Instant View: Goldman Sachs earnings double, beat forecasts

NEW YORK (BestGrowthStock) – Goldman Sachs Group Inc on Tuesday reported that its first-quarter earnings doubled as fixed income trading profits again bolstered results.

Net income for the New York-based bank rose to $3.29 billion, or $5.59 cents per share, from $1.66 billion, or $3.39 per share, a year earlier.

The earnings beat analysts’ forecast for EPS of $4.01 according to estimates compiled by Thomson Reuters I/B/E/S.

On Friday, Goldman was charged with fraud by the U.S. Securities and Exchange Commission in the structuring and marketing of a debt product tied to subprime mortgages.

Goldman shares were up less than 1 percent.

The following is reaction from industry analysts and investors:

PAUL HAND, MANAGING DIRECTOR AT RBC CAPITAL MARKETS, IN TORONTO:

“They’re bigger numbers, but they always seem to beat.”

On SEC fraud scam: “It’s always very dangerous when regulators, years after the fact, go through e-mails and tapes and files with today’s information but without the context of what it was like back then. It’s scary. And that’s why we get so frustrated as a (financial) community.

“The biggest issue here is that it reinforces the view of a lot of knowledgeable people that Goldman is a highly successful machine in keeping their investment banking business in line, when in actual fact they are a giant hedge fund. They’ve done a very good job of balancing those interests off.”

OWEN IRELAND, ANALYST, ODL SECURITIES, LONDON

“Whilst there could be a PR backlash following the recent allegations, what can’t be denied is the ability of Goldman Sachs to produce stellar results. They have simply reiterated that they are a financial powerhouse.”

STEPHEN POPE, CHIEF GLOBAL EQUITY STRATEGIST, CANTOR FITZGERALD, LONDON

“They are very strong, very good earnings numbers and probably the best ever quarter that has come from any investment bank, but the shares haven’t gone racing ahead in pre-market trading because you have the shadow of this inquiry hanging over it.”

DAVID MORRISON, MARKET STRATEGIST, GFT GLOBAL MARKETS, LONDON

“On the face of it, Goldman’s numbers are pretty good, which they do time and time again. Investors will want to focus on the blowout numbers, but the news the FSA is also probing the firm takes some of the shine off.”

MICHAEL HOLLAND, FOUNDER OF HOLLAND & CO, WHICH OVERSEES MORE THAN $4 BILLION OF ASSETS, NEW YORK:

“The best run banks — Goldman, JPMorgan, and even Bank of America — are good across the board. They’re showing no lack of leadership in all product areas. That’s especially true for Goldman Sachs. There’s a dose of reality thrust on investors when they see numbers like these — whatever may have happened in the past few days. People who want to use Goldman for political purposes may be putting parts of the business at risk, and that is what it is, but overall, Goldman has shown with these numbers that they are the best of the best.”

DAVID BUIK, SENIOR PARTNER, BGC PARTNERS, LONDON

“I am not remotely surprised because they always outstrip their estimates. Knockout figures for fixed income, really good figures for equities (but) the fact that 43 percent of the income will be distributed as compensation will annoy the Street.”

MIKE LENHOFF, CHIEF STRATEGIST, BREWIN DOLPHIN, LONDON

“That is quite exceptional — either that or clearly the consensus was just not ambitious enough in estimating where things were at with Goldman Sachs.”

“This has been typical in a way of the results that have been reported thus far. The earnings season … has really been quite astonishingly good. Not only have the earnings surprised on the upside but the sales have as well. The market is really just focusing on that and I don’t think it’s focusing on anything else.”

JUSTIN URQUHART STEWART, DIRECTOR, SEVEN INVESTMENT MANAGEMENT, LONDON

“Their numbers were pretty good because a lot of their competition have been taken out. They are one of the few games in town that can actually provide those facilities and services. They seem to be successful so they are attracting a lot of new businesses … Despite the actions of the SEC and the FSA, which will be focusing probably much more on some of the political elements that have been stated in terms of their not-so-much illegal behavior but certainly may be how the politicians regard as moral behavior, that won’t necessarily affect their performance of the business itself.”

JOHN HAYNES, HEAD OF RESEARCH, RENSBURG SHEPPARDS, LONDON

“The numbers are better than the forecasts which is good, but they are a closed box, it is impossible to be confident in estimates of investment banks. We are at a mature stage in the investment banking cycle. The fixed income, commodity and currency divisions did well which you would expect them to. But going forward, I would say that (investment banks) will be less advantaged than the traditional banks as interest rate spreads start to widen. It’s difficult to see how they’ll do it again.”

Investment

(Reporting by Jonathan Spicer, Atul Prakash, David Brett, Jon Hopkins, Harpreet Bhal, Tricia Wright, Dominic Lau and Simon Falush; Compiled by Christian Plumb, Dan Wilchins and Tiffany Wu)

Instant View: Goldman Sachs earnings double, beat forecasts