Q1 Profit Plunges 60% in Worst Show Since Blank­fein Took Over

The Economic Times - - Companies -

New York: Gold­man Sachs Group, the worst per­former in the Dow Jones In­dus­trial Av­er­age this year, posted a 60% drop in profit as the firm re­ported its low­est rev­enue for a first quar­ter since chief ex­ec­u­tive of­fi­cer Lloyd Blank­fein took the top post in 2006.

Net in­come de­clined to $1.14 bil­lion, or $2.68 a share, from $2.84 bil­lion, or $5.94, a year ear­lier, the New York-based com­pany said Tues­day in a state­ment. That beat the $2.48 per-share es­ti­mate of 23 an­a­lysts sur­veyed by Bloomberg, as the firm cut costs deeper than ex­pected. Gold­man Sachs’s rev­enue fell 40% to $6.34 bil­lion, miss­ing the av­er­age es­ti­mate of $6.69 bil­lion.

Blank­fein is try­ing to ride out a years-long bond­trad­ing slump that’s been com­pounded by mar­ket swings and stiffer reg­u­la­tions — chal­lenges that forced many com­peti­tors to scale back. He’s em­barked on the big­gest cost-cut­ting push in years, fol­low­ing his largest com­peti­tors who have turned to ex­penses as the only lever to pull in an en­vi­ron­ment of de­te­ri­o­rat­ing rev­enue.

It was “a quar­ter to for­get,” Glenn Schorr, an an­a­lyst at Ever­core ISI, said in a note. The firm’s 6.4% re­turn on equity, a gauge of prof­itabil­ity, was “unGold­man­like,” Schorr said and well be­low in­vestors’ 11% “com­fort zone.”

The ques­tion is whether costcutting, ei­ther in the first quar­ter or over a longer time pe­riod, will be enough to sat­isfy in­vestors. The shares dropped 0.8% at 9:30 a.m. in New York.

Net in­come de­clined to $1.14 bil­lion, or $2.68 a share, from $2.84 bil­lion, or $5.94, a year ear­lier

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