Goldman Sachs Reports $2.1 billion Q1 Profit
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Wall Street’s Goldman Sachs has reported a higher than expected $2.1 billion profit for the first quarter of 2012, an outcome of the company reining in costs and risk-taking activities. However, analysts are saying that Goldman’s profits mask other problems, including a 16 percent decline in revenue.
Wall Street’s Goldman Sachs has reported a higher than expected $2.1 billion profit for the first quarter of 2012, an outcome of the company reining in costs and risk-taking activities. However, analysts are saying that Goldman’s profits mask other problems, including a 16 percent decline in revenue.
Goldman Sachs reported yesterday that it booked a first-quarter profit of $2.1 billion, a 128 percent increase from the $908 million the company made in the same period last year. At the same time, Goldman announced it would raise its quarterly dividend payout to 46 cents per share from 31 cents.
Despite the strong performance results, analysts say Goldman’s profits “masked lurking problems”.
In effect, the company’s revenue fell 16 percent compared to a year ago, and had to make up for its weaknesses by turning to cost cutting.
Over the last year, Goldman shed over 3,000 jobs, or 8 percent of its workforce, and trimmed down its infamously extravagant remuneration and employee benefits.
The bank announced it had set aside $4.38 billion for the first quarter of 2012 for compensation and bonuses, a 16 percent decline compared with the first quarter of 2011.
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The AP also pointed out that Goldman’s Q1 2011 $908 million profit “strips out payments that the bank made that quarter to Berkshire Hathaway, when it bought back the investment that Berkshire gave Goldman as a lifeline in the height of the financial crisis.”
[quote] If that payment is included, then Goldman’s profits fell 23 percent, AP added. [/quote]
The results also show how the new regulatory environment and market uncertainty has led banks, such as Goldman, and their clients to rein in their risk-taking appetite.
Goldman’s first quarter has been largely overshadowed by the resignation of former Goldman excutive Greg Smith, who openly accused the bank of putting its profits before its clients.
On a morning conference call, Goldman chief financial officer David Viniar said:
[quote] We have been cautious on risk and we remain cautious on risk given the environment, and I think that is also reflective of the fact that our clients have been cautious on risk and remain cautious on risk. [/quote]As part of its de-risking strategy, Vinair said the company conducted a “purely de-risking sale” of Chinese bank ICBC. This week, Goldman sold $2.5 billion worth of its stake in China’s largest bank, a stake Goldman has held since 2006.
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