Goldman Sachs profit soars on bond trading and curtailed costs

Goldman reported nearly $2 billion in revenue from trading fixed income, currency and commodities.
Updated 18 October 2016
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Goldman Sachs profit soars on bond trading and curtailed costs

NEW YORK: Goldman Sachs Group Inc. reported a 58 percent jump in third-quarter profit on Tuesday as bond trading rebounded and the Wall Street bank managed to keep a lid on expenses.
Goldman reported nearly $2 billion in revenue from trading fixed income, currency and commodities, making it the biggest contributor to overall revenue.
Strong bond issuance and better conditions in credit and mortgage markets helped the bottom line, Chief Financial Officer Harvey Schwartz said on a conference call with analysts.
But he noted that the business only seems to be doing so well because it performed so poorly in the year-ago period.
“It wasn’t so much about tailwinds as it was about not having so many headwinds in the quarter,” said Schwartz. “It translated nicely for us.”
He noted that while credit and mortgage trading results were better, currencies were flat and rates declined slightly.
Goldman, the fifth largest US bank by assets, has historically been more reliant on bond trading than its peers. That helped the bank earn big profits leading into the 2007-2009 financial crisis, but financial reform rules imposed since then have hindered the business.
In an effort to buoy profits, Goldman launched an efficiency program earlier this year, with the goal of reducing annual expenses by $700 million.
That program was evident in its third-quarter results, with operating expenses up just 10 percent, compared to a 19 percent rise in net revenue. Staff levels were down 5 percent compared to the third quarter of 2015.
Goldman shares, which had fallen 6.2 percent this year through Monday’s close, were up 1.3 percent in morning trading, to $171.19.
Overall, Goldman generated $2.1 billion in net income for common shareholders, up 58 percent from the year-earlier period. It was the bank’s second straight rise in quarterly profit after four quarters of decline.
Earnings per share rose to $4.88 from $2.90, partly because Goldman bought back roughly 22 million of its own shares over that time. Analysts on average had expected earnings of $3.82 per share, according to Thomson Reuters I/B/E/S.
In a statement, CEO Lloyd Blankfein described it as “solid performance.”
Goldman’s return-on-equity — a closely watched measure of how well a bank uses shareholder money to generate profit — was 11.2 percent in the quarter. Those returns have been weighed down by higher capital requirements imposed following the 2007-2009 financial crisis. Analysts and investors generally expect big banks to produce returns of at least 10 percent to meet their basic cost of capital.
Goldman has been trying to shift its business model over the last several years to rely less on trading and more on stable businesses like investment management. That division generated revenue of $1.49 billion, up 4 percent from the year-ago period.
The bank has also dived into consumer lending, launching an online platform called Marcus last week. Goldman is taking a “slow and methodical” approach to building that business, Schwartz said.
Investments and loans Goldman makes with its own balance sheet were another bright spot in the quarter. The bank’s revenue from investing and lending more than doubled to $1.4 billion, due to higher stock market values.
Investment banking revenue, which includes income from advising on mergers and acquisitions as well as underwriting bond and share offerings, fell 1.2 percent to $1.54 billion.
Goldman topped all banks globally in M&A fees in the quarter, a slow one for deals, but trailed JPMorgan in revenue from underwriting bond and equity offerings, according to Thomson Reuters data.
Its equities-trading revenue rose 2 percent to $1.78 billion.
Goldman’s results echoed trends reported by Wall Street rivals including JPMorgan Chase & Co, Citigroup Inc. and Bank of America Corp. Its chief rival, Morgan Stanley, is due to report results on Wednesday.


Former Nissan chairman Ghosn appears in Tokyo court

Updated 23 May 2019
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Former Nissan chairman Ghosn appears in Tokyo court

  • It is the first of a series of hearings to iron out logistics for Carlos Ghosn’s actual trial
  • Nissan’s former chairman has hired a strong legal team as he fights to clear his name

TOKYO: Nissan’s former chairman, Carlos Ghosn, appeared in a Japanese courtroom Thursday for a hearing ahead of his trial on accusations of financial misconduct.
It was the first of a series of hearings to iron out logistics for Ghosn’s actual trial. The trial date has not been set, and experts say it could be months away.
Ghosn, who led the Japanese automaker for two decades, was arrested in November and charged with underreporting his income and breach of trust. He was released on bail in March, rearrested in April on fresh accusations and then released again on bail on April 25.
Ghosn insists he is innocent and says he was targeted in a “conspiracy” by others at Nissan Motor Co.
Nissan, which is allied with Renault of France, has seen profits nose-dive amid the fallout from Ghosn’s arrest.
Ghosn has hired a strong legal team as he fights to clear his name. One of his top lawyers, Junichiro Hironaka, was seen walking into the courtroom Thursday with Ghosn.
One of the conditions of Ghosn’s release on bail is that he is forbidden to contact his wife. Prosecutors say that’s to prevent evidence tampering.
Ghosn’s lawyers challenged that restriction, saying it is a violation of human rights, but the Supreme Court rejected their appeal Tuesday.
The lawyers can appeal again to have the restriction removed.
In a briefing Thursday, Deputy Chief Prosecutor Shin Kukimoto welcomed the Supreme Court’s decision.
“For married people to be together is important, but I feel there was enough reason for the Supreme Court to support us in this restriction,” he said.
Kukimoto declined comment on the hearing, which was closed to reporters and the public.
Kukimoto also said the maximum penalty upon conviction of all 15 counts of the charges Ghosn is facing is 15 years in prison and a fine of ¥150 million ($1.4 million).