The earnings report is out, and it’s hitting like a wet blanket. The stock off 2% pre-market.
Revenue: $8.84 billion is shy of estimates of $8.99 billion.
EPS: $2.75 is well ahead of the $2.04, but we’re within range.
Here’s what CEO Lloyd Blankfein had to say about the company’s results: “The market environment became more difficult during the second quarter and, as a result, client activity across our businesses declined… Looking ahead, we remain focused on helping our clients to raise capital, manage risk and invest for the future, which are all important to economic growth.”
The trading business is way down:
Trading and Principal Investments
Net revenues in Trading and Principal Investments were $6.55 billion, 39% lower than the second quarter of 2009 and 36% lower than the first quarter of 2010.
Net revenues in Fixed Income, Currency and Commodities (FICC) were $4.40 billion, 35% lower than a strong second quarter of 2009. During the second quarter of 2010, FICC operated in a challenging environment generally characterised by lower activity levels and wider corporate credit spreads. The decline in net revenues compared with the second quarter of 2009 reflected significantly lower results in credit products, interest rate products and currencies. These decreases were partially offset by higher net revenues in mortgages and, to a lesser extent, commodities. During the second quarter of 2009, mortgages included a loss of approximately $700 million on commercial mortgage loans.
Net revenues in Equities were $1.21 billion, 62% lower than a strong second quarter of 2009. During the second quarter of 2010, Equities operated in a challenging environment characterised by a significant decline in global equity prices, a sharp increase in volatility levels and lower activity levels. The decline in net revenues compared with the second quarter of 2009 primarily reflected significantly lower results in derivatives and, to a lesser extent, principal strategies. In addition, net revenues in shares were lower compared with a solid second quarter of 2009. Commissions declined slightly compared with the second quarter of 2009.
Principal Investments recorded net revenues of $943Â million for the second quarter of 2010. These results included a gain of $905Â million related to the firmâ€™s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), primarily reflecting the expiration of transfer restrictions related to these shares, a net gain of $34Â million from corporate principal investments and a net loss of $10Â million
Dealmaking is down:
Net revenues in Investment Banking were $917 million, 36% lower than the second quarter of 2009 and 23% lower than the first quarter of 2010.
Net revenues in Financial Advisory were $472 million, 28% higher than the second quarter of 2009, primarily reflecting an increase in client activity. Net revenues in the firm’s Underwriting business were $445Â million, 58% lower than the second quarter of 2009. Net revenues in equity underwriting were significantly lower than a strong second quarter of 2009, primarily reflecting lower levels of industry-wide activity, as the second quarter of 2009 included significant capital-raising activity by financial institutions. Net revenues in debt underwriting were also significantly lower, primarily reflecting a decline in industry-wide activity. The firm’s investment banking transaction backlog increased during the quarter.(8)
The full announcement is here.
More to come…
Here’s the preview, via The Fly On The Wall:
The consensus estimate is $2.04 for EPS and $8.99B for revenue. The consensus range is $1.60-$2.90 for EPS and $7.53B-$10.61B for revenue, according to First Call. Wall Street analysts and media outlets generally believed that Goldman Sachs’ $550M settlement with the SEC represented a significant victory for the investment bank.