On the surface, Goldman's
results, which unlike JPM and Citi do not break out the
contribution of DVA, aka the top and bottom line contribution from Goldman's CDS
blowing out in Q2, were good because they beat expectations of $6.26 billion in
revenue and $1.18 in EPS, printing at $6.63 billion and $1.78/share. Of course,
going back 3 weeks and the bottom line estimate would have missed then consensus
EPS, but who cares: after tall the firm guided down and all the algos know is
that GS beat. The problems arise when one spreads the various top line segments
which portend nothing new: Client Flow, a proxy for general credit trading,
dropped from $3.5 billion to $2.2 billion in Q2, but better than Q2 2012 when it
was just $1.6 billion. However, client flow in equities was an abysmal $1.7
billion, down from $2.3 billion in Q2 and $1.9 billion last year as increasingly
less people opt to use Goldman's REDi platform or its equity sales team.
But most troubling was the epic collapse in the firm's Investing and
Lending group, aka its highest margin, Prop Trading operation, which in the
aftermath of the JPM fiasco mysteriously saw its revenue collapse from $1.9
billion to a mere $203 million, down from $1 billion a year earlier, and only
the second lowest number in the past 3 years. Did the JPM CIO CDS
repricing scandal force all banks to suddenly reevaluate their CDS books and
mark mid-market? We don't know, but there were no reason why Goldman's prop
traders should have generated only $200 million in a quarter in which the bulk
of the heat was focused on JPM and others. And finally, in terms of employee
retention, Goldman employees can not be happy: in Q2 average comp to the firm's
32,300 total staff also declined to a multi-year low of $343,003, down from
$350,864 last quarter, and down 16% from $408,958 a year earlier.
Goldman revenue breakdown by group:
Average comp:
And Q2 EPS estimates over time, courtesy of John Lohman:
Goldman revenue breakdown by group:
Average comp:
And Q2 EPS estimates over time, courtesy of John Lohman:
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