Why Goldman Sachs' Earnings Are Down

Is the Achilles of the financial world finally starting to falter?

This article is from the archive of our partner .

Superbank Goldman Sachs' second-quarter earnings are down 82 percent from the last quarter. Meanwhile, employee compensation is down somewhat from last year. Though Goldman's stock perplexingly rose as this news broke, the story's still enough to get finance bloggers wondering: is the public's favorite--and famously successful--Wall Street villain finally faltering?

  • Decline About Environment, Not Goldman  Economist Hugh Johnson tells Marketplace that "the earnings really reflect the fact that things changed in this world of ours in the second quarter and they changed for the worse, unfortunately. Investors became very very concerned about what the future has in store."
  • Predictable Fall, Rebound Expected  Richard Bove of Rochdale Research says Goldman's financial advisory business "is expected to recover in the third quarter and throughout next year ... [Goldman's] backlogs are solid. The third quarter is starting off with good results." Meanwhile, Goldman's "most important business," trading, may have declined due to "the uncertainty that developed in the quarter related to European finances and fears of a new economic downturn in the United States." The decline probably won't continue, says Bove, mostly because "money is building in investors' hands and it must be put to work."
  • 'Chinks in Goldman's Shining Armor,' The Wall Street Journal's Michael Corkery dubs the news. Nevertheless, he also highlights three reasons investors "may believe that Goldman hasn't completely lost its money-making touch." Goldman, he explains, despite declining from its previous performance, still outperformed J.P. Morgan and others in both trading and equity. It remains on top in mergers and acquisitions, as well.
  • 'Looking Human'  Felix Salmon admits that "for the time being, this is just one bad quarter," and top management are likely doing "everything they can" to reverse the downward tick. Nevertheless, in Goldman's comments to the press about "worry about global growth," he sees evidence of the sort of"lazy" finger-pointing Goldman didn't used to have to do. " This quarter, at least," Salmon writes, "Goldman is just another bank: it’s not special any more." If they have more quarters like this one,Goldman stock will drop and the bank will "stop being able to hire anyone it likes."
This article is from the archive of our partner The Wire.