An Unbowed Goldman Reports Profit Growth, but Caution Remains
At the top of the investment banks stand Goldman Sachs and JPMorgan, with the former recently announcing earnings that beat expectations. The interpretation of the results, however, creates a larger picture of the bank that creates doubt and uncertainty.
The sources of revenue for Goldman Sachs were closely analyzed, and it is very important to investors given that the bank’s future is still highly unstable. A large portion of the revenue in the first-quarter was “from investments that tended to fluctuate in value,” meaning that the earnings may have been merely good timing. Another area is fixed income, which, unlike other banks, Goldman Sachs remained in, and the bank continues to pull substantial amounts of revenue from the area. Also, “the core business unit that has produced many of Goldman’s leaders and has helped define its culture — the powerful division that trades bonds, currencies and commodities — produced lower year-over-year results for the first three months of the year.” Investment banking, in contrast, was up 36 percent.
The shift in revenue sources for the banks is huge in determining how they will perform in the future, and it is not looking good for Goldman Sachs. They still draw a lot of revenue from areas that are facing increased regulations that are constantly changing, and the once powerful bond, currencies, and commodities is no longer a stable base for the bank. The biggest growth lies in investment banking, which can face a wide range of highs and lows, leaving little to be accurately depicted in terms of future revenue.