Goldman sees profits plunge
GOLDMAN Sachs was yesterday accused of massaging its figures downwards to ease political pressure as it reported an 83 per cent collapse in second quarter net income.
In what one observer described as a “well-orchestrated earnings announcement”, Goldman said net income for the three months to June came in at $453m (£297m), or 78 cents per share. Revenues slipped 36 per cent to $8.8bn, dragged down by scarcer investment banking activity and weaker proprietary trading.
Goldman revealed a $600m hit from then-chancellor Alistair Darling’s bank bonus tax and a $550m charge for settling a row with the US Securities and Exchange Commission over its mortgage-backed Abacus instrument.
Chief executive Lloyd Blankfein said client activity fell as “the market environment became more difficult during the second quarter”.
Financial officer David Viniar hinted the third quarter would show little improvement, saying: “Right now, the business environment is pretty slow.”
Shares in Goldman fell as low as $141.55 before paring their losses to close 2.11 per cent higher at 148.91. Peter Kenny of Knight Equity Markets said investors appeared unfazed by the apparently poor results.
He said: “What’s on people’s minds is what’s baked into the numbers. Is this politically motivated? In some cases it is because it makes Goldman look mortal. It’s all part of a fairly well orchestrated earnings announcement that isn’t just about figures.”
Alan Villalon of FAF Advisors said Goldman was caught in the same economic squeeze as its Wall Street rivals, but added: “They’re going to be under a lot of scrutiny here. The compensation ratio – the last thing people want to see is that tick up.”
The bank handed staff $3.8bn in remuneration in the second quarter. Its payout ratio fell from 49 per cent to 43 per cent for the first half.