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Quarterly Earnings: Goldman, Bank of America, TD Ameritrade, Charles Schwab

July 18, 2017

GOLDMAN'S BOND TRADING REVENUE SLUMPS 40%.   Goldman Sachs reported improved EPS of $3.95/share (its shares outstanding fell nearly 6%), topping Wall Street expectations of $3.39/share. Meanwhile total revenue, including net interest income, fell 0.6% to $7.9 billion, while operating expenses fell 2% to $5.4 billion.


Unfortunately, Goldman reported a 40% drop in bond trading revenue, mirroring a broader weakness in trading activity that has plagued big U.S. banks – though Goldman’s decline was far worse than declines at JPMorgan (19%) and Citigroup (6%). It was the worst performance in Lloyd Blankfein’s tenure as Chairman and CEO.


Some of Goldman's other businesses performed better:  (i) equities rose 8% to $1.9 billion; (ii) investing and lending jumped 42%;  (iii) investment management revenues rose 13% to $1.5 billion; and, (iv) investment banking revenue fell 3% to $1.7 billion.


BANK OF AMERICA BEATS WALL STREET EXPECTATIONS  BofA reported a higher-than-expected quarterly profit on strength in its consumer bank and cost cuts that are beginning to bear fruit after years of branch closures, staff cuts and efforts to reduce technology and paper-related expenses. CEO Brian Moynihan and CFO Paul Donofrio both characterized the second quarter as one of the best in the bank's history.


Net income was rose 11% to $4.9 billion, or 46¢/share – beating analyst estimates of 43¢/share. Total revenue of $23 billion also beat average analyst estimates of $21.8 billion.


Even as big banks have reported better results, investors have been disappointed that profits are not growing faster. Last week, shares of JPMorgan, Wells Fargo and Citigroup each fell after beating analysts' estimates, as did Goldman Sachs today.


Analysts consider Bank of America the most interest-rate sensitive among big U.S. banks because of the way its balance sheet is constructed in terms of loan maturities, types of funding and hedges. Its net interest income, which measures the difference between its cost of funding and the income it generates from those funds, rose 8.6% to $11 billion in Q2.


TD AMERITRADE TOPS STREET 3Q FORECASTS.   TD Ameritrade beat Wall Street expectations, reporting Q3 earnings of $231 million, or 44¢/share – vs. estimates of 41¢/share. Revenues of $931 million also top Street forecasts - $900 million.


SCHWAB STOCK SLIPS AFTER PROFIT RISES IN LINE WITH EXPECTATIONS.   Charles Schwab shares fell -1.3% after the discount broker reported that Q2 profits rose to $575 million or 39¢/share – in line with analyst expectations. Revenue increased 17% to $2.1 billion from $1.8 billion, above the Street estimates of $2.1 billion. Clients opened over 350,000 new brokerage accounts during the quarter, with the year-to-date total reaching 719,000, marking the biggest first-half increase in 17 years. Total client assets rose 16% to $3.04 trillion.