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Last Update: 18-Oct-11 09:40 ET
Goldman Sachs Third Quarter Results Fall Far Short of Expectations
Goldman Sachs (GS $99.84 +2.94) reported a third quarter loss of ($0.84) per share, $0.68 worse than the Capital IQ Consensus Estimate of ($0.16).
Revenues fell 59.7% year/year to $3.59 bln vs the $4.31 bln consensus. "CEO and investor confidence as well as asset prices across markets were lower in the third quarter given the uncertain macroeconomic and market conditions. Our results were significantly impacted by the environment and we were disappointed to record a loss in the quarter," said Lloyd C. Blankfein, Chairman and Chief Executive Officer.
Net revenues in Investment Banking were $781 million, 33% lower than the third quarter of 2010 and 46% lower than the second quarter of 2011. Net revenues in Financial Advisory were $523 million, up slightly from the third quarter of 2010. Net revenues in the firm's Underwriting business were $258 million, 61% lower than the third quarter of 2010. Net revenues in both equity underwriting and debt underwriting were significantly lower than the third quarter of 2010, reflecting a significant decline in industry-wide activity. The firm's investment banking transaction backlog increased compared with the end of the second quarter of 2011.
Net revenues in Institutional Client Services were $4.06 billion, 13% lower than the third quarter of 2010 and 16% higher than the second quarter of 2011. Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.73 billion, 36% lower than the third quarter of 2010. During the quarter, global economic uncertainty intensified, resulting in volatile markets and significantly wider credit spreads. Although these factors contributed to difficult market-making conditions, particularly in credit products, mortgages and currencies, activity levels were generally consistent with the prior quarter. The decline in net revenues compared with the third quarter of 2010 reflected significantly lower results in credit products, mortgages and, to a lesser extent, currencies. Net revenues in Equities were $2.33 billion, 18% higher than the third quarter of 2010. This increase was primarily due to significantly higher commissions and fees, reflecting higher transaction volumes.
Operating expenses were $4.32 billion, 29% lower than the third quarter of 2010 and 24% lower than the second quarter of 2011. The accrual for compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as benefits) was $1.58 billion for the third quarter of 2011, a 59% decline compared with the third quarter of 2010. The ratio of compensation and benefits to net revenues for the first nine months of 2011 was 44.0%.
As of September 30, 2011, total capital was $245.74 billion, consisting of $70.09 billion in total shareholders' equity (common shareholders' equity of $66.99 billion and preferred stock of $3.10 billion) and $175.65 billion in unsecured long-term borrowings. Book value per common share was $131.09 and tangible book value per common share (9) was $120.41, both essentially unchanged compared with the end of the second quarter of 2011.
Revenues fell 59.7% year/year to $3.59 bln vs the $4.31 bln consensus. "CEO and investor confidence as well as asset prices across markets were lower in the third quarter given the uncertain macroeconomic and market conditions. Our results were significantly impacted by the environment and we were disappointed to record a loss in the quarter," said Lloyd C. Blankfein, Chairman and Chief Executive Officer.
Net revenues in Investment Banking were $781 million, 33% lower than the third quarter of 2010 and 46% lower than the second quarter of 2011. Net revenues in Financial Advisory were $523 million, up slightly from the third quarter of 2010. Net revenues in the firm's Underwriting business were $258 million, 61% lower than the third quarter of 2010. Net revenues in both equity underwriting and debt underwriting were significantly lower than the third quarter of 2010, reflecting a significant decline in industry-wide activity. The firm's investment banking transaction backlog increased compared with the end of the second quarter of 2011.
Net revenues in Institutional Client Services were $4.06 billion, 13% lower than the third quarter of 2010 and 16% higher than the second quarter of 2011. Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.73 billion, 36% lower than the third quarter of 2010. During the quarter, global economic uncertainty intensified, resulting in volatile markets and significantly wider credit spreads. Although these factors contributed to difficult market-making conditions, particularly in credit products, mortgages and currencies, activity levels were generally consistent with the prior quarter. The decline in net revenues compared with the third quarter of 2010 reflected significantly lower results in credit products, mortgages and, to a lesser extent, currencies. Net revenues in Equities were $2.33 billion, 18% higher than the third quarter of 2010. This increase was primarily due to significantly higher commissions and fees, reflecting higher transaction volumes.
Operating expenses were $4.32 billion, 29% lower than the third quarter of 2010 and 24% lower than the second quarter of 2011. The accrual for compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as benefits) was $1.58 billion for the third quarter of 2011, a 59% decline compared with the third quarter of 2010. The ratio of compensation and benefits to net revenues for the first nine months of 2011 was 44.0%.
As of September 30, 2011, total capital was $245.74 billion, consisting of $70.09 billion in total shareholders' equity (common shareholders' equity of $66.99 billion and preferred stock of $3.10 billion) and $175.65 billion in unsecured long-term borrowings. Book value per common share was $131.09 and tangible book value per common share (9) was $120.41, both essentially unchanged compared with the end of the second quarter of 2011.
