Goldman Sachs Still Seen As Top Investment Banking Pick

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