{"id":381990,"date":"2011-04-19T13:15:29","date_gmt":"2011-04-19T13:15:29","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/04\/19\/weak-trading-saps-goldman-profits\/"},"modified":"2011-04-19T13:15:29","modified_gmt":"2011-04-19T13:15:29","slug":"weak-trading-saps-goldman-profits","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/04\/19\/weak-trading-saps-goldman-profits\/","title":{"rendered":"Weak trading saps Goldman profits"},"content":{"rendered":"

19 April 2011<\/span> Last updated at<\/span> 09:15 ET<\/span><\/span><\/p>\n

Goldman Sachs saw its net earnings in the first three months of 2011 drop 21% from a year ago, to $2.74bn (\u00a31.7bn).<\/p>\n

The profit fall followed continued weak business at its capital markets unit.<\/p>\n

Net revenues in Goldman’s key division, which makes the bulk of the firm’s money trading in bonds, derivatives and stocks, fell 22% from a year ago.<\/p>\n

Ordinary shareholders saw their share of earnings slump 72% after the Wall Street firm decided to pay out a $1.8bn dividend on preferred stock.<\/p>\n

The dividend payment related to Goldman’s buyback earlier this year of $5bn of preferred stock from Warren Buffett, which the billionaire had originally bought in a rescue deal during the 2008 financial crisis.<\/p>\n

Net revenues at the broker-dealer – a measure of overall business levels – were down 7% from a year before.<\/p>\n

Goldman accordingly cut the amount allotted to employee pay by 5% to $5.2bn, or 44% of its net revenues.<\/p>\n

‘Good results’<\/span><\/p>\n

Despite the sharp fall in profits, Goldman’s first quarter performance<\/a> still beat expectations.<\/p>\n

The results also marked a rebound from the previous quarter, which had seen a 52% year-on-year slump in profits, again due to lacklustre sales and trading business.<\/p>\n

“These are good results,” said Joerg Rahn of German investment firm Marcard, Stein and Co. “Yes, expectations weren’t gigantic but they were beat nevertheless.”<\/p>\n

The drop-off in debt trading revenues was higher than anticipated, according to Matt McCormick of investment firm Bahl & Gaynor.<\/p>\n

“I expected Goldman Sachs to be the best in class on that issue, but all their other peers seem to be facing the same challenges.”<\/p>\n

Meanwhile, the result is expected to steady nerves ahead of the opening bell on the New York Stock Exchange.<\/p>\n

“Goldman Sachs is a bellwether and these numbers will probably begin to calm some of the fears that the market has been worried about,” said Peter Cardillo, economist at Avalon Partners in New York.<\/p>\n

US stocks fell sharply in early trading on Monday following an announcement by rating agency Standard & Poor’s that it was putting a negative outlook on the US government’s triple-A credit rating.<\/p>\n

Meanwhile, another major US financial institution, Bank of New York Mellon, reported net profits of $625m<\/a>, up 12% from a year ago.<\/p>\n

Despite the strong showing from its core custody business, the result still fell short of market expectations.<\/p>\n<\/div>\n

Read the rest here:
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