Perhaps Goldman Sachs is waiting for the next round of Quantitative Easing.
Goldman Sachs Plans Job Cuts as Debt Trading Misses Estimates
By Christine Harper - Bloomberg
Goldman Sachs Group Inc. (GS), the U.S. bank that makes most of its money from trading, said it will cut about 1,000 jobs after a plunge in fixed-income revenue that was bigger than analysts estimated.
Second-quarter fees from trading debt, currencies and commodities tumbled 63 percent from the previous quarter, more than twice the drop at other major U.S. banks. Net income was $1.09 billion, or $1.85 per share, the New York-based company said today in a statement, falling short of the $2.30 per-share average estimate of 23 analysts surveyed by Bloomberg.
Led by Chairman and Chief Executive Officer Lloyd C. Blankfein, Goldman Sachs last year ceded its dominant position among fixed-income traders to larger rival JPMorgan Chase & Co. (JPM) In the second quarter of 2011, Goldman Sachs cut risk-taking to the lowest level since 2006. Debt-trading revenue of $1.6 billion dropped below JPMorgan Chase & Co.’s $4.28 billion, Citigroup Inc.’s $3.03 billion and Bank of America Corp.’s $2.7 billion.
“It’s clear that Goldman underperformed many of its peers,” said Richard Staite, an analyst at Atlantic Equities LLP in London, who has a “neutral” rating on the stock. “It seems to have prompted them into a cost-saving initiative.”
The firm identified annual cost savings of $1.2 billion that will include about 1,000 job cuts this year, Chief Financial Officer David A. Viniar told analysts during a conference call after earnings were released. Goldman Sachs employed 35,500 people at the end of June, up 100 people from the prior quarter.
“It looks like the environment’s going to be somewhat slower for the foreseeable future and so we decided it made sense at this point to cut some level of expenses to be more efficient,” said Viniar, who turned 56 years old today.
Job cuts will be “broad based” and are likely to affect both junior and senior employees, he said, adding that Goldman Sachs’s plans to grow in countries such as China, India and Brazil, where the firm has been doing the most rapid hiring, won’t be affected.
Operating expenses in the second quarter totaled $5.67 billion, down 28 percent from $7.85 billion in the first quarter and 23 percent below the $7.39 billion in the second quarter of 2010. Compensation expenses fell 39 percent from the first quarter to $3.2 billion.
Goldman Sachs fell $2.73, or 2.1 percent, to $126.61 in New York Stock Exchange composite trading at 2:04 p.m. The stock, at its lowest level since April 2009, has dropped about 25 percent this year.
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