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HenryTo
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 Posted: Tue Oct 18, 2011 11:19 pm Post subject: |
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Morningstar on GS' 3Q earnings:
| Quote: | Goldman Sachs GS reported a net loss to common shareholders of $428 million, or $0.84 per share, on $3.6 billion of net revenue for the third quarter. Net revenue fell 60% from the previous year and 50% sequentially. Expenses were under control, with no material changes in noncompensation expenses excluding certain charges, such as this quarter's outsize $100 million U.K. bank levy accrual. Compensation expense remained at 44% of net revenue this quarter, as in every other quarter this year, despite the large swings in revenue. Even if fixed base salaries were increased as a result of bonus scrutiny, company-level compensation appears to be variable and largely under management's discretion. That said, even if management has discretion over compensation, Goldman's and every other investment bank's compensation is set by the market, and a year-end compensation true-up, as in the fourth quarter of 2009, isn't out of the question. We don't anticipate any significant change in our fair value estimate.
Though this is a rare quarterly loss for Goldman Sachs and an equally rare second consecutive quarter of underperformance, we believe it's important for investors to keep the situation in perspective. The $428 million loss to common shareholders in the third quarter is disappointing, but the company earned $1.96 billion in the first two quarters. If we exclude the $1.64 billion charge related to redemption of preferred stock issued to Berkshire Hathaway BRK.A in the first quarter, then pro forma earnings would be $3.17 billion for the first nine months and an annualized return on equity of about 6.2%. That is an unacceptable long-run return on capital, but given the volatile nature of the investment banking business and the severe economic and political uncertainty that existed in the second and third quarter, an occasional 6.2% return on equity is to be expected. In 2010, which wasn't a particularly strong year, as economic growth was about as sluggish then as it is now, Goldman Sachs earned $7.71 billion and had a return on average common shareholders' equity of about 11.5%.
Revenue moved in the directions we were expecting, but the magnitude for certain line items is always hard to predict. Underwriting revenue slowed to a trickle, down 68% sequentially, as a volatile downward-trending equity market and European contagion fears practically shut down capital-raising activity. Financial advisory revenue held up quite well, down only 18%, but merger deals can often be long in the making and a quarter or two of volatility won't necessarily scuttle a deal. Investment banking revenue should improve from these levels, if the fourth quarter brings more clarity to the European situation and global economic growth prospects.
Trading was fairly well bifurcated, with strong performance in equities and a continued relatively weak performance in fixed income, currency, and commodities. Equity market volatility led to high volume, benefiting the company's equity market-making and commission businesses. However, the fixed-income credit business was negatively affected by a lack of volume and likely negative marks on fixed-income inventory. FICC as a whole was up 8% from the previous quarter because the second quarter was a very low comparable. As long as political and economic uncertainty is reduced, regardless of the overall growth in the economy, we expect trading segment results to improve.
Asset-management revenue was stable despite the drop in the equity markets, but the equity market downturn was solidly felt in Goldman Sachs' investing and lending segment. The stable performance in asset management can be attributed to diversification, as equity funds composed only 17.5% of assets under management at the end of the second quarter. The company's largely unrealized losses in principal investments and loans, though, added up to about $2.5 billion. As much of the loss was unrealized, if equity markets advance and credit spreads tighten, future gains should more than offset the losses. We find it interesting that the company's best-performing revenue lines in the third quarter--equity commissions and equity market-making--are the businesses that are least likely to be affected by pending regulations such as the Volcker Rule and Basel III.
Goldman Sachs appears to be taking a measured approach in managing its capital base. Though management believes the stock is undervalued--a sentiment we share--it's being cautious with its liquidity and capital ratios in light of recent counterparty concerns that were expressed mainly about peers in the credit default swap market and news headlines. The equity capital raised, improvement in liquidity, transformation into a bank holding company with access to the Federal Reserve, and decrease in questionable assets over the past several years should allay investor concerns. |
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HenryTo
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rffrydr
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| Posted: Sat Jan 22, 2011 8:55 am Post subject: |
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Wow, I thought this went out with the Lloyd's "Names."
Won't do them any favors with the conspiracy theorists but does show a dichotomy in the market's so-called prejudice against "family" controlled businesses. Ford traditionally sold at a discount for this--though I've heard several fund managers who seek out the "skin-in-the-game" structure.
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HenryTo
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| Posted: Fri Jan 21, 2011 12:56 pm Post subject: |
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Following is courtesy of Footnoted.com:
| Quote: | There's long been an air of mystery surrounding the top echelon at Goldman Sachs (GS) -- its so-called "partners," a hold-over from the days before the company was publicly traded -- including just who is a member at any given time. Now, thanks to a joint footnoted/New York Times analysis, we know just how male, American and rich the Goldman partners really are.
Now, for example, we know there have been just shy of 860 people in the club, and they've sold more than $20 billion in Goldman shares over the dozen years since the bank's IPO. The 475 or so current partners -- overwhelmingly male even after all these years -- still hold another $10 billion, or 11.2% of the company. The partners' stake is likely to rise as they take ownership of gobs of options they received in late 2008 -- back when the rest of us were worried the financial system might collapse under its own weight. More detail over at the Times' DealBook.
At the heart of Goldman's curious hybrid between partnership and publicly traded company, of course, is the partnership agreement itself, first filed with the company's IPO documents in 1999 (here's a version from April 1999 -- search for Exhibit 10.26) and most recently updated with Goldman's 10-K last spring in the wake of Berkshire Hathaway's (BRK.A) $5 billion in Goldman preferred shares (preventing Goldman bigwigs from selling their stakes until Warren Buffett cashed in his own).
It's a document that offers a lot to chew on for anyone interested in corporate governance, shareholder-manager dynamics and the agency problems that arise when owners' and managers' interests collide. For example, partners promise not to sell too many of their shares -- keeping at least 25% for ordinary partners, and 75% for select senior officers, presumably including the likes of Chairman and CEO Lloyd Blankfein, President and COO Gary Cohn and CFO David Viniar, who head the committee implementing the shareholders' agreement. But the transfer restrictions are curious in that they only apply to shares acquired after becoming partner, which may dilute their effectiveness.
Perhaps the most interesting feature of the agreement, from the start, is the commitment to vote in lockstep with one another. Ahead of any proxy vote, Goldman's partners hold a sort of straw poll among themselves -- and then vote all their shares with the majority. Even holding just 11.2% of the company's shares -- down from 48.3% at the IPO but up from 8.2% in 2009 -- it makes them a powerful force.
Another interesting tidbit from our analysis: Despite diversifying its business over the years, 61% of the company's partners are American citizens (and that's not even counting the handful with dual US citizenship). It's a more worldly bunch than the 82% shortly after the company's IPO (and even the 69% in 2005), but it's still pretty provincial for a company that gets just 54% of its pre-tax earnings from North America (essentially, the U.S.). |
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rffrydr
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| Posted: Wed Jan 19, 2011 9:55 am Post subject: |
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"Wages" make up the difference--at long last.
Goldman's redirect of Facebook deal to foreign clients is only going to exasperate those at home already feeling squelched. I would not be a shareholder here.
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rffrydr
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| Posted: Tue Jan 11, 2011 9:45 am Post subject: |
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Restructuring businesses and way it's reported to try to show greater separation between client and firm.
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rffrydr
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rffrydr
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rffrydr
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| Posted: Tue May 18, 2010 12:40 pm Post subject: |
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Still leading the pack:
An NBC News/Wall Street Journal poll taken May 6-10 found that Wall Street is enormously unpopular in America — Goldman Sachs, for example, had an approval rating of just 4 percent. That’s lower than BP at 11 percent amid the Gulf oil spill and Toyota at 31 percent after the repeated recalls. President Barack Obama, by contrast, had a 49 percent approval rating in the poll.
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diesel
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| Posted: Mon May 10, 2010 3:45 pm Post subject: |
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If I could see others trades before they made them I am sure I could win all the time as well....
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rffrydr
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| Posted: Mon May 10, 2010 10:45 am Post subject: |
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Tim Melvin
Goldman Trading Profits
5/10/2010 12:39 PM EDT
| Quote: | I see on the tape that Goldman Sachs reported that they did not have a single losing day n its trading operations in the first quarter. That's incredible. When you consider the range of markets and instruments Goldman deals in to not have one overall down day deifies the imagination. The regulatory filing also revealed that Goldman expects to be the target of further investigations and possible shareholder lawsuits as a result of their actions during the market meltdown of the past few years. They also received inquiries about their dealing with the Greek government.
They are either really the smartest guys in the room or have an unfair advantage of some type. No loss in three months is spectacular. Even more spectacular is that on 35 separate days profits from the trading desks was over $100 million according to the report. |
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rffrydr
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| Posted: Wed May 05, 2010 7:11 pm Post subject: |
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For you math majors out there, from Fabrice...with love:
"Well, what if we created a "thing", which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?") it sickens the heart to see it shot down in mid-flight... It’s a little like Frankenstein turning against his own inventor  "
http://tinyurl.com/25lgq55
"Frankenstein" blares in the headlines-- completely inverting Fabrice's tender meaning. It takes a true Frankenstein lto ove his own creation so. To be pitied? maybe. Condemned? No...nothing different here than in the GulfWestern conglomeration days. We count that as a viable business organization when it's impulse was obfuscation and ever more abstraction. --And that one in particular born of movie-studios and the price of "shadows on the wall" as the japanese said. It's built into our indices; and it indexes what is un-categorical. The more abstract something the more timeless--and as we have learned by now, it's hard to put a price on infinity. 
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rffrydr
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| Posted: Sat May 01, 2010 7:05 am Post subject: |
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Buffett the new CEO? Of course not. And even if he did take it would that be a sign of "strength"?
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rffrydr
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rffrydr
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| Posted: Tue Apr 27, 2010 5:07 pm Post subject: |
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Madman gives up the Goldman ghost:
Goldman Has More Pain Ahead
By Jim Cramer
RealMoney Columnist
4/27/2010 5:21 PM EDT
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Forgot what it was like, right? Forgot the pain. Forgot the ugliness. Given the run, you could argue that we deserved this beating. As I said earlier, the hearings were a terrific excuse to sell. But so was Greece. So will be Portugal.
The only group that should have been directly affected by the hearings was the investment-banking cohort, because what happened today is that we heard why we need the Volcker rule. Goldman Sachs (GS - commentary - Trade Now) was a conflicted hedge fund that issued, underwrote and sold securities. That's what we heard today.
I think that these hearings will turn the tide to the most strict regimentation possible, and that means earnings per share will be trimmed at, yes, Goldman Sachs. The others? Not that much at all, because they are much less conflicted.
So do you sell Goldman? It trades at 6 times earnings and has plenty of cash and is priced for lots of losses from lawsuits from many, many clients.
But, yes, you sell it if you can't take pain, because there is much more pain ahead for this firm, the winner of the mortgage battles, and the loser of the political war.
Random musings: To read our continuous live blogging of the Goldman hearings, click here.
At the time of publication, Cramer was long GS. |
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