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How Equity Trading Revenues Continue to Weigh on Goldman Sachs

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Earnings review

Goldman Sachs (GS) reported 2Q16 earnings of $3.72 per share. It beat consensus estimates of $3.08. It was significantly higher than the EPS (earnings per share) of $1.98 reported in 2Q15. Last year, its earnings were hit by litigation charges. Revenues of $7.9 billion beat forecasts of $7.5 billion, but were 13% lower year-over-year. During the quarter, trading revenues picked up and the firm cut expenses. Shares of the company fell 1% despite strong earnings results. Analysts were disappointed with a fall in equity trading revenues and expected it to cut costs more.

“Despite the uncertainty created by Brexit, we achieved solid results by continuing to serve our clients across our diversified franchise and by managing our business efficiently,” said Lloyd C. Blankfein, Goldman Sachs’ chairman and CEO.

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Goldman Sachs’ performance relative to peers

Large banks have the potential to impact the broader market indices including the S&P Index Futures (SPY) and the corresponding financial ETFs. So far in 2016, shares of Goldman Sachs have fallen 11%. They have underperformed the financial sector. The Financial Select Sector SPDR ETF (XLF) represents the US financials sector.

Year-to-date, shares of large-cap peer Morgan Stanley (MS) have fallen 10.6%. Comparatively, shares of Citigroup (C), JPMorgan Chase (JPM), and Bank of New York Mellon (BK) have fallen 15%, 4%, and 3%, respectively.

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