Today is the day of Goldman Sachs’ results. You can see them here. There’s some bad stuff: net earnings were down 11% on the second quarter of 2011, headcount was trimmed by 100 compared to the first quarter of 2012 and by 1,183 compared to the second quarter of 2011. Lloyd Blankfein spoke ominously of market conditions deteriorating and lower activity levels in the second quarter.
But, there was good news too. Apropos of nothing, Goldman’s FICC sales and trading revenues rose a massive 37% year-on-year in Q2. This looks like quite an achievement in light of the 17% decline at JPMorgan and the 4% decline at Citi. Admittedly, Citi and JPMorgan’s figures are adjusted for the accounting obscurer that is DVA, and Goldman’s aren’t – but Goldman says DVA didn’t have much impact on its results.
It therefore looks like Goldman did a lot to regain its lost FICC market share from JPMorgan over the past quarter. Goldman’s FICC performance is all the more impressive given that JPMorgan increased its FICC VaR by 50% last quarter and still suffered a big revenue decline. By comparison, Goldman reduced its average daily commodities VaR by 50% and cited commodities as one of its key growth areas.
Given that FICC margins tend to be higher than for other areas of the business and that FICC salespeople and traders tend to earn more, it’s not entirely surprising that Goldman has started opening the pay differential with JPMorgan again. In the first half of 2012, average pay per head at Goldman Sachs was $226k (down 5% on last year). This was 22% higher than average compensation per head at JPMorgan’s investment bank. Until recently, JPMorgan was closing the Goldman pay gap. In the first half of 2011, it only paid its investment bankers 12% less than average compensation at Goldman Sachs….
Separately, the Harvard Business Review has an interesting article on Kevin Crain, an MD at Bank of America Merrill Lynch who found himself going to bed at 1am and getting up before 6am. Kevin had a heart attack aged 46 and came across Tony Schwartz, CEO of ‘The Energy Project.’ Schwartz persuaded him to stay in bed an extra hour and to go for a half hour stroll at lunchtime. Kevin’s life was transformed. “I’m actually more productive than I used to be because I’m more attentive to the issues I should be focusing on,” Kevin says of his new relaxed life.
Citigroup expects to avoid massive reductions in its staff, but is cutting 1,200 jobs from its securities and banking division, and will consider more spending reductions in trading and investment banking if revenue doesn’t improve. (BusinessWeek)
Mervyn King said Barclays board had been in a state of denial for months about the Bank’s loss of confidence in Barclays’ management. (Bloomberg)
n our view, the task facing the new CEO is clear – Barclays needs to rebalance away from lower-return businesses both inside the investment bank and across its broader business mix. (UBS via the Institute of Trading)
A poor choice of replacement for Bob Diamond could condemn Barclays Capital to second tier status, says UBS. (UBS via the Institute of Trading)
Banking used to generate 13% of revenues at recruitment firm S3. Now it generates 5%. (The Times)
It’s starting to look like Singapore will beat London to becoming the 2nd offshore financial centre for the renminbi after Hong Kong. (Financial Times)
Commonwealth Bank of Australia will freeze base salaries for people making A$150,000 ($155,000) or more in its institutional banking and markets division for the 2nd year running. (Bloomberg)
Foreign banks want to expand their Chinese workforces by 56% by 2015. Priority positions are in corporate banking, risk management, treasury and compliance. (Bloomberg)