Goldman Sachs (US)

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Goldman Sachs still enjoys a reputation as one of the world's most commercially astute investment banks. However not even the golden child of the banking sector was immune to the savage downturn in the market during 2008, which crippled Goldman's stock price and forced it to abandon its legal status as a securities house in order to maintain the confidence of its own shareholders. Previously, unlike most of its peers, the company had resisted the temptation to diversify into a broader selection of financial services during the 1990s and early 2000s. Instead it focused even more tightly on what it does best, moving more quickly than any of its peers to take advantage of new trends within the industry, with great skill and extraordinarily lucrative results. Until 2008, that is, when the firm reported its first ever quarterly losses. By early 2009, Goldman was once again firing on all cylinders, allowing it to report another set of record results for the year. Since then, though, performance has been somewhat less inspiring as the firm took action to shift its focus away from the riskier activities in which it had previously excelled.

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Adbrands Weekly Update 17th May 2018: Goldman Sachs is to expand its newly established consumer banking business by teaming up with Apple for the launch of an Apple Pay credit card, expected to launch early next year. The new partnership will replace Apple's existing arrangement with Barclays, and could also be extended to include loan finance for new Apple products. Apple would receive a cut of all expenditure and might also take a "bounty" on every newly signed-up credit card customer. More than 200m customers worldwide already have Apple Pay installed on their iPhones. Traditionally a specialist in investment banking, Goldman's first foray into the traditional consumer market came with the introduction of online savings service Marcus in 2016.

Adbrands Weekly Update 18th Apr 2018: American banks enjoyed big profit gains from US tax reforms, as well as generally upbeat business sentiment. Net income at JPMorgan Chase jumped by 35% to an all-time record for the bank of $8.7bn, while Bank of America grew 30% to $6.9bn. However both were beaten in percentage terms by Morgan Stanley whose net earnings jumped by 38% to $2.7bn. Goldman Sachs was the next biggest profit jumper, up 26% to $2.8bn, while Citi was up 13% to $4.6bn. Wells Fargo gained 5% to $5.9bn, but said it might be required to restate those figures at a later date to accommodate a forthcoming $1bn regulatory settlement over mis-sold car insurance and mortgage fees. The lower tax rate alone generated a combined total of $2.9bn in extra profit from the six companies. Yet despite those big gains, investors were generally unimpressed by the lack of any significant growth in lending to businesses and consumers. That was one of the key underlying motivations for Republicans' tax reforms: to encourage borrowing and growth in the wider economy. So far, there's no sign of that, as JPMC finance chief Marianne Lake admitted: "I think we have to recognize that tax reform is in its early stages." As far as revenues were concerned, JPMC remained the clear leader among US banks with 12% growth to $27.9bn, but reigning #2 Wells Fargo slipped back to $21.9bn - it was the only bank to report a year on year decline. That allowed BofA to reclaim second place with $23.1bn. Citi had $18.9bn. Morgan Stanley topped Goldman again with $11.1bn to $10.0bn respectively.

Adbrands Weekly Update 18th Jan 2018: Most US companies will take an exceptional hit in their 4Q results from President Trump's tax reform bill, not least the big banks who kicked off the reporting season this week. The cut in the US corporate tax rate will significantly benefit all companies in the future but it creates a short-term problem for businesses that accumulated big losses during the 2008 financial crisis which they had intended to set off for tax purposes against future profits. A lower tax rate will make those deferred credits harder to use, so they now mostly have to be written off. That's a bigger issue for some companies than for others. Goldman Sachs took a $4.4bn charge, but perhaps more worrying was a sharp decline - a startling 50% plunge for the final quarter - in what was once its biggest income stream of fixed income trading. That was offset by gains elsewhere, with the result that full year revenues were up 5% to $32.1bn. Net earnings almost halved after the tax charge to $3.7bn. A resulting slump in Goldman's share price means that it is less valuable by market cap than rival investments house Morgan Stanley, which reports later today.

Adbrands Weekly Update 19th Oct 2017: US banks mostly had a great quarter, as consumer and business lending offset generally lacklustre trading and investment results. JPMorgan Chase led the pack as usual with profits up 7% to $6.7bn on revenues up 3% to $26.2bn, well ahead of expectations. That was despite a shock 21% fall in trading revenues. Bank of America too beat expectations, with net profit of $5.6bn on revenues of $21.8bn. Citi delivered profit of $4.1bn on revenues of $18.2bn. Morgan Stanley also beat predictions as a result of strong performance in wealth management. Perhaps surprisingly, even Goldman Sachs - which has minimal exposure to consumer lending - also did well, with revenues ahead of expectations despite the trading downturn and profits exactly as predicted. The big disappointment - again - was Wells Fargo, still struggling with the fallout from its sales practises scandal. Given its business profile, it should have been the bank most likely to benefit from rises in lending, but actually total loans slipped by 1% year-on-year, compared to gains of 2% to 3% at the other lenders; consumer loans alone were down 3%. Revenues slipped back to $21.9bn - lower than analysts had been anticipating and putting the bank at risk of losing its second place position to BofA - while net profits slumped by 19% year-on-year to $4.6bn as a result of a $1bn charge against regulatory investigations.

Adbrands Weekly Update 20th Jul 2017: Investors had been expecting a weak set of results from the big US banks, with predictions of a sharp slowdown in performance as the initial "Trump Bump" lifting the markets fizzled out during 2Q. In fact, that wasn't the case at all, as a long-awaited surge in consumer and commercial lending, and higher short-term interest rates, offset declines in non-equity investment trading. JP Morgan Chase led the charge with record quarterly profits of over $7bn, up 13% against the year ago period, while revenues topped $26.4bn, well above expectations. Citigroup continued its positive streak with a 2% lift in revenues to $17.9bn as a result of what it called "broad-based" growth in loans across regions and products. Net income slipped 3% as a result of the pullback in currency, stocks and bonds trading but was still better than had been feared at $3.9bn. Wells Fargo continued to put the sales practises scandal behind it with better than expected earnings of $5.8bn, the first increase for almost two years. However revenues were slightly weaker than predicted at $22.2bn. Bank of America delivered a 10% increase in net income to $5.3bn on revenues up 7% to $22.8bn; both figures were higher than consensus expectations. Investment and wealth specialist Morgan Stanley also beat expectations in all its divisions, with revenues of $9.5bn and net income of $1.8bn. The biggest disappointment was Goldman Sachs, the bank most exposed to fixed income and currency trading, and with the lowest consumer and commercial exposure. It reported a second consecutive weak quarter, with fixed income trading revenues plunging by a shock 40%, while its commodities trading unit suffered its worst quarter for at least 17 years. Traditional rival Morgan Stanley - which has long languished in Goldman's shadow - outpaced its competitor for the second straight quarter. Those metrics overshadowed what were otherwise better than expected revenues and net income from Goldman, prompting a sharp sell-off of its shares and renewed concern over the famed investment bank's strategy.


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Background

Free for all users | see full profile for current activities: The firm was first established in 1869 by Marcus Goldman to trade in commercial paper in New York's diamond-broking district. In the 1880s, Goldman recruited his son-in-law Sam Sachs as a partner, creating Goldman Sachs & Co. The business joined the New York Stock Exchange in 1896 and entered the field of investment banking in 1906 when it co-managed a public offering for United Cigars Manufacturers. It was a pioneer in the developing field of IPOs, responsible for underwriting offerings for companies including Sears Roebuck and Merck. 

Although several members of the Goldman and Sachs families led the firm over the following years, its most influential figure was Sidney Weinberg, widely regarded as the country's most skilful businessman in his heyday, earning the nickname "Mr Wall Street". In fact he first entered the firm in 1907 as assistant janitor, but gradually clawed his way up the corporate ladder, becoming a partner in 1927, and then senior partner from 1930 until 1969. Weinberg played a key role in re-establishing the firm's reputation after it was tarnished by the collapse of a closed end mutual fund scheme in the Great Depression, which made and then lost huge sums for its investors. In particular he developed a close relationship with leading tycoons, which enabled the firm to broker a string of giant deals after World War II, including the mammoth IPO of Ford in 1956. 

In the 1980s, with corporate America under attack from leveraged buyout raids funded by other investment banks, Goldman was one of the few major banks to side with corporations against the raiders, confirming its reputation as an ally of big business. Goldman Sachs' partners repeatedly considered a public offering of their own, drawing up and then abandoning plans on three occasions before finally biting the bullet in 1999, when a minority stake was sold to the public for almost $4bn. 

Although it has long held its reputation as Wall Street's most prestigious firm, Goldman Sachs has also suffered its fair share of embarrassment, including involvements with fraudulent British tycoon Robert Maxwell in the 1980s, and later with collapsed hedge-fund Long-Term Capital Management. It was among several securities firms accused of IPO "spinning" - allocating preferential shares in new issues to clients who might bring the firm additional business - after the Enron and Worldcom debacles. Despite such concerns, the firm has continued to lead its rivals in staying ahead of successive downturns in the world economy. In honour of that fact, in 2006, Goldman chairman-CEO and long-time figurehead Henry ("Hank") Paulson was named as President Bush's new Treasury secretary. In September 2008, it was he who drew up plans for the emergency bailout of insurance giant AIG and for the creation of a $700bn industrywide rescue plan. Paulson's plan was later widely criticised for coming too late, and for not going far enough to inspire immediate confidence in struggling financial institutions, but in the short term it did at least prevent an even worse economic catastrophe. See full profile for current activities


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