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Goldman Demonstrates How It’s Done

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Lloyd Blankfein just couldn’t resist an opportunity to show up his “rivals” Mike and Jamie.

Goldman Sachs said on Tuesday that second-quarter earnings rose 5 percent, to $2 billion, buoyed in part by a more favorable environment for investment banking….

Analysts had been expecting a soft quarter for Goldman Sachs, which dominated trading on Wall Street before the financial crisis. Now, Goldman and the rest of Wall Street have been wrestling with declining trading activity….

Goldman reported investment banking net revenue of $1.78 billion, 15 percent higher than in the period a year earlier, helping to offset declines in fixed income, currency and commodities, which dropped 10 percent.

The big surprise, according to Mr. Hintz, came from the surge in the firm’s investing and lending division. Profits swelled 46 percent, to $2 billion, in the second quarter, driven largely by “company-specific events and strong corporate performance” in private equity, according to the company’s regulatory filing on Tuesday….

“We are pleased with our results for the quarter in the context of mixed operating conditions during the period,” Lloyd C. Blankfein, Goldman’s chief executive, said in a statement. “This performance was driven by the diversity, strength and breadth of our global client franchise….”

Goldman’s results were announced on the same day that JPMorgan Chase reported that its earnings in the second quarter dropped 8 percent, a sign that JPMorgan was also grappling with declines in trading revenue as well as mortgage lending.

Of course, things could have been different, had people freaked out about Russia invading the Ukraine, like Citi expected.

“We had hedged our equities book in [Europe, the Middle East and Africa] in anticipation of kind of a significant negative market reaction,” Citigroup Chief Financial Officer John Gerspach told investors on a conference call Monday. “Ultimately, that did not materialize to the extent that we had planned.”

The bank posted revenue of $659 million for its equity markets business, down 26% compared with last year’s second quarter. Mr. Gerspach said its moves to guard against the geopolitical risks of a conflict in the region resulted in realized losses as it unwound its hedges.

Goldman’s Quarterly Profit Rises 5% [DealBook]
Goldman Posts Surprise Profit Gain on Trading, Deal Fees [Bloomberg]
JPMorgan Profit Beats Estimates on Trading, Shares Climb [Bloomberg]
Cautious Citi Dinged on Hedging Russia, Ukraine Tensions [WSJ CFO Journal blog]


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