EmailGoldman Sachs (GS $128.42 -0.91) reported second quarter earnings of
$1.85 per share, $0.56 worse than the Capital IQ Consensus Estimate of $2.41.
Revenues fell 38.8% year/year to $7.28 billion versus the $8.06 bln consensus.
Annualized return on average common shareholders' equity was 6.1% for the second
quarter of 2011 and 8.0% for the first half of 2011. The firm's Tier 1 capital
ratio under Basel 1 was 14.7% and the firm's Tier 1 common ratio under Basel 1
was 12.9% as of June 30, 2011.
Net revenues in Investment Banking were $1.45 billion, 54% higher y/y and 14% higher q/q. Net revenues in Financial Advisory were $637 million (+35% y/y), Underwriting business (+73% y/y), debt underwriting were significantly higher y/y. Net revenues in equity underwriting were also significantly higher than the second quarter of 2010, reflecting an increase in industry-wide equity and equity-related offerings.
Net revenues in Institutional Client Services were $3.52 billion, 29% lower y/y and 47% lower q/q. Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.60 billion, 53% lower y/y, reflecting significantly lower results in mortgages, commodities and interest rate products. High levels of uncertainty and decreased levels of liquidity during the quarter contributed to difficult market-making conditions, particularly in mortgages and commodities, and prompted the firm to operate at generally lower levels of risk. In addition, net revenues in currencies decreased slightly and net revenues in credit products were essentially unchanged compared with the second quarter of 2010. During the quarter, Fixed Income, Currency and Commodities Client Execution operated in a challenging environment reflecting broad market concerns and uncertainty, which led to slightly lower levels of activity. The effect of these macro concerns was more pronounced within the firm's Asian and European franchises. Net revenues in Equities were $1.92 billion, 19% higher than the second quarter of 2010, primarily reflecting higher net revenues in equities client execution.
Operating expenses were $5.67 billion, 23% lower y/y) and 28% lower q/q. The ratio of compensation and benefits to net revenues for the first half of 2011 was 44.0%.
