Goldman execs scrutinize bond trading after revenue nosedives

(Reuters) – Goldman Sachs Group Inc.’s management team looks for ways to revive commercial banking bonds and generate more revenue from existing clients that have become less profitable for the bank.

The Wall Street bank reported a 40 percent drop in second-quarter revenue bonuses on Tuesday, had expected worse than many analysts and posted weaker results on the amenities of its history as a public company.

Seven analysts toasted Marty Chavez CFO during a conference call on whether Goldman is enough to transform the company.

“Everyone in our FICC business focused on it, and on a granular molecular level, working – as in the management team,” he said, using an acronym for trading in fixed income, foreign exchange and commodities.

The company has delivered $ 1.2 billion in revenue, the lowest figure since the fourth quarter of 2015.

Goldman’s trade defeat was deeper than the general weakness that hit Wall Street because of historically low volatility.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co fell 6 percent to 19 percent.

Morgan Stanley will report on Wednesday.

Goldman shares fell 2.5 percent even though they have managed to beat global forecasts of analysts’ earnings.

Shares were the worst stocks of major US banks, losing 4.3 percent this year compared to Monday’s close, compared with a 6.7 percent increase for the S & P 500 financial .

Goldman declined in most areas of bond swaps, including interest rates and currency, but commodity trading has been the worst case scenario, Chavez said.

The bank does not exclude figures for each commodity, but Chavez said raw materials had the worst performance in the 73 quarters in which Goldman reported publicly gains.

Many of Goldman’s clients are active asset managers, such as hedge funds, who have struggled to a large extent to show attractive returns and prevent investors from moving to passive vehicles such as index funds and quoted funds.

These customers are trading less and therefore have generated less revenue for the Goldman Sachs bank. They do not trade both corporate clients than their larger competitors who have lent large companies and managed their hedges.

Goldman has also traditionally been more focused on derivatives and amenities than other banks, and both areas were weak in the second quarter, Chavez said.

Oil prices fluctuated between $ 44 and $ 58 a barrel in the first half of 2017, in sharp contrast to the first half of 2016, ranging from $ 27 to $ 50 a barrel.

Volatility indexes also reached multiyear levels in the first half of 2017, which means that traders have fewer options for directional paris.

To improve overall trading obligations, Goldman looks for ways to do more business with existing customers, Chavez said.

“This is something that all of us evaluate and make changes and works, and we are committed to it,” he said. “We know we have to do better.”

Goldman has maintained its commitment to its products unit J. Aron & Company, while fellows such as Morgan Stanley and Barclays PLC have declined in recent years.

Bank of America profit rises as consumer bank hits profit ‘milestone’

(Reuters) – Bank of America Corp reported a higher-than-expected quarterly gain on its consumer bank and cut costs that began to pay off after years of closure of branches, staff reductions and efforts to Reduce the role of technology and related costs.

Chief Executive Brian Moynihan spoke enthusiastically about a broad recovery in consumer activity that began in 2009, calling his quarterly profit of $ 2 billion to the analysts call on Tuesday.

In the midst of the great recession, the unit had 6,000 financial centers, 100,000 employees, two-thirds of the bank deposits and few digital capabilities.

Regulatory changes introduced after the financial crisis of 2008 began quickly to reduce revenues, as strategic decisions, such as the reduction of activities generated by third parties.

The company has recently benefited from cost reduction as well as improved technology, deposit growth and focus on higher-quality borrowers, Moynihan said.

In the second quarter, the division was able to increase deposits at lower costs and use these cheaper funds to stimulate loan growth, which helps to outperform any other unit.

Overall, the Bank of America reached a goal of spending more than 60 cents for every dollar of income it produces, down from 63 cents a year earlier. Investors have seen this measure closely as a sign of bank efficiency.

Bank of America, the second largest asset lender, is working to reduce annual operating expenses by 53 per billion next year.

The consumer bank helped Bank of America to make a net profit of $ 4.9 billion, or 46 cents per share, up 11 percent from the same period last year.

Analysts were expecting 43 cents on average, according to Thomson Reuters I / B / E / S.

The bank’s total turnover to 23070000000 also exceeded the analysts’ average estimate of 21.78 billion.

“It was a good quarter for Bank of America,” said Evercore ISI analyst Glenn Schorr.

“You really have to try to find some problems to deal with.”

Moynihan and chief financial officer Paul Donofrio both second quarter qualified one of the best in bank history.

However, its stock has declined 1.1 percent to $ 23.75 at noon, after a rise of 8.4 percent since the beginning of the year.

While large banks have reported better results, investors were disappointed that profits are not increasing faster.

Last week, shares of JPMorgan Chase & Co, Wells Fargo & Co and Citigroup Inc fell after beating analysts’ estimates, such as Goldman Sachs Group Inc. on Tuesday.

Profits and gains from the Bank of the United States were overshadowed by the margin of intermediation below expectations, according to analysts.

This measure, up 8.6% to $ 10.99 billion in the second quarter, measures the difference between the cost of bank financing and the income generated from these funds.

Bank of America is considered the most sensitive to interest rates among major US banks because of the way its balance is built in terms of term loans, types of financing and hedges.

In addition to its global markets unit, which suffered a slowing of trade just like other Wall Street banks, another Bank of United States companies also generates greater profits.

Morgan Stanley’s profit boosted by underwriting, wealth management

(Reuters) – Morgan Stanley reported a higher quarterly profit than expected on Wednesday, thanks to strong investment banking and asset management.

Morgan Stanley shares, which complete the quarterly earnings season for large lenders, rose 2.5% to $ 46.29 in the pre-market market.

Asset management activities of the lender saw its best quarter in more than three years, revenues rose 8.9% to 4.15 billion.

The company, the bank has developed a reliable revenue stream, generates a pre-tax margin of 25 percent, according to the stated objective of CEO, James Gorman.

Investment bank revenues soared 25 percent. 100 to $ 1.53 billion, as an asset of the debt and securities market activities generated sales commission.

“Our second quarter results demonstrated the resilience of our franchise in a small business setting,” Gorman said.

Brokerage income was reduced to Morgan Stanley who worked to transform his bond trading business by appointing new members of management and cutting staff were modest compared to Goldman Sachs Inc. Archer Group, who declined 40% Of the income bond operations.

At Morgan Stanley, global business revenue declined by about 3 percent, while revenue bond operations declined 4.5 percent.

Commercial bonds struggled for major US banks this quarter, making it difficult to compare with the period last year when banks have dealt with the following wholesale volumes the vote for Britain to leave the European Union.

Morgan Stanley said brokerage, a company in which it is generally safe, grew from $ 2.1 trillion to $ 2.2 billion.

The bank’s 9.1% profitability index, a measure of profitability, was well within the target of 9% to 11%, Gorman wanted the bank to reach the end of 2017.

Morgan Stanley’s non-interest expense increased 6.8 percent to $ 6.86 billion, even as the bank aims to reduce spending by $ 1 billion by the end of this year.

Earnings applicable to common stockholders were $ 1.59 billion in the second quarter ended June 30, compared to $ 1.43 billion a year earlier. Earnings per share increased from 75 cents to 87 cents.

On average, analysts expected a profit of 76 cents per share, according to Thomson Reuters I / B / E / S.

Net sales increased 6.6% to $ 9.5 billion compared to the average estimate of 9.09 billion.

By the end of Tuesday, Morgan Stanley shares rose 6.8 percent this year, compared with a 4.2 percent increase in the KBW bank index.

Morgan Stanley, the sixth US bank by assets, ended the earnings season for major lenders.

Reports Sruthi Shankar Bangalore and Olivia Oran in New York; Editing by Saumyadeb Chakrabarty