Tuesday, April 20, 2010

Goldman beats big this morning, continues to migrate away from I-banking (GS)

Earlier this morning, Goldman Sachs announced q1 2010 earnings per share of $5.59, about $1.60 ahead of analyst estimates. Revenues of $12.78billion were nearly two BILLION dollars higher than estimates.

A blowout quarter for the FICC division (Fixed Income, Credit & Commodities) drove most of the upside:

In an attempt to assuage (baseless) anger over high compensation levels, Goldman noted that this quarter's compensation ratio of 43% was the lowest ever for the company:
The accrual for compensation and benefits expenses was 43.0% of net revenues for the first quarter of 2010, down from 50.0% for the first quarter of 2009. The ratio of compensation and benefits to net revenues for the first quarter of 2010 is the firm’s lowest ever first quarter ratio, 650 basis points lower than the firm’s historical reported first quarter average ratio of 49.5%.
Management and legal council took a lot of questions on the conference call relating to the SEC's investigation, and not too much new info came out about the situation. Shares are trading at 161.50, a little above where I bought them Friday. I continue to expect this stock to head higher, and this earnings report certainly doesn't hurt, as it boosts expected 2010 earnings.

Take a look below at the comparison of revenue by segment in this quarter to the first quarter of 2000. Goldman actually does LESS in investment banking revenue now than it did ten years ago, while trading revenue is up 400%. Certainly something for potential hires to keep in mind when prepping for an interview. The response to the question "Do you know what we do here?" is certainly different now than it was a decade ago.

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