DJ Goldman, Lehman Stay Above Fray With Results; Shares Rally
March 18th, 2008
Goldman Sachs Group Inc. (GS) and Lehman Brothers Holdings Inc. (LEH), which haven’t been wounded by the credit crunch like some of their brethren, showed they remained ahead of the pack with fiscal first-quarter results that topped expectations and didn’t include any unexpected bad news.
Still, the results were well below prior-year levels as both investment banks booked roughly $2 billion in credit-related losses.
Investors applauded the results, sending the shares higher in premarket activity and recouping some recent losses. Lehman was up 19% to $37.80 while Goldman climbed 9.2% to $164.97. Both companies also saw strong trading action during the quarter, which ended Feb. 29, with Lehman calling its clients’ activity a "record."
Goldman’s net income dropped 53% to $1.51 billion, or $3.23 a share, interrupting 10 quarters in a row of higher year-over year earnings. Year-earlier net income was $3.2 billion, or $6.67 a share.
The latest results included $1 billion in losses on residential mortgage loans and securities, and nearly $1 billion in losses on credit products and investment losses, including $135 million on Industrial & Commercial Bank of China.
Revenue decreased 35% to $8.34 billion.
The mean estimates of analysts surveyed by Thomson Financial were for earnings of $2.58 a share on revenue of $7.47 billion.
"Market conditions are clearly very difficult," said Chairman and Chief Executive Lloyd C. Blankfein. "But we saw strong customer activity across many of our franchise businesses in the first quarter. Although market conditions present many challenges at the moment, they also offer considerable opportunities."
The trading and principal investments segment saw revenue decrease 46% amid the credit and investment losses. Investment-banking revenue dropped 32% on a decline in debt underwriting, while the asset-management unit recorded a 23% increase on higher fees.
As for Lehman, its net income fell 57% to $489 million, or 81 cents a share, from $1.15 billion, or $1.96 a share, a year earlier. Net revenue fell 31% to $3.51 billion. Analysts’ mean estimates were for earnings of 72 cents a share on $3.35 billion in revenue.
Tags: lehman, results
March 18th, 2008 at 6:30 pm
No, but any idiot could have seen banks in trouble and possibly even failing when their bread & butter (mortgages and mortgage securities) is disappearing.A large piece of the economic boom, post tech-bubble was based on real estate investment.Again, you don’t have to be a genius to see it coming.
March 18th, 2008 at 7:20 pm
now that was some funny shit. times like these call for some levity.
March 18th, 2008 at 8:11 pm
If I own a business and it fails can I expect a federal bailout?
March 18th, 2008 at 9:01 pm
Forcing a depression and taking advantage of a depression aren’t quite the same thing.
March 18th, 2008 at 9:52 pm
This sounds like socialism for the rich: “Lehman now has access to the discount window at 3.25%… that may well be enough to keep Lehman from going south.”On the basis of what do investment banks have a right-to-not-go-belly-up?
March 18th, 2008 at 10:43 pm
You seriously give a shit about whether some anonymous random person clicks up or down on you?
March 18th, 2008 at 11:33 pm
Traditionally speaking the UK and the US economies are quite close together. In the UK they talk about being in phase with the US cycles, and out of phase with Europe. (You’ll find in UK recessions people start to idolise the Germans, who have had quite a rough time of late).The problems in Europe will really begin when the Euro runs into the European pension crisis on the horizon as the population ages.
March 19th, 2008 at 12:24 am
“the Federal Reserve would fund up to $30 billion of Bear Stearns’ less liquid assets”?!? wha…?!?! Why the heck do you Americans put up with this socialism for the rich mega-corporations and a stick-a-fork-in-you for the man on the street?JP Morgan is getting BS on a silver platter with sugar and cream on top.
March 19th, 2008 at 1:14 am
Europe seems to be a bit more stable than us right now in many more ways than one.Of course anyone with half a brain should have known that electing Bush would be a disaster and that you can’t trust Republicans with money.
March 19th, 2008 at 2:05 am
No they are not. Do not follow the herd think.The stock holders paid the bill.
March 19th, 2008 at 2:55 am
Oooohhh…. so now,Any sufficiently complicated C or Fortran program can contain a full implementation of all of Common Lisp.Nice.
March 19th, 2008 at 3:46 am
Excellent post and a very good explanation. However, I think it’s unlikely that Lehman will go down, they just completed a USD 2 billion unsecured financing deal that was well over 100% subscribed. And their CDS spread against base rate isn’t looking too bad.