Goldman Sachs earnings for second quarter sound promising until the firm utters the words: challenging environment. Sure, GS beat expectations in significant areas, including fixed income, commodities, and currencies, with revenue popping upward 20% in comparison to this time one year ago. Despite all of this good news, the firm is still down for the first half of 2016.
The firm went on to qualify its earnings successes with a heavy iron lining. It was specifically that fixed income, commodities, currencies, and were working in the challenging environment where there is political uncertainty, low-interest rates, and many concerns about global growth.
The word choice and inclusion of any qualifying statement to the successes for the quarter are like a beast of burden. The words challenging environment strongly and firmly paint a full picture on the firm’s quarterly earnings performance.
Meanwhile, equities actually missed expectations, falling 12% since this same time in 2016. The firm cited that there was lower revenue from derivatives in Asia, and in cash products. Even its securities services overall experienced a dip in its revenues. Goldman Sachs cites lighter client activity and lower volume in the markets for the dip in its revenue in equities. It is not a surprise even when compared with the performance of second-quarter to first-quarter 2016.
Its investment banking outlook is about on par with its equities. The investment banking revenue fell 11% for 2016. The reason GS cited is lower equity underwriting revenue.
Goldman said its investment banking backlog decreased from the ends of both the year-ago quarter and the first quarter.
For the first half of 2016, Goldman is down 24% in FICC, 18% in markets, 17% in investment banking, and 28% in revenue.
Goldman Sachs needed a big rebound to offset the first-quarter losses, but it did not get its wish. The second quarter was challenging and did not avenge the first-quarter losses.