Goldman Sachs Posts Lower Q3 Profit

Poor bond trading conditions are driving down revenues at the big United States investment banks, as the volatile market experiences yet another downturn. Oppenheimer raised Goldman Sachs from a market perform rating to an outperform rating and increased their target price for the company from $180.94 to $236.00 in a research report on Monday, September 21st. The company added $1.45 billion to reserves for litigation and regulatory proceedings in the second quarter and increased its estimate of possible losses beyond those reserves by 55 percent to $5.9 billion. For starters, Goldman ranked first in announced and completed M&A, as well as equity offerings year-to-date. However, Investment Banking and equity trading improved 6%, and 18% YoY. Finally, Sandler O’Neill raised their price target on shares of Goldman Sachs to $217.00 and gave the company a “hold” rating in a research note on Saturday, July 18th. BofA and JPMorgan earlier this week reported top-line declines of just 11 percent, while Citi on Thursday said FICC trading revenue fell 16 percent.

Lloyd Blankfein, Chief Executive, stated that the company experienced lower activity levels and a decline in asset prices during the quarter.

The Wall Street bank said on Thursday its net income applicable to common shareholders fell 38 per cent, to $1.33-billion, or $2.90 per share, from $2.14-billion, or $4.57 per share, a year earlier. The company reported $1.98 earnings per share (EPS) for the quarter, topping the Thomson Reuters’ consensus estimate of $1.81 by $0.17. However, analysts were expecting earnings of $2.91 per share on revenue of $7.13 billion.

U.S. Bancorp was also slightly profitable in the third quarter, with a net income of $1.489 billion, or $0.81 per share, up from$1.483 billion in the previous quarter and up from $1.471 billion in the same quarter past year.

But other areas hit by the lower trading activity included its lending business, which include lending against trades. But its annualized return on equity fell to 7 percent for the quarter – in line with Bank of America and below Citigroup. The average 12-month target price is $207.88, reflecting greater than 12.3% upside potential over the stock’s last closing of $185.18.

One bright spot was investment banking, where debt underwriting and M&A advisory stood out. Revenue also did not meet analysts’ expectations of $7.29 billion. Smith Sarah G sold 4,664 shares worth $1.00M. The stock was bought at an average cost of $18.51 per share, for a total transaction of $378,510.99. Since then, revenue has slipped for two straight quarters, pulling compensation expense at the bank down by 1 percent for the first nine months.