Shrinking Bank Revenue Signals Dawn of 'Worst' Decade of GrowthRead the full article here
October 25, 2010By Dawn Kopecki and Michael J. Moore - Bloomberg Business Week
Oct. 26 (Bloomberg) -- Shrinking revenue at U.S. banks, led by Goldman Sachs Group Inc. and Citigroup Inc., may continue to fall as the industry heads into what could be its slowest period of growth since the Great Depression.
After the six largest U.S. banks posted record revenue in 2009, combined net revenue fell by an average of 8 percent in the third quarter from a year earlier and 16.3 percent over the last two quarters, according to data compiled by Bloomberg. Revenue so far this year is down by 4.1 percent, driven by declines in everything from trading at Goldman Sachs to home lending at Bank of America Corp. New laws restricting account and credit-card fees, as well as derivatives and capital rules, are also squeezing lenders.
Next year will kick off a decade that will bring the “worst revenue growth” for U.S. banks in 80 years, according to Mike Mayo, a banking analyst at Credit Agricole Securities USA Inc. in New York. Net revenue at U.S. commercial lenders has expanded at a slower pace in each of the last three decades, falling to 6 percent in the last decade from 12 percent in the 1970s, according to Federal Deposit Insurance Corp. data.
“Revenues aren’t just weak for this quarter, or even for this upcoming year, but for the entire upcoming decade,” said Mayo, a former Federal Reserve analyst who has more than 20 years of industry experience. “The speed limit’s been lowered for how fast banks can drive earnings.”
The trend over the last two quarters is hitting almost every line of income statements and is spread across the sector, affecting investment banks, consumer banks and commercial lenders. It’s eating away at profits, depressing stock prices and threatening bonuses and new hiring.
Read the full article hereDouble whammy hits big local real-estate portfolioWhen investment-banking giant Goldman Sachs bought 11 Seattle and Eastside office buildings and complexes in 2007 — overnight becoming one of the market's largest landlords — there wasn't much talk of risk.A Goldman Sachs affiliate paid $930 million for 11 Seattle and Eastside office properties in 2007 but now — as a balloon payment looms ever larger — it's reeling from plunging real-estate values and emptied cubicles.
By Eric Pryne - Seattle Times business reporter
The 2.5-million-square-foot portfolio was almost fully leased, its market value on the rise. Stable, venerable Washington Mutual, the largest tenant, had been locked in for another decade.
A Goldman affiliate, Whitehall Street Global Real Estate Limited Partnership 2007, paid a whopping $930 million for the buildings, borrowing almost all of it.
What's happened since then makes the deal a poster child for the troubles confronting Seattle's commercial real-estate scene.
Today, one-third of Whitehall's local space sits vacant. That includes about half of the biggest building, 34-story 1111 Third Avenue in downtown Seattle, hit hard by WaMu's implosion.
The portfolio's value has plummeted, perhaps as much as 60 percent. Bond-rating agency Fitch estimated it at $342 million in a recent report.
Fitch also predicted the Goldman Sachs affiliate will default when the huge, interest-only loan Whitehall took out in 2007 matures in 18 months and all the principal — about $900 million — must be paid back.
Fitch's somber assessment came a few months after Key Bank, which services the mammoth mortgage, put the loan on its "watchlist," citing the big drop in occupancy.
"It's an early indicator to investors of potential trouble," said Paul Mancuso, a vice president with Trepp, a New York firm that analyzes commercial real-estate debt.
Whitehall's 11 properties, which include two downtown Bellevue high-rises, are better known in Seattle as the Archon portfolio, for another Goldman Sachs subsidiary that manages them.
. . . .
No Seattle landlord was hit harder than Goldman. WaMu vacated 288,000 square feet in 1111 Third — half the tower.
"That's a zombie building," one Seattle broker said.
. . . .
Follow up here
4 COMMENTS:
does Goldman have an office in France?
Thank God for France
Thank God for France. While American liberals tremble at the idea of sending an angry email to congress for fear that their name will appear on the State Department's list of terrorists, French workers are on the front lines choking on tear gas and fending off billyclubs in hand-to-hand combat with Sarkozy's Gendarmerie. That's because the French haven't forgotten their class roots. When the government gets too big for its britches, people pour out onto to the streets and Paris becomes a warzone replete with overturned Mercedes Benzs, smashed storefront windows, and stacks of smoldering tires issuing pillars of black smoke. This is what democracy looks like when it hasn't been emasculated by decades of propaganda and consumerism. Here's a blurp from the trenches:
There's no question that Washington elites have joined with Wall Street to offload the massive debts from the financial meltdown onto workers and retirees. Nor is their any doubt that they will invoke (what Slavoj Zizek calls) a "permanent state of economic emergency" to justify their actions. That will allow them to move ahead with so-called "austerity measures" that are designed to impoverish workers and strip popular government programs of their funding. The trend towards "belt-tightening" merely masks the ongoing class war which is aimed at restoring a feudal system of royalty and serfs.
http://tinyurl.com/25syzpm
Lets play connect the dots....
U.S. Seeks to Shield Goldman Secrets .
Goldman Sachs Group Inc. has always closely guarded the secrets of its lucrative high-speed trading system. Now the securities firm is getting a help from an unusual source: federal prosecutors.
Federal prosecutors in Manhattan this week asked a federal district judge to seal the courtroom at the forthcoming trial of a former Goldman computer programmer accused of stealing the firm's computer code. The trial is set to start to late November.
http://tinyurl.com/25b8f3p
Reminds me of the star –chamber courts that the founding fathers abhorred. While Goldman may be considered to be too big to fail it is still not above the law even though it has been earning billions of dollars using the proprietary data of its clients to bet against them (as was disclosed in recent testimony before Congress and in a lawsuit filed against it by the SEC).
http://tinyurl.com/28g7bbe
Michael Lewis Exposes Goldman's Prop Trading In Flow Clothing
We have long noted that Goldman's feigned change of heart to eliminate its prop desk is nothing but a sham, as the very same traders will continue pursuing principal strategies but merely be given the additional layer of protection that they are "client facing" i.e., make fake flow markets. Today, Michael Lewis confirms this speculation, and identifies precisely how not only Goldman, but all banks are abusing Frank Dodd using legalistic loopholes that do nothing at all to change the actual role of the principal trader, whose existence has always been predicated upon accumulating positions primarily in OTC products (nobody makes money trading stocks any more) and selling when the firm so desires.
http://tinyurl.com/24h9eup
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