Pankaj Nangia/Bloomberg paid Goldman Sachs news from a lifeline by Warren E. Buffett company, Berkshire Hathaway.Goldman Sachs gave investors a look at the new normal on Wall Street - and many are concerned.
In some ways of Goldman latest results looked good.
On Tuesday the Bank results reported in the first quarter of $1.56 a share, nearly double analysts expectations. Some divisions such as investment banking and investment management showed improvement. And the expensive lifeline by Warren E. Buffett holding company, Berkshire Hathaway, the Bank paid Goldman last important temple from the financial crisis.
But strong on the difficulties of an investment bank in the postcrisis world focused investors instead on Goldman slow growth, offered.
In the trade and the rest of institutional client services, once the hallmark of the company's operations, sales fell by 22 percent, to $6.7 billion. Total profit fell in the first quarter by 21 percent, to 2.74 billion $ of $3.5 billion, including the unique hit from the repayment of Berkshire. Revenue fell to $11.9 billion of 12.8 billion US $. And the return on equity, a key measure of profitability, is heavily on a few years ago.
"Everyone is saying this sector dead money, is," said Roger Freeman, analyst at Barclays Capital. "I hear it over and over and Goldman is one, the".
Investors noted. The Goldman broke shares on Tuesday, drop by up to 3 percent, to $151.86, to 1.3 per cent. The stock is from almost 10 percent for the year.
It is as Goldman Sachs and the rest of Wall Street eliminated the earnings situation will be given the new mandate to take advantage of and hang up temper to more capital. The threat of the new financial regulation makes only an uncertain Outlook. Investment banks, and its shareholders have felt no clear, as the rules will have a business at a time when economic growth is already slow.
Goldman, which more than most companies born out of the crisis, is gesattelt not with many of the same problems as his rival. Bank of America still the lazy legal consequences struggle under the weight loans and mounting. Morgan Stanley pays 2008 for an investment by the Japanese Bank of Mitsubishi UFJ financial group, a business that will cost the company $900 million per year.
The company struck a note of optimism in terms of the quarter despite lackluster results. On a conference call with analysts, executives said that client activity had increased, even in the midst of further economic interests.
"We are pleased with our first quarter," Chief Executive said Lloyd C. Blankfein, in a statement. "In general improvement of the market and economic conditions, coupled with our strong client franchise, solid results produced." "Looking ahead, we continue to see indications of economic activity throughout the world promote."
Still, investors are nervous about Goldman prospects. Many big names have actively their exposure, been reduced including the Wellington management, based in Boston. It sold over a million shares in Goldman end of 2010, according to filings. Wellington refused to comment.
A concern is that Goldman-return on equity deterioration of. In the first quarter, Goldman Sachs return on equity was 12.2 per cent. It was 20.1 per cent a year and 38 percent at the beginning of 2009.
"" Most investors have only one question: "what is the return on equity go to?" ", said Mr Freeman of Barclays.""Is not clear the response, in the light of the uncertain regulatory environment."
The current return on equity is also far below Goldman the stated goal of 20 percent-a level, which closely to the company tracks the average since its initial public offering in 1999. But the company is not ready, review your goal down, was until it less "unknown variables are" close around its operating model, according to a person to the company that has not authorized to speak publicly about the matter.
Although analysts are confident, that is Goldman finally can increase over the course of time, it will be a hard slog in the near future.
Return on equity is the amount of money that delivers a company on each share. So if the total investor base is growing, Goldman must produce even higher yields to keep are the same. Currently, Goldman sits on $64 billion of shareholders shareholder equity, up from 46.6 billion US $ at the end of 2008, which means that it must work harder to generate the same return on equity.
To improve the gives the company could issue a number of one-time dividends or share buy-backs to reduce the capital. But that would be a tricky move right now. Regulators were to buy back large quantities of material, because they should have sufficient capital of an economic shock to let companies like Goldman. Also, to bucks Goldman capital let go until it knows what regulatory changes.
In the meantime, the company has not the same opportunities to increase profits. Before Goldman could increase profits up its leverage effect, ratchet wrench relying on borrowed money. With pressure from regulators, wet risk leverage ratio to 12.9 per cent dropped the company's gross at the end of the quarter, from 27.9 per cent at the beginning of the year 2008.
Mr Freeman said "until now, they were bound working with two hands behind the back". "Now they have only one hand, and it's still not easy."
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