Goldman Sachs posted unexpectedly poor second-quarter earnings, producing earnings per share of $1.85, compared to forecasts of around $2.30. Earnings came in at $1.1bn on revenues of $7.3bn. The main problem was a slowdown in its trading division. The banks also announced 1,000 job cuts. Meanwhile, Bank of America posted its worst quarterly loss on record, $8.8bn, due to a large legal settlement.
What the commentators said
There seems little scope for “returning to the days when banks like Goldman could rake in billions” from trading, said Juliet Samuel in City AM. Clients’ risk appetite has fallen, due to many being rattled by the shaky economic backdrop and recent market volatility. “When everyone is too scared to get in their cars and go anywhere, it’s hard to make money running a toll road.”
On the retail side of the business, the post-bubble years are also proving arduous. Bank of America’s underlying revenue fell around 10%, said Eric Dash on NYTimes.com. “Scarred by the last few years”, consumers are paying off debts and won’t take out new loans. So demand for mortgages has suffered “even though rates are at historic lows”. In addition, said Karen Maley of Business Spectator, persistently low interest rates are denting net interest income. Given their struggles to raise revenue in an environment of “heightened risk and ongoing deleveraging”, it’s no wonder cost-cutting and job losses are back on the agenda.