Goldman Sachs' Revenue Likely To Rebound In 2011

We think the overall setting is ripe for a turnaround, though 2011 earnings will be largely dependent on FICC's comeback

Michael Wong, CPA 20 January, 2011 | 11:10AM
Facebook Twitter LinkedIn

Goldman Sachs (GS) reported net income applicable to common shareholders of $2.2 billion, or $3.79 per diluted share, on $8.6 billion of net revenue for the fourth quarter of 2010. Net revenue was flat sequentially, down 3%, but revenue composition was different from what we--and probably others--had expected. We don't anticipate any significant changes in our $180 fair value estimate for Goldman's shares.

Fixed income, currency, and commodities, or FICC, was the fourth quarter's glaring area of weakness. FICC revenue came in at $1.6 billion, a 39% decline from the previous third quarter. The fourth-quarter weakness in FICC was partially made up by general strength in the company's investment banking, investing lending, and investment management segments. However, the FICC revenue line trajectory is important, as it has comprised 40% to 70% of net revenue over the last two years.

In terms of earnings, expenses must also be considered. The fourth quarter had a $135 million expense benefit from an overaccrual of UK bonus taxes, a $305 million impairment charge for the company's New York Stock Exchange Designated Market Maker rights, and a $320 million charitable contribution expense. The company's largest expense--compensation--came in at only 26% of net revenue.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Goldman Sachs Group Inc390.85 USD-0.26Rating

About Author

Michael Wong, CPA  Michael Wong is a stock analyst at Morningstar.

© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement