Last year bore bitter fruit for Goldman Sachs (GS), the investment banking and securities powerhouse. Revenues from trading, a main revenue driver, were weak. Fees even shrank in Goldman’s mergers and acquisitions division, a core business. As a result of the tough year, Goldman’s stock got sideswiped, plummeting 44 percent by year-end 2011.
But there are more woes ahead. Potential charges stemming from lawsuits, along with government agency investigations, are weighing down Goldman shares. The Federal Reserve passed stringent rules for the largest U.S. banking institutions, including Goldman, which turned into a bank during the crisis to avail itself of federal bailout help.
Still, the Wall Street firm has built its once-golden reputation on core strengths. Goldman has a global footprint and strong client relationships, note S&P analysts. Early last year, the firm bought India’s Benchmark Asset Management Co., a major player in exchange-traded funds. Goldman also is planning to prime the revenue pump with other investments in growing regions.
For now, though, Goldman is muddling along. Third quarter losses per share were 84 cents, compared to a $2.98 gain a year ago. Net revenues sank to $3.59 billion, compared to $10.7 billion last year. “Our results were significantly impacted by the environment,” noted Goldman CEO Lloyd Blankfein.
Of the 30 analysts followed by Thomson/First Call, five have strong buy recommendations on GS and 12 have buys, with 12 holds and one underperform.
Wells Fargo recently downgraded Goldman to market perform, citing its vulnerability to a deteriorating global economy. Instead, analysts see greater upside potential in JP Morgan Chase (JPM) and PNC Financial Services Group (PNC).
The company reports next on Jan. 18.
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