Goldman alerting Wash pols it plans to cut US jobs and increase jobs overseas to head off criticism - THAT is funny! When was the last time deep-pockets Goldman was seriously criticized by Wash pols? Now those friendly tele call from Wash to NY will have to be made from Wash to Singapore.
Philippe Dauman of Viacom led the executive pay list in 2010. The median was $10.8 million. Photograph by Daniel Acker/Bloomberg News
Executive Pay, Revisited: Even Higher Than It First Seemed According to figures provided by Equilar, a firm that tracks compensation data, median pay for chief executives at 200 of the nation’s largest companies rose 23 percent last year, much higher than the preliminary figure of 12 percent calculated in early April. Nearly every component of pay was up, including cash bonuses and stock grants. Media executives, in particular, dominated the top of the highest-paid list, with 6 among the top 10. [ http://www.nytimes.com/interactive/2011/07/03/business/20110703-executive-pay-revisited-even-higher-than-it-first-seemed.html ]
Among the executives who registered huge gains in the value of their company stock and options in 2010 were Warren E. Buffett, the chief executive of Berkshire Hathaway, top, Lawrence J. Ellison of Oracle, center, and Jeffrey P. Bezos of Amazon.com. Together, the three men's holdings climbed by more than $13 billion for the year. Anindito Mukherjee/European Pressphoto Agency (Top); Paul Sakuma/Associated Press (Center); Kim White/Reuters (Bottom)
By PRADNYA JOSHI Published: July 2, 2011
IT turns out that the good times are even better than we thought for American chief executives.
A preliminary examination of executive pay in 2010, based on data available as of April 1, found that the paychecks for top American executives were growing again, after shrinking during the 2008-9 recession.
But that study, conducted for The New York Times by Equilar, an executive compensation data firm based in Redwood City, Calif., was just an early snapshot, and there were even more riches to come. Some big companies had not yet disclosed their executive compensation.
The final figures show that the median pay for top executives at 200 big companies last year was $10.8 million. That works out to a 23 percent gain from 2009. The earlier study had put the median pay [ http://www.nytimes.com/2011/04/10/business/10comp.html ] at a none-too-shabby $9.6 million, up 12 percent.
Total C.E.O. pay hasn’t quite returned to its heady, prerecession levels — but it certainly seems headed there. Despite the soft economy, weak home prices and persistently high unemployment, some top executives are already making more than they were before the economy soured.
Pay skyrocketed last year because many companies brought back cash bonuses, says Aaron Boyd, head of research at Equilar. Cash bonuses, as opposed to those awarded in stock options, jumped by an astounding 38 percent, the final numbers show.
Granted, many American corporations did well last year. Profits were up substantially. As a result, many companies are sharing the wealth, at least with their executives. “We’re seeing a lot of that reflected in the pay,” Mr. Boyd says.
And at a time of so much tumult in the media business, it might be surprising that some executives in media and communications were among the most richly rewarded last year.
The preliminary and final studies put Philippe P. Dauman, the chief executive of Viacom, at the top of the list. Mr. Dauman made $84.5 million last year, after signing a new long-term contract that included one-time stock awards.
Leslie Moonves, of the CBS Corporation, got a 32 percent raise and reaped $56.9 million. Michael White of DirecTV was paid $32.9 million, while Brian L. Roberts of the Comcast Corporation and Robert A. Iger of the Walt Disney Company each received pay packages valued at $28 million.
“Media firms seemed to be paying a lot,” said Carol Bowie, head of compensation policy development at ISS Governance, which advises large investors [ http://www.issgovernance.com/press/20110620_execcompdata ] on corporate governance issues like proxy votes. “Media companies in general tend to be high-payers, and they tend to feed off each other.”
Other big payers included oil and commodities companies like Exxon Mobil and a few technology giants like Oracle and I.B.M.
Some of the other highly paid executives on the new list who were not in the April survey are Gregg W. Steinhafel of Target, who had a $23.5 million pay package; Michael E. Szymanczyk of Altria, $20.77 million; and Richard C. Adkerson of Freeport-McMoRan Copper & Gold, $35.3 million.
Most ordinary Americans aren’t getting raises anywhere close to those of these chief executives. Many aren’t getting raises at all — or even regular paychecks. Unemployment is still stuck at more than 9 percent.
In some ways, chief executives seem to live in a world apart when it comes to pay. As long as shareholders think that the top brass is doing a good job, executives tend to be well paid, whatever the state of the broader economy. And some corporate boards were probably particularly generous in 2010 after a few relatively lean years for their top executives. In other words, some of this was makeup pay.
“What is of more concern to shareholders is that it looks like C.E.O. pay is recovering faster than company fortunes,” says Paul Hodgson, chief communications officer for GovernanceMetrics International, a ratings and research firm.
According to a report released by GovernanceMetrics [ http://www2.gmiratings.com/news_docs/155620110607prelimceopay.pdf ] in June, the good times for chief executives just keep getting better. Many executives received stock options that were granted in 2008 and 2009, when the stock market was sinking.
Now that the market has recovered from its lows of the financial crisis, many executives are sitting on windfall profits, at least on paper. In addition, cash bonuses for the highest-paid C.E.O.’s are at three times prerecession levels, the report said.
Of course, these sorts of pay figures invariably push the buttons of many ordinary Americans. Yes, workers’ 401(k)’s are looking better than they did in some recent years, but many investors still have not recovered from the hit they took during the financial crisis. And, of course, millions are out of work or trying to hold on to their homes — or both.
And it’s not as if most workers are getting fat raises. The average American worker was taking home $752 a week in late 2010 [ http://www.bls.gov/news.release/archives/wkyeng_01202011.pdf ], up a mere 0.5 percent from a year earlier. After inflation, workers were actually making less.
On the flip side, some chief executives have consistently taken token salaries — sometimes, $1 — choosing instead to rely on their ownership stakes for wealth. These stock riches don’t show up on the current pay lists, but they can be huge.
Warren E. Buffett, for instance, saw his stock holdings rise last year by 16 percent, to $46 billion. Other longtime chief executives or founders who are sitting on billions of paper profits include Jeffrey P. Bezos of Amazon.com and Michael S. Dell, the founder of Dell.
Resurgent executive pay has some corporate watchdogs worried [ http://www.nytimes.com/2011/06/19/business/19gret.html ] that companies have already forgotten the lessons of the bust. Boards have promised to tie executive pay to company success, but by some measures pay is rising faster than performance. The median pay raise for chief executives last year — 23 percent — was roughly in line with the increase in net corporate profits. But it far exceeded the median gain in shareholders’ total return, which was 16 percent, as well as the median gain in revenue, which was 7 percent.
FOR the moment, shareholders aren’t storming executive suites. And while they received a say on pay under new federal rules last year, their votes are nonbinding. In other words, boards can still do as they please.
Pay specialists say companies are taking a hard look at these votes [ http://say-on-pay.com/ ]. Still, only about 1.5 percent of the 200 companies in the Equilar study were rebuffed by their shareholders on pay. A vast majority of the votes passed overwhelmingly, with 80 percent or 90 percent support, according to Mr. Boyd of Equilar.
Mr. Boyd says companies are making an effort to explain their pay plans. “We saw companies take it very seriously,” he says of the new rule.
In some respects, the mere possibility that shareholders might reject a proposed pay plan is enough to make corporate executives think again. Ms. Bowie of ISS says that outrageous payouts — such as so-called tax gross-ups, in which companies cover executives’ tax bills on perks like corporate jets — are becoming rarer.
Disney for instance, eliminated tax gross-ups this year in the face of shareholder ire, she said.
Company directors have the power to rein in runaway executive pay, but it is unclear whether either they or shareholders will do so in 2012. “It can be done if there is the will,” Ms. Bowie says.
BMW layoffs exemplify the evisceration of the middle class
Miguel Carpinteyro is losing his BMW job after 14 years. Three of his children have medical issues, and he and his wife might lose their house. (Irfan Khan, Los Angeles Times)
Every working American should be dismayed by — and afraid of — what BMW is doing.
Michael Hiltzik July 03, 2011
By all accounts, BMW's parts distribution warehouse in Ontario was one of the jewels of the company's system.
Supplying dealer service departments throughout Southern California, Arizona and Nevada, it received gold medals from BMW for its efficiency and employed several of the top-ranked workers in the country. In the roughly 40 years its workers had been represented by the Teamsters union, there had never been a labor stoppage.
Times being what they are, when a Teamsters committee [ http://www.teamsters495.org/ ] came to the plant in early June to open negotiations over a new contract to start Sept. 1, they thought they might be asked to accept minuscule wage increases and maybe some givebacks on health coverage.
They were stunned by what they heard instead: As of Aug. 31, the plant would be outsourced to an unidentified third-party logistics company and all but three of its 71 employees laid off.
The union contract will be terminated. Some of the employees might be offered jobs with the new operator, but there are no guarantees. And no one expects the new bosses will match the existing $25 hourly scale or the health benefits provided now.
The average seniority of employees at Ontario is about 20 years; five have spent 30 years or more at Ontario or its predecessor warehouse in Carson. Of the employees to be laid off (according to a notice BMW sent [ https://s3.amazonaws.com/s3.documentcloud.org/documents/213213/col-bmw-warn-act-notice.pdf ] the union), 27 are age 50 or older. The word that came most often to the lips of workers and their families I've talked to is "devastated."
"The hardest thing I ever had to do in my life was to look my family in the eyes and tell them that after 32 years I'm out of a job," says Tim Kitchen, who at 53 is the longest-serving employee at the warehouse. The esprit de corps that once prevailed in the warehouse is gone, he says. "You walk in there now, it's like a morgue." Early retirement isn't an option; Kitchen still has two kids' college educations to pay for.
Every working American should be dismayed by — and afraid of — what BMW is doing.
These employees exemplified the best qualities of the American worker. They devoted their working lives to BMW, at a time when it was building and solidifying its U.S. beachhead. Their wages, with benefits, paid for a reasonable middle-class lifestyle if they managed it carefully. Throw in the job security they were encouraged to expect, and they had the confidence to make sacrifices and investments that contributed to the economy for the long term, like college education for the kids, an addition on the house, a new baby. Then one day they were handed a mass pink slip, effective in a matter of weeks.
The harvest will be weighed in foreclosed homes, college educations deferred or abandoned, new cars left in the dealers' lots (BMWs not excepted) and consumer goods on the shelf, one more little cascade of blows to the U.S. economy.
Miguel Carpinteyro, 42, had 14 years with BMW and every expectation of retiring there. In the backyard of their home in the San Bernardino County community of Highland, he and his wife, Jerri, just finished building a pool, which is good therapy for their two autistic sons. A daughter has a heart condition requiring frequent medical visits.
The family put money aside for retirement through a 401(k), but they may have to tap that to live on, never mind paying their medical bills without employer-sponsored insurance. Their household budget, based on a BMW wage, can't be sustained on much less. "We'll probably end up losing the house," Jerri told me.
Many of the BMW employees can boast of tenures stretching back to the bygone era when a job was more than a job. The longevity of the workforce tells you that good wages and benefits kept turnover at the plant low — when companies cared about keeping turnover low. Some can measure their loyalty to BMW in the kids' ballgames and dance recitals they missed over the years because the company needed them to pull double shifts. Will workers employed by an outsourcing contractor and earning closer to minimum wage do the same? To ask the question is to answer it.
BMW says for the record that it's "very much aware of its legal obligations and corporate responsibilities." The company will negotiate with the Teamsters over severance but won't discuss that or other transitional issues in public. It notes that it still employs 10,000 people in California, including those at two vehicle technology centers and Newbury Park-based BMW DesignworksUSA, and says that number might grow in the future.
The company doesn't concede that it's outsourcing the Ontario plant to save money on wages. It says it brought in outside logistic contractors at Ontario and four of its other five parts depots nationwide because it prefers to focus on its "core expertise" of engineering and making cars. Of course, nonunion workforces generally receive lower pay and benefits than union — that's the power of collective bargaining — so the math is hardly a secret.
If there are operational efficiencies to be gained from the outsourcing, as BMW contends, the firm presumably expects them to translate into higher profits, but it won't be sharing the money with the warehouse workers. Among the most likely beneficiaries are its shareholders — maybe via another dividend boost on top of the $950-million raise [ https://s3.amazonaws.com/s3.documentcloud.org/documents/213189/col-bmw-dividends.pdf ] the company gave them out of its $4.7-billion profit last year.
BMW's defenders will point out that the company has a perfect legal right to outsource any jobs it wishes. Fair enough. Yet by the same token, American taxpayers had a perfect legal right to tell BMW to drop dead when the firm's credit arm asked the Federal Reserve for a low-interest $3.6-billion loan during the 2008 financial crisis. BMW got the money then because U.S. policymakers saw a larger issue at stake: saving the economy from going over a cliff. Just as there's a larger issue involved at Ontario, which is saving the American middle class from going over the same cliff.
It's fashionable to observe today that the loyalty the BMW workers gave their employer was naive; complain to manufacturing CEOs about their remorseless hollowing out of middle-class livelihoods to maintain payouts to shareholders, and the answer you get is that this is merely the way of our hyper-competitive modern world. Nothing personal; it's the tyranny of the marketplace.
Yet what gives BMW the freedom to convert good American middle-class jobs into low-wage piecework is the evaporation of American workers' power of collective action. The labor lawyer and writer Thomas Geoghegan [ http://tomgeoghegan.com/ ] contends that BMW could never outsource union jobs like this in its home country, Germany, where union solidarity extending from the professional staff down to the shop floor would stomp the living daylights out of the very idea. "Foreign companies know there's no solidarity here," he says.
On Monday, the Fourth of July, Americans will gather to celebrate the overthrow of tyranny. But the ease with which we allow corporate employers to impoverish their loyal workers should make us pause under the fireworks and think about how over the ensuing 235 years we've simply substituted one set of tyrants for another, the new ones immeasurably more heartless and bloodthirsty than the ones we shed.
Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik [ http://www.latimes.com/hiltzik ], check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.
Resource Storage Gives Lenders Profits in Tough Times, but Some Clients Complain of Bottlenecks
By CAROLYN CUI And TATYANA SHUMSKY JULY 5, 2011
About 600 miles from Wall Street, Goldman Sachs Group Inc. employees are busy doing deals.
But instead of a sleek office tower, they work in a rundown warehouse deep in an industrial section of Detroit. And rather than trading in stocks or bonds, they move metal—lots of metal.
Goldman's warehouse on the banks of the Detroit River is one of more than 100 storage facilities controlled by the giant securities firm around the world. The warehouses are part of Wall Street's effort to forge a new frontier in the commodities markets: warehousing metal.
In the past 18 months, Goldman, J.P. Morgan Chase & Co. and trading firms Glencore International PLC and Trafigura Beheer BV have snapped up warehouse operators, all of them accredited to house metal traded through the London Metal Exchange, or LME. The buying binge means the four firms now are landlords to about two-thirds of the LME's entire metal stocks, from aluminum to copper to zinc.
LME metal stocks represent a small portion of the global supply. For example, LME's total aluminum stocks are about 4.5 million tons, or about 10% of the world's annual supply.
For Wall Street, warehouses are a way to earn extra income, especially as core businesses like trading are suffering. The facilities represent a relatively small but profitable way to bet on commodities markets without actually trading, the firms said.
But the growing muscle of securities firms in the metal-storage business is riling users and traders, who say the firms have both a bird's-eye view of supply and demand and the ability to control what goes in and out of their warehouses. These traders worry the firms could exploit their knowledge. The new owners say they keep their trading arms and warehouse operations separate, and there is no evidence to suggest they share information.
Traders and metal users have complained to the U.K.'s competition watchdog and the LME about companies acting as both trader and warehouse keeper. On Thursday, the Office of Fair Trade said the complaints lacked substance, and the agency won't investigate. The LME says it has no evidence to support claims the warehouses are used to gain an unfair advantage.
Goldman's operations in Detroit are at the center of the controversy, because aluminum prices are higher in that area than the trading price in London, and Goldman controls most of the warehouses in Detroit. Warehouses like the one along the Detroit River hold about one million tons of aluminum, or almost 25% of the LME's stocks.
Metal users such as beverage giant Coca-Cola Co. and can maker Novelis Inc. have expressed concern to the LME that the Detroit warehouses send out too little of the commodities they need. The LME has responded by instructing warehouse to release more commodities.
"This is inappropriate," says Nick Madden, chief procurement officer at Novelis, referring to the release limits and the wait to receive aluminum. Warehouses in Detroit owned by Goldman are only required to release 1,500 metric tons of metals a day. The warehouse only rarely surpasses this limit, according to LME data.
Novelis, a beverage-can maker, is the largest user of aluminum in the U.S. "We see it as very unhealthy for the market," he says. "The ultimate bill goes to the consumers."
Procurement officers at Coke and Novelis have said the limited releases are driving metal costs higher. A Goldman spokesman says its warehouse unit "is fulfilling the LME's requirements."
With record levels of commodities piling up, companies that own the warehouses are raking in nearly $1 billion in rental revenue each year, according to LME data.
Here is how it works: If a producer or merchant needs to store some aluminum, for example, it sends the metal to a warehouse, paying rent every day. In Detroit, Goldman charges 41 cents per metric ton of aluminum per day, or about $150 a year, according to LME data.
The rent is offset by big cash incentives warehouses pay to attract metal. But with millions of tons in storage, even a difference of a few dollars of income per ton can quickly add up.
The business was a backwater in the commodities markets for decades, dominated by small, independent operators. Then the financial crisis put the industry on the radar screens of Wall Street firms looking for new ways to make money. The firms correctly predicted a slump in metal demand during the recession, increasing the need for storage.
In 2010, J.P. Morgan acquired Henry Bath & Son as part of the New York bank's purchase of RBS Sempra Commodities. Goldman bought Metro International Trade Services LLC, a Romulus, Mich., warehousing company, for an undisclosed sum. Trafigura, the world's second-largest metal trader after Glencore, purchased U.K.-based NEMS Ltd. Glencore paid $209 million for Pacorini Metals, the metal-storage business of Pacorini Group, an Italian, family-run firm.
"The warehouses give the banks exposure to commodities without them having to be involved in price volatility," said Clare Eilbeck, a metals researcher at Brook Hunt, a subsidiary of commodities consulting firm Wood Mackenzie.
Simon Collins, a director at Trafigura, says the Amsterdam-based firm sees its warehouses as a "recession hedge" when other businesses slow. So far, the frenzy of warehouse buying is paying off. Glencore's Pacorini earned profits of $31 million in 2010 on revenue of $220 million, according to its recent initial-public-offering prospectus. Henry Bath was one of the biggest contributors to J.P. Morgan's base-metal business in the first five months of this year, according to people familiar with the matter. A J.P. Morgan spokeswoman declined to comment. A Glencore spokesman also declined to comment.
In Detroit, Goldman often offers a discount to attract customers to its warehouses but sometimes forces buyers to wait seven months or longer to get their inventory back, according to some users and LME data.
As a result of recent complaints, the LME will require most warehouses to release more metal on a daily basis starting next April. But analysts say the exchange's move isn't enough to alleviate the delays.
In New Orleans, warehouses owned by Goldman, J.P. Morgan, Glencore and Trafigura have accumulated 60% of all the LME's zinc stock. Right now, traders say, the delay in getting metal out of storage is about five days, but traders are worried that might increase—like in the aluminum market—as stocks rise but output remains constant. Greater stocks inside warehouses mean more clients potentially requesting the release of stored commodities.
"Clients are clearly not pleased with metals being tied up for many months," said Mike Frawley, global head of metals at Newedge USA LLC. Clients have little choice but to wait or find another source, such as buying directly from a producer or merchant.
But getting metal quickly from other sources for faster delivery costs extra. For aluminum, buyers are charged a premium of about $187 a ton, according to Karen McBeth, global director of Platts Metals Group, a commodities-information provider. Aluminum currently trades at $2,486 a metric ton at LME. Zinc users are being charged about $165 a ton more than the LME trading price.
There will be yet another problem if the economy picks up and buyers increasingly need metal they are storing in warehouses. "I am very worried," said Steven Spencer, chief executive of Traderight Ltd. "We have never seen stocks this high. It's going to be very hard to move so much metal around."
Write to Carolyn Cui at carolyn.cui@wsj.com and Tatyana Shumsky at tatyana.shumsky@dowjones.com
Goldman Sachs to Cut 1,000 Jobs as Fixed-Income Revenue Misses Estimates
Goldman Sachs Group Inc. chairman and chief executive officer Lloyd C. Blankfein. Photographer: Chris Kleponis/Bloomberg
Goldman Sachs Group Inc. signage is displayed on the floor of the New York Stock Exchange in New York. Photographer: Jin Lee/Bloomberg
By Christine Harper - Jul 19, 2011 3:17 PM CT
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.
‘Foreseeable Future’
“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 84 cents, or 0.7 percent, to $128.49 in New York Stock Exchange composite trading at 4:15 p.m. The stock, at its lowest level since April 2009, has dropped about 24 percent this year.
Net Income
Net income climbed 77 percent from the same period a year earlier, and earnings fell 38 percent if one-time costs are excluded from the 2010 results. Last year’s second-quarter earnings were reduced by a $550 million settlement with the Securities and Exchange Commission and a $600 million expense to pay a U.K. tax on employee bonuses.
Analysts in the Bloomberg survey lowered their earnings estimates by an average of $1.09 per share in the past four weeks.
Revenue fell 39 percent to $7.28 billion from $11.9 billion in the first quarter and $8.84 billion a year earlier. The figure fell short of the average $8.2 billion estimate of 15 analysts surveyed by Bloomberg. Return on equity, a measure of how well the firm reinvests shareholder funds, decreased to 6.1 percent from 12.2 percent in the first quarter.
No Rebound
“We’ve had four relatively weak quarters in a row, and I think it’s now quite clear that the difficult environment is going to be continued throughout the remainder of this year,” Atlantic Equities’ Staite said. “I’d be pretty surprised if we see a marked rebound any time in the near term.”
Overall revenue from trading, run since February 2008 by Edward K. Eisler, David B. Heller, Pablo J. Salame and Harvey M. Schwartz, fell 47 percent to $3.52 billion from $6.65 billion in the first quarter and was down 29 percent from $4.98 billion in the second quarter of 2010.
“Certain of our businesses had disappointing results as we reduced our market risk in response to attempting to manage fluctuations in prices and market liquidity,” Blankfein, 56, said in the statement.
Value at risk, a gauge of how much the firm could lose in a single day of trading, fell for the eighth consecutive quarter, to $101 million. The figure was the lowest since the third quarter of 2006. The firm reduced the amount at risk to equity prices, currencies and interest rates, while the risk in commodity prices jumped.
‘Not as Effective’
“During the quarter we were not as effective at navigating intra-quarter swings in market prices and liquidity as we have been historically,” Viniar told analysts. “We generated lower revenues from managing client-originated market-making inventory, particularly in our largely U.S.-based mortgages business and our global commodities and credit business.”
Goldman Sachs’s equity-trading revenue declined 17 percent to $1.92 billion from $2.32 billion in the prior quarter and rose 19 percent from $1.61 billion a year earlier. That compared with $1.22 billion of second-quarter equity-trading revenue at JPMorgan and $812 million at Citigroup. Analysts including as Roger Freeman at Barclays Capital expected Goldman Sachs’s equities revenue to be about $2 billion.
Revenue from investment banking, overseen globally by Richard J. Gnodde, David M. Solomon and John S. Weinberg, advanced to $1.45 billion in the quarter from $1.27 billion in the first quarter and $941 million in the second quarter of 2010. By comparison, JPMorgan’s investment-banking fees totaled $1.92 billion in the quarter and Citigroup reaped $1.09 billion.
Investment Banking
Goldman Sachs’s investment-banking revenue exceeded estimates from analysts at Atlantic Equities, Barclays Capital and ISI Group, who expected revenue in the range of $1.2 billion to $1.3 billion.
Fees from takeover advice, a business led by Gene T. Sykes and Yoel Zaoui, increased to $637 million from $357 million in the first quarter and from $471 million a year earlier. The firm ranks first among advisers on mergers and acquisitions announced so far this year, according to Bloomberg data.
The firm also ranks first year-to-date in managing global equity sales and initial public offerings, the data show. Revenue from equity underwriting, overseen by London-based Matthew Westerman, fell to $378 million from $426 million in the first quarter, while debt underwriting revenue dropped to $433 million from $486 million in the prior three months.
Investing and Lending
Investing and lending, the segment in which Goldman Sachs books gains or losses from the firm’s own stakes in companies such as Industrial & Commercial Bank of China (1398) Ltd. and other assets, made $1.04 billion in the period, compared with $2.71 billion of gains in the first quarter and $1.79 billion in the second quarter of 2010.
Revenue from investing and lending was more than double what was expected by analysts at Atlantic Equities, Barclays Capital and ISI Group. Their estimates ranged from $210 million to $411 million.
“People regard those revenues as pretty volatile and I don’t think people will take any comfort from a better performance” in that business, said Atlantic Equities’ Staite.
Revenue from investment management, the business run by Edward C. Forst and Timothy O’Neill, was unchanged from the first quarter at $1.27 billion and up from $1.13 billion in the second quarter of last year. Assets under management increased to $844 billion at the end of June from $840 billion at the end of March.
To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.
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