Goldman Earnings Double: Breaking Down the Numbers

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July 16 (Bloomberg) Bloomberg Market Makers anchor Erik Schatzker recaps second-quarter results from Goldman Sachs watched earnings double, beating analysts’ estimates as trading and investment-banking revenue jumped. He speaks on Bloomberg Television's "In The Loop."

Trading revenue, especially in fixed income, held up in the second quarter, even as long- term rates were backing up.

It was an open question for wall street, and we still have not seen bank of america or morgan stanley, but the big question, goldman had to exorcise the demons it was living with from 1994. lloyd blankfein and gary cohen were still there when it was still a private, capra was being destroyed by the backup in yields.

For goldman sachs, even more important to demonstrate it could hold its own in a fixed income market, like we saw in the month of june.

They proved they were strong in foreign exchange currencies, commodities, even as industry trading revenue declined, as you would expect in that kind of environment.

The other thing i want to highlight is the return on equity.

This is the benchmark of profitability for wall street banks like goldman sachs and morgan stanley, j.p. morgan.

10.5% in the second quarter.

This is still terrible.

That is pretty much the cost of capital for a firm like goldman sachs.

So long as they cannot earn their cost of capital, it is destroying shareholder value.

Yes, earnings per share come out ahead of estimates, not as much of a decline from the first quarter as expected, but in the bigger picture, broader perspective, this is not a good quarter for goldman sachs.

You need to see a firm like goldman sachs over the medium term generating roe in the mid- teens.

That will drive investors to drive the stock up.

Thank you, erik schatzker.

This text has been automatically generated. It may not be 100% accurate.


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