Goldman Sachs Posts Huge Earnings Miss
July 20, 2010 at 11:23 UTC || By Forex Playmaker
Further evidence of weakness among global banks came in the form of a huge earnings disappointment issued by Goldman Sachs (NYSE: GS) earlier today.
Goldman’s earnings missed analyst expectations by a wide margin, reporting an anemic $0.78 EPS compared to the already depressed $1.99 EPS that analysts were expecting. Even taking into account one time charges — including the $550 million SEC settlement and the $600 million UK bonus tax — earnings still fell well short of expectations.
Despite the headline earnings miss and the revenue decline of 36%, shares of the investment bank are trading marginally higher at this hour, last priced at 145.95. Nevertheless, investors should prepare themselves for significant declines for the banking sector going forward.
Goldman is the latest among big banks to report worse-than expected earnings numbers — including disappointments by JP Morgan (NYSE: JPM) , Bank of America (NYSE: BAC) and Citigroup (NYSE:C). The sector as a whole is in poor health, as profits for the banks are directly tied to economic performance in the U.S. and abroad, both of which have slowed substantially in recent months.
Morgan Stanley (NYSE: MS) is slated to report earnings tomorrow and will likely add further pressure to the banking sector on worse-than-expected numbers. As noted in the weekly playbook, which forecast weakness for riskier assets heading into the week, investors should fade the rallies, especially where banks are concerned.
Equities Disclosure: Author is Short MS
