Goldman Sachs’s Lowest Revenue in Four Years

By Prachi Makkar,
Money & Investing Writer
goldman sachs

Whenever we want to know about how the banks are performing, we always look towards the big names such as J.P. Morgan (NYSE: JPM), Bank of America (NYSE: BOA, and definitely Goldman Sachs (NYSE: GS).

Recently, Goldman suffered a major drop in their revenues and reported the worst quarterly results in over four years.

Since the start of the year, the company’s stock has declined about 12 percent. This fall made it the worst performer of the Dow Jones Industrial Average.

Goldman Sachs’s disappointing numbers were the lowest out of all but, they were not the only ones suffering.

Their counterparts such as JP Morgan Chase & Co., Citigroup Inc. (NYSE: C) and Bank of America Corp also posted profits with declines as well.

This specific quarter had a very rocky start and continued to be volatile. This can really be seen in their reported numbers.

The uncertainty about U.S. interest rates, sliding commodity prices, worries about the Chinese economy, and other aspects have affected the markets and numbers for all major banks.

Goldman Sachs’s first quarter revenues declined 40 percent. Goldman’s emphasis on bond trading and low returns during the first quarter are being questioned. Goldman relies heavily on the capital markets business specifically bond trading which is very volatile.

The fixed income, currencies, and commodities trading unit was one of the worst performers with the revenue down 47 percent. Equities trading is normally a strength for them but, it fell 23 percent to $1.8 billion.

Investment banking fell 23.2 percent to $1.46 billion.

The markets are very cyclical and there are always highs and lows. This is Wall Street’s sixth year of unexpected price swings and weak volumes that have really been hurting investors and the market.

Goldman executives and representatives are defending their numbers and actions.

They said that these difficulties in trading are roadblocks and are short term problems.

Goldman reported the lowest quarterly revenue in over four years.

A year earlier, the bank recorded its best quarterly profit in five years. Their net income applicable to common shareholders at that time was $2.75 billion, or $5.94 per share.

This fell 56.3 percent to 1.2 billion, or $2.68 a share. Net revenue fell from $10.62 billion to $6.34 billion.

Their return on average common equity was 6.4 percent this quarter and investors believe to cover the cost of capital it should be at least 10 percent.

The ROE was 14.7 percent a year before. Executives are saying that they are focused on improving this measure. The company’s profit decreased by more than one half from one year ago.

Just a few days into the second quarter, they have already had a much better start. Markets have shown signs of improvement in the early days of this quarter.

Analysts and executives believe that this quarter will have much better numbers than the first quarter. Goldman actually beat the earnings estimates by Wall Street which had decreased significantly.

After beating the low expectations of analysts’ expectations, Goldman Sachs’s shares went up 2.3 percent at $162.65 a share.

The market and investors were prepared for low numbers this quarter because of the uncertainty of the markets. People are disappointed and are waiting for the recovery.

But, we all have faith and know that the markets are cyclical and volatile. For every low there is a high and numbers will start to improve.

A version of this article appeared in the Tuesday, April 26th print edition.

Contact Prachi at
prachi.makkar@student.shu.edu

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