Citigroup Takes 'One Last Whack' To Goldman Sachs


Photo: endbradley via flickr

Citigroup joins the parade, and moves Goldman’s earnings to the loss column.The title of the note: Taking One Last Whack To 3Q Est’s, We now see a loss of 65c

Marking GS Estimates to market as of 9/30 — Given 3Q weakness across trading and investment banking that extended through the end of Sept, further equity market declines and wider credit spreads we reduce our GS EPS estimate from a 10c gain to a 65c loss. While we expect 3Q11 will mark Goldman’s 2nd quarterly loss in its history since its IPO in 1999 – likely sparking negative headlines – we see the weakness from this quarter as generally already in the stock trading at 0.8x TBV.

One-timers in our estimate are a net ~15c drag — Our 3Q est includes a $300 mil DVA gain given wider credit spreads on Goldman’s fair valued liabilities (17c benefit to our numbers) and also includes $300 mil of combined severance charges and impact from the UK bank levy (worth ~30c drag). Excluding all of these items we see about a 50c core 3Q loss. Our est embed ~$1 bil of stock buyback during 3Q, which implies about a 1% cut to diluted shares. On the call we will be looking for comments regarding progress on Goldman’s $1.2 bil cost saving initiative as well as any views on impact of Volcker rule given the draft version leaked to the press this week.

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