You could be forgiven for thinking some kind of disease is spreading throughout the global financial industry, with executives finding their heads on the block, authorities everywhere investigating them, the public absolutely loathing them, and multi-billion dollar losses dotted around to boot. Goldman Sachs’ latest contribution to the melee is an 11% fall in profits from $1.08bn to $962m for the second quarter, compared with the quarter before. Hardly dire, but no one is going to be happy with $118m less profit year-on-year.
The bank, which provides services mainly for institutional investors like multi-national corporations and also pension funds, said that: ‘activity levels for both corporate and investing clients were lower given continue instability in Europe and concerns about global growth.’ It seems everyone is blaming that old chestnut at the moment. Mind you, the debt crisis amongst PIIGS countries is dire and seems to be worsening with each waking minute. So Goldman Sachs probably has a point.
The drop is annoying for the firm, as it has been spending time trying to make efficiency savings and introducing new electronic trading technology to bring it into line with new regulations and prevent any further threats to its profits. The first quarter actually went pretty well, too, with a credit rally and temporarily increased investor appetite for bonds.
It’s not all bad for the bank, however. It said that the drop in profits was slightly offset by an increase in revenues from bonds, currencies and commodities trading. The firm says it made around $2.2bn in Q2 from these businesses, which is an increase of 11% on the same period last year. Furthermore, the company has redeemed itself as far as shareholders are concerned however, adjusting shares to yield earnings of $1.78, where analysts had been predicting $1.17 per share. Thanks to the unexpectedly higher figure, shares in the company rose 1.8% this morning in New York.
At least the firm is in profit – JP Morgan’s recent $4bn shocker and HSBC expected $1bn fine make a profit drop look like a birthday cake. Or a nice fat bonus.