earnings

UBS announced earnings today and I tell you, it is hard work to get people to focus on the strong fundamentals of your business when you keep distracting them with enormous screw-ups. Today’s:

Due to the gross mishandling of Facebook’s market debut by NASDAQ, we recorded a loss of CHF 349 million [$356mm] in our US Equities business as a result of our efforts to provide best execution for our clients. As a market maker in one of the largest IPOs in US history, we received significant orders from clients, including clients of our wealth management businesses. Due to multiple operational failures by NASDAQ, UBS’s pre-market orders were not confirmed for several hours after the stock had commenced trading. As a result of system protocols that we had designed to ensure our clients’ orders were filled consistent with regulatory guidelines and our own standards, orders were entered multiple times before the necessary confirmations from NASDAQ were received and our systems were able to process them. NASDAQ ultimately filled all of these orders, exposing UBS to far more shares than our clients had ordered. UBS’s loss resulted from NASDAQ’s multiple failures to carry out its obligations, including both opening the Facebook stock for trading and not halting trading in the stock during the day. We will take appropriate legal action against NASDAQ to address its gross mishandling of the offering and its substantial failures to perform its duties.

Once upon a time two months ago Felix Salmon said “The fact is that if UBS ended up losing anywhere close to $350 million on Facebook stock, it has no business being in the equity capital markets at all,” and I laughed, and, um, well, how do people feel about that today? Read more »

Deutsche Bank had two weird little bits of gun-jumping news today, one good(ish), one bad (just bad). The good news is that Deutsche Bank has decided that it wasn’t manipulating Libor too much:

A Deutsche Bank internal probe has found that two of its former traders may have been involved in colluding to manipulate global benchmark interest rates but there was no indication of failure at the top of the organization, three people close to the investigation said.

So … great? Those two Deutsche Bank traders can look forward to possible jail, but the buck stops with them: the board-appointed probe has exonerated the board. Ha ha ha you say, but why not? Jailable Libor manipulation by traders seems conceptually distinct from approved-by-the-Fed-and-BoE Libor manipulation for the perceived good of the financial system, and while the former is worse for the traders and submitters the latter might be worse for the top officers. At Barclays, at least, senior people were not intervening to pick up half a basis point here and there on swaps trades, but they were intervening to make themselves look pretty in the eyes of markets and Paul Tucker. And now they’re gone! At Deutsche, we don’t know what this report says, but there’s at least fake statistical evidence that DB didn’t systematically skew Libor one way or another, suggesting that the einzigen Badapfel* theory might be true, or true enough for the board not to fire itself, which is a lower bar.

The bad news is that DB announced today that it expects to announce crummy earnings next week, to the tune of EUR1.0bn/700mm of pre/after-tax net income in 2Q2012, down from 1.8/1.2bn in 2Q2011 and off ~30% from analyst estimates. This puzzled me not so much in earnings being down – what else is new, new normal, etc. – but in that we’re getting a sneak preview a week before earnings. Why do that? Read more »

You can’t possibly care about GS earnings can you? “Beat Diminished Expectations” is an elegant summary. FICC looks anemic relative to JPM and C but as Glenn Schorr of Nomura pointed out on the call some of what those guys call FICC Goldman calls “Investing & Lending” and an important principle of selling financial services generally is that non-comparability helps you so good work Viniar!

Good work Viniar generally; my favorite bit was when Schorr asked about all the recent partner departures and Viniar said basically that they were making up for lost time what with all the partner non-departures over the last four years, when it was a “tough economic environment, a tough reputational environment,” and partners – well they were so “completely loyal” that they just couldn’t leave GS in the lurch at trying times like those. This tickled me because, boy, don’t you wish you were a Goldman partner? In my line of work, when nobody was hiring and if they were hiring they weren’t hiring Goldman alums because Goldman was a vampire squid sucking the stuffing out of muppets, staying at Goldman until conditions improved was just simple pragmatism and nothing to be proud of: if you can’t get a job elsewhere, and you need a job, it stands to reason that you keep the job you’ve got. But once you’re making ten bucks a year the same behavior is the height of loyalty: since you don’t need a job anywhere, you show that you’re unbowed by the bad job environment and Goldman’s tarnished reputation by continuing to draw your partner paychecks. That seems right actually, and I promise you that I will grow many delightful moral qualities if you pay me $10 million a year. Read more »

JPMorgan had a … quarter, whatever, go read about it. Top and bottom-line beats with revs up and net income down y/o/y. And JPMorgan’s investment bank had a … you’d have to say pretty good quarter, with fees still not where I’d like to see them as a former fee-getting banker but with FICC bouncing back nicely from last quarter.

But who cares about the investment bank? Turns out we’ve been looking at the wrong JPMorgan all along, per this sweet Bloomberg story that examines the London Whale in his native ecosystem:

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has transformed the bank’s chief investment office in the past five years, increasing the size and risk of its speculative bets, according to five former executives with direct knowledge of the changes.

Achilles Macris, hired in 2006 as the CIO’s top executive in London, led an expansion into corporate and mortgage-debt investments with a mandate to generate profits for the New York- based bank, three of the former employees said. Dimon, 56, closely supervised the shift from the CIO’s previous focus on protecting JPMorgan from risks inherent in its banking business, such as interest-rate and currency movements, they said.

Some of Macris’s bets are now so large that JPMorgan probably can’t unwind them without losing money or roiling financial markets, the former executives said, based on knowledge gleaned from people inside the bank and dealers at other firms.

Har har har. Much of my admiration for Jamie Dimon comes from the fact that JPMorgan more or less does what Goldman is always accused of doing, and more or less gets away with it, so it’s nice to have proof that JPMorgan is Just A Giant Hedge Fund Masquerading As A Bank. And the story is juicy; I loved the description of Macris as “always ha[ving] off-the-wall ideas, but in hindsight sort of smart ideas,” which golly I have met people like that and I wouldn’t necessarily trust them with all my cash. Read more »

  • 18 Jan 2012 at 12:26 PM
  • Banks

Goldman Sachs Now Paying Employees For A Full Year Of Work

I know I’ve said that the Jamie & Doug in the Morning Show is the best call-in program in finance, given Jamie Dimon’s reliably amusing anti-regulation rant, but the true connoisseur should also really get a kick out of David Viniar’s calmer, wonkier, more NPR-appropriate chat. I certainly do. We’ll maybe have more to say about it later.

My enjoyment is, however, complicated by the fact that at this time of year I feel certain feelings. Specifically, feelings about Goldman Sachs comp, which will be terrible, horrible, down 115%, whatever, and yet … still … somehow … I want it. Have we talked about this before? Sometimes I miss investment banking. A thing that some people not in the industry don’t know about investment banking is that it is an awesome job, in the specific sense that many people would do it for free, or even pay money to do it, and in the even more specific sense that sometimes they do. (For, um, fairly loose definitions of “pay money.”) This happened twice during my time at Goldman. Let’s all luxuriate in a chart:
Read more »

  • 18 Jan 2012 at 8:57 AM

Goldman Sachs’s War On Plants PAYS OFF

Goldman Sachs said profit dropped 58 percent, beating analysts’ estimates as the company cut compensation in response to falling revenue. Fourth-quarter net income dropped to $1.01 billion, or $1.84 a share, from $2.39 billion, or $3.79, in the same period a year earlier, the New York-based company said today in a statement. Per-share earnings exceeded the $1.23 average estimate of 26 analysts surveyed by Bloomberg, whose predictions ranged from 70 cents to $2.50. “There seems to be continued emphasis on cost control and compensation control and that’s a good thing,” said Charles Bobrinskoy, the Chicago-based vice chairman and director of research at Ariel Investments. [Bloomberg, earlier]

  • 20 Oct 2011 at 1:05 PM

Stephen Schwarzman’s Crab Claw Funds At Risk

Blackstone reported an unexpected third- quarter loss as an 11 percent drop in the value of its buyout holdings forced the reversal of previously booked fees. Economic net income, a measure of earnings excluding some costs tied to the firm’s initial public offering, showed a loss of $341.9 million, or 31 cents a share, compared with a profit of $339.3 million, or 31 cents, a year earlier…“The third quarter presented extremely challenging market conditions, dominated by risk aversion and volatility,” Schwarzman said in today’s statement. “Our earnings were not immune to the sharp downward trajectory of global markets.” [Bloomberg, related]