Bloomberg News

Goldman Sachs EPS Estimate Slashed 40% by Atlantic Equities

June 17, 2011

June 17 (Bloomberg) -- Goldman Sachs Group Inc.’s second- quarter profit estimate was reduced 40 percent by an analyst at Atlantic Equities LLP, who said the firm’s trading and investing revenue is declining, making job cuts more likely.

Goldman Sachs will likely earn $2.17 per share, down from a previous estimate of $3.49, Richard Staite wrote today in a note to investors. Staite expects trading revenue to tumble to $4.9 billion, a 27 percent decrease from the first quarter, and investing and lending gains to narrow to $200 million from $2.7 billion, he wrote.

“About half the cut is due to weaker trading revenues while the other half is driven by lower investment gains,” wrote Staite, who has a “neutral” recommendation on Goldman Sachs stock. “Given the weak environment we expect jobs to be cut across the industry.”

Goldman Sachs, the fifth-biggest U.S. bank by assets, has dropped 19 percent in New York Stock Exchange composite trading so far this year on concern about weaker revenue and increased regulation. Staite’s estimate for Goldman Sachs’s second-quarter earnings per share puts the London-based analyst below the $3.56 average forecast of 21 analysts surveyed by Bloomberg.

Goldman Sachs earned $4.38 per share in the first quarter of this year and $0.78 per share in the second quarter of 2010. Staite wrote that he expects the New York-based firm’s second- quarter return on tangible equity, or ROTE, will be 8 percent, while the full-year ROTE will be 13 percent.

Staite said he expects Goldman Sachs’s fixed-income, currencies and commodities trading revenue to drop 33 percent from the first quarter to $2.9 billion in the second quarter, while equity trading revenue may fall 15 percent to $2 billion.

Investment-banking revenue, which includes fees from merger advice and underwriting, will probably rise to $1.3 billion, or 4 percent, from the first quarter, he wrote.

--Editors: William Ahearn, Dan Kraut

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.


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