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 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.

Adbrands Weekly Update 20th Apr 2017: Most US banks continued to enjoy a strong boost from soaring post-election markets, aided by weak comps from the year ago quarter. JP Morgan Chase and Citigroup both reported a 17% jump in profits for 1Q, well ahead of expectations. Investment trading and modest recent upticks in lending rates both contributed to growth. JP Morgan's revenues rose 6% and Citi's by almost 3%, also both ahead of consensus forecasts. Bank of America did even better, with profit soaring by 40% on a 7% lift in revenues, while Morgan Stanley enjoyed a spectacular near-71% jump in profits and a 25% surge in revenues. However, there are always losers as well as winners. News from Wells Fargo, still struggling to repair its reputation after the sales practises scandal, was less positive. Revenues dipped slightly and profits were flat, though still above expectations. The big surprise was Goldman Sachs, whose focus on investment banking should have guaranteed strong gains. In fact, results came in well below analysts' expectations, even if they were up strongly against a dismal year-ago quarter. Unlike rival banks, Goldman's revenues from bond and equity trading actually fell year-on-year. "We didn't navigate the quarter well," said newly appointed CFO Martin Chavez.

Adbrands Weekly Update 20th Oct 2016: The wind appeared to change direction for US banks during 3Q, helped along by the strengthening domestic economy and continuing troubles for several continental European rivals. After several quarters of weak or worse performance in their investment banking divisions, JPMorganChase, Citigroup and Bank of America all enjoyed a sharp uplift. Revenues from trading of fixed income, currencies and commodities (or FICC) jumped 48% for JP Morgan in 3Q, 39% for Bank of America and 35% for Citi. Wells Fargo also enjoyed a small contribution from FICC, where it only recently began to establish a presence following the purchase of parts of GE Money. This surge helped to offset another weak performance across the board in consumer banking, still hamstrung by low interest rates. JPMorganChase, Wells Fargo and Bank of America all reported modest year-on-year growth in combined revenues, though Citigroup was down slightly. Bank of America was the only one of the four to report a rise in net profits year-on-year, chalking up its best quarterly performance since 2008. Better still were the profits at Goldman Sachs and Morgan Stanley, banks with a much larger exposure to investment banking. Both reported a 60% leap on the bottom line, on revenues up 19% and 15% respectively.

Adbrands Weekly Update 21st Jul 2016: JPMorganChase kicked off the quarterly reporting season as usual last Thursday, with better than expected 2Q figures after the first quarter's sharp slowdown. An uplift in bond and currency trading and a rise in consumer loans fuelled modest revenue growth, but profits slipped against the year-ago quarter. It was a similar picture at Wells Fargo; Citi and Bank of America also reported dips in net profit against the year ago period, but revenues slipped as well. Even so, all four came in above analysts' more pessimistic expectations, reinforcing general confidence about the underlying strength of the US economy. The sector's biggest surprise came from Goldman Sachs, which reported a spectacular surge in performance after a very weak first quarter, and also for 1Q 2015 as a result of litigation provisions. A big increase in M&A activity helped to push earnings and revenues well ahead of expectations. There was a similar but less marked performance at Morgan Stanley.


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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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