reported its first quarterly loss as a public company, and mid-February. In that two-month period, when Goldman's share price sunk to near-historic lows, partners sold more than $280 million worth of company stock.
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Bankers' Rewards More Shocking Than Ever
Tuesday 14 July 2009
by: Nils Pratley | Visit article original @ The Guardian UK
It's time to ask whether banks' exceptional profits deserve exceptional rates of taxation.
The most revealing insight into Goldman Sachs' record quarterly revenues and profits was provided by finance director David Viniar. He said the performance was achieved by "basic blocking and tackling". In other words, Goldman didn't do anything special between March and June. Its bankers didn't score spectacular goals or touchdowns; they simply went about their business in "plain vanilla" areas.
The result was that the firm generated profits at the rate of $38 million a day while also allocating $74 million daily to the pot labelled "compensation and benefits". If the second half of this year is like the first, Goldman's staff can expect to receive roughly $700,000 a head on average in 2009, with its big beasts collecting much, much more.
How did this happen so soon after the banking crisis? We can allow Goldman one little boast. It clearly did a better job of managing risk than most of its competitors. It didn't blow itself up and it is now freer than others to throw its capital behind profitable opportunities, particularly in bonds, currencies and commodities.
But the rewards for the survivors now start to look more obscene than ever. The disappearance of Lehman Brothers and Bear Stearns, the retreat of Royal Bank of Scotland, and the chastened nature of the Swiss banks and Morgan Stanley has changed the market. Goldman and a handful of other firms now enjoy immense pricing power.
Spreads between bid and offer prices have widened; fees for underwriting and arranging rights issues have exploded; and easy money can be made by finding buyers for the vast sums of debt that governments must issue. Investment banking suddenly looks like one of the world's least competitive industries.
Don't worry, the winners argue, it's a temporary phenomenon that will reverse when the rest of the sector is back on its feet. We'll see, but the behaviour of the survivors suggests the opposite: they are hiring staff on salaries and guaranteed bonus packages that make sense only if the days of mega-profits have returned permanently.
Their assessment may not be perverse. Regulators are clearly determined to stamp on remuneration structures that encourage excessive risk-taking. But Goldman demonstrated that, in the current investment banking climate, you don't have to take big risks to earn big bucks. The bank's leverage ratio has halved since 2007.
The question for governments in the US, Europe and Japan is whether they are prepared to tolerate this state of affairs indefinitely. The point of rescuing the banks was to prevent economic catastrophe. That process clearly involves banks rebuilding their capital bases and generating profits once again. But once this stage is reached - and Goldman has got there faster than anybody else - it's time to ask whether exceptional profits deserve exceptional rates of taxation.
If we, the taxpayers, are obliged to underwrite the banking system, it is surely right to extract a fair price for that guarantee. That's how pricing power works, as Goldman would presumably understand.
Zie: http://www.truthout.org/071409L
Voor het echte verhaal dat u nooit van de Nederlandse commerciele massamedia verneemt lees Rolling Stone:
2 opmerkingen:
Inderdaad, it's surprisingly easy to rule the many by the very few.
Ook de parasiet in het dierenrijk doet zijn gastheer geloven, door chemische manipulatie van het brein van de gastheer, dat de parasiet de gastheer ten goede komt in plaats van schaadt.
herman_m
En Taibbi, die het grote Goldmanbashen is begonnen ...
Je kon er op wachten
Popular Rolling Stone contributor, writer and blogger Matt Taibbi claims that he was sent e-mails which attacked him and accused him of anti-Semitism for exposing the investment bank giant Goldman’s Sachs and their shady financial dealings over the years.
http://undertheradarmedia.wordpress.com/2009/07/16/rolling-stone-writer-called-anti-semitic-for-simply-following-the-money/
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