Why Goldman Sachs Group Stock Slumped 5% Today

19 April, 2017, 01:33 | Author: Glen Fletcher
  • Record Earnings Lead To Big Bonuses On Wall Street

Earlier, Goldman Sachs reported first quarter earnings that came up short, missing estimates by a distance. Trading revenues in bonds, currencies and commodities was effectively flat in quarter while trading revenues for stocks were down 6 percent from a year earlier. JPMorgan Chase, Citigroup and Bank of America's trading divisions all reported increases in trading last quarter.

At the time of writing, Goldman Sachs' shares were down three per cent in pre-market trading, at $219.64.

Chavez, who is now deputy CFO and will step up to the CFO role next month, repeatedly cited low levels of volatility as reason for the poor performance. Goldman Sachs said its investment-banking backlog decreased from the fourth quarter and last year's first quarter.

But Reuters said analysts seemed unsatisfied with the explanations from Chavez and outgoing CFO Harvey Schwartz.

Goldman Sachs also announced the repurchase of an addition 50 million shares of common stock and raised its quarterly dividend to 75 cents from 65 cents per common share.

Goldman reported net revenues of $8.03bn, below the $8.45bn expected by an analysts' consensus by Yahoo Finance.

Until Tuesday, Goldman Sachs stock was arguably the poster child for the Trump Bump: During the stock market rally since the President was elected, the bank had contributed more to the rise of the Dow Jones industrial average than any other company. Thomson Reuters had predicted Goldman Sachs share value to be $5.31 a share, and the actual value was $5.15 a share.

This time, though, Goldman blamed its disappointing results on low volatility in the market-also known as Wall Street's "fear index"-making its customers less interested in trading their portfolios, especially foreign exchange and commodity assets". While Goldman trades almost every kind of financial instrument on Wall Street, its strongest traders are in commodities and currencies, both of which had wild swings this quarter that could have resulted in the miss. The bank's expenses rose just 15 percent and it paid out a smaller share of its revenue to employees.

Investment-banking revenue, which includes fees from underwriting as well as advising on mergers, climbed 16% in the quarter.

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