Goldman Slashes Expenses, Ups Risk, Beats Expectations

[Stocks-to-Watch]

There was a time when Goldman Sachs (GS) seemed to beat analysts’ expectations now matter how high they got. More recently, analysts have been rushing to lower their estimates as Goldman’s banking and trading operations looked like they would be particularly weak in the fourth quarter.

Well, the new more humble Goldman Sachs is still beating analysts estimates, even if it’s for different reasons than in the past. Goldman posted $1.84 in EPS, ahead of expectations for $1.24. Shares jumped nearly 4% in morning trading

Revenue dropped 30% from a year ago, as the bank’s capital markets business hit a very rough patch — companies have been delaying IPO’s and the bank’s trading operations are bringing in much less revenue as Goldman cuts risk and focuses on client services.

But Goldman has been aggressively cutting expenses, and appears to be well ahead of its competitors in that regard. Operating expenses fell 7%, and the company has slashed employees: headcount is down 2,400 from a year ago, more than double what had been expected, the Wall Street Journal points out.

And while the company is certainly taking on less risk than it did a few years ago, it did increase risk by one measure in the last quarter. The company’s “value at risk”, the amount Goldman could lose on a given day, rose to $135 million at the end of the fourth quarter, up from $102 million at the end of the third quarter, notes Marketwatch.



Original Article Source by Barrons.com

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