Goldman Sachs GS better than expected earnings results but comp accruals need adjustment: Overall, GS generated clean $2.34 EPS in Q310, compared to JPM's $2.30 on a fully diluted basis; better than expected. Revenues were solid ex
principal investments driven by clean FICC $3.9bn -4% QoQ and clean
Equities $1.9bn +67% which J.P Morgan believes is due to hedging gains on short
long-dated Vol. position in equity derivatives.
Comp ratio stood at 45% (stated 43%) ex. principal investments which JPM strips out as it does not see the rationale for paying employees for PE-type gains – assume an
underlying 10% comp ratio for these earnings.
The long-term picture looks positive for GS being a winner in a world of high frequency trading ability in a more transparent/cash-like fixed income world considering its strong technology platforms.
JPM has an Overweight rating on GS with a PT of $175
GS closed Tuesday at $153.70
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