11 months ago • 2 mins
Investment bank Goldman Sachs reported some seriously disappointing fourth-quarter results on Tuesday.
What does this mean?
Goldman Sachs isn’t alone in laying off workers, but it has been wielding the job-cutting ax with particular gusto compared to other Wall Street residents. And now we know exactly why: the firm missed profit expectations by a country mile, which had a lot to do with slumping investment banking and asset management fees. That’s probably why the firm’s trying its best to Ctrl Z the hiring spree it went on when dealmaking was at its height – slashing jobs and other costs left, right, and center. But that frenzy’s come a bit late in the day, and some investors might not be impressed by Goldman’s Johnny-come-lately cost-cutting antics.
Why should I care?
For markets: No rush for gold.
The world of investment banking is cyclical, and trading revenues and advisory fees ebb and flow – so by the time the results roll in, last quarter’s earnings are already ancient history. That means it’s not the quarterly sprint that counts: it’s all about the multi-year marathon. So sure, last quarter’s numbers were a disappointment – but Goldman’s a finely-tuned long-distance runner, and there isn’t any finish line in sight. Long-term shareholders know that too, which could be why the firm’s share price is still trading near all-time highs.
The bigger picture: Banks bounce back.
After the financial crisis hit, experts worried that investment banks’ best days were behind them, and predicted they’d never see pre-recession profit levels again. But the Wall Street titans clawed their way back, and of the five most famous banking firms, only Citigroup’s share price has been outstripped by the S&P 500 over the last ten years. That’s quite a feat for the industry, especially given that it seems to have ditched the profitable but questionable moves that landed it in hot water before.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
/3 • Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.