Tuesday, April 14, 2009

A Closer Look at Goldman Sachs' Earnings

As you know, The Goldman Sachs Group, Incorporated became a bank holding company last year. As such, they became eligible to participate in the government rescue programs. They expanded their bank operation so they could foist the bulk of their assets on the back of the FDIC. Check the FDIC website, the assets of Goldman Sachs Bank USA have grown from $19.1 billion to $162.5 billion in just one year. Funding with deposits is much cheaper than funding with corporate debt.

Anyway, as a bank holding company, they are required to report earnings on a calendar year basis. They had formerly reported using a November fiscal year end. Their most recent annual report includes financials up to NOVEMBER 30, 2008.

Last night's release included the earnings for January, February and March of this year. Goldman reported earnings of $3.39 per share, easily besting estimates of $1.64 per share.

You may ask, what happened to December? It was not included in the previous quarter's release, nor in this release. Well, December appears at the end of the press release in its own little category.

What happened in December? I'm glad you asked. Goldman recorded a LOSS OF $2.15 per share. Add it together, and you come up with earnings of $1.24 for the four month total. I am not sure about how Wall Street analysts accounted for this, but it adds up to an earnings miss to me.

I have attached the link below, please double check my understanding of the data. I would hate to bad mouth Goldman.



MK said...

Goldman's stock closed yesterday @ $130.15

Their offering was priced at a sweet discount 5.5%: $123.00 per share

Stock closed today @ $115.11

Loss for the new share holders of $320.7 million

Lesson: If Goldman is selling, don't buy

buchlajoe said...

nieve question ... if GS doesnt need the TARP money , why do they have to raise it in an equity offering to give it back? seems like they just want to get out from under the govt. scrutiny .

MK said...

That is it. Goldman is jumping on the opportunity to raise capital and get out from under the government. Suckers are born every minute.

Note: they need approval to pay back the TARP, which they have not received yet.

Of course, they won't relinquish their bank holding company status. The other goodies are just too good to pass up: FDIC deposit coverage, FDIC debt coverage, increased Fed borrowing access, etc.