DealBook: What Happened at Goldman?

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Wednesday, April 19, 2017

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“We did underperform,” said R. Martin Chavez, Goldman Sachs’ incoming chief financial officer, “and the underperformance was driven by commodities and currencies.” Karsten Moran for The New York Times
By Amie Tsang
What kind of business do you associate with Goldman Sachs?
The trading of bonds, currencies and commodities? Well, that’s a core part of its business.
But the bank’s performance in those areas so far this year has been weak — an embarrassing setback when compared with strong profits in those businesses for competitors, like Bank of America and Citibank.
So what happened? Clients sent fewer orders their way and less volatility in markets made it harder to profit from price swings.
Goldman Sachs doesn’t want people to read too much into just one quarter’s earnings.
But this is Goldman, so all of Wall Street was trying to work it out. (Investors punished the bank’s stock, which closed down 4.7 percent.)
It wasn’t all bad. Goldman’s net revenue was higher than expected, and the firm is still first in the rankings for advising on mergers and acquisitions and for underwriting corporate stock offerings.
Looking forward, Antony Currie writes in Breakingviews that the bank’s internal technology revolution cannot come soon enough. Goldman needs the higher returns that could come with its online retail banking unit, but it could still be a while before that makes enough to cover the shortcomings in other areas.
Harbert Reaches $40 Million Tax Settlement
Philip A. Falcone is no stranger to regulators.
He made billions betting on the collapse of the housing market and then lost at least $1 billion investing in wireless telecommunications. He was barred in 2013 from working in the securities industry for five years after violations at his former hedge fund, Harbinger Capital Partners.
Now it’s the turn of his financial backers to face regulatory issues.
Eric T. Schneiderman, the New York attorney general, said on Tuesday that his office had reached a $40 million settlement with Harbert Management Corporation and several of its top executives over allegations that they had not paid state taxes for some of the most profitable years that Mr. Falcone was managing Harbinger, which was owned by Harbert.
An investigation by Mr. Schneiderman’s office had found that Harbert paid no state taxes on the profit generated by Harbinger from 2004 to 2009, even though the hedge fund and Mr. Falcone were based in Manhattan.
Harbert said in a statement that the firm and its executives “adamantly deny that they committed any wrongdoing” and that they made “a commercial decision to settle this legacy issue.”
By The Numbers: I.M.F. Growth Forecasts
3.7 percent: the growth rate forecast for the world in 2017.
That figure tops the 3.1 percent for 2016, but it could be threatened by protectionist tendencies in developed economies, the International Monetary Fund warned. Still, the volume of global trade is expected to pick up this year.
4.5 percent: the growth rate for developing nations.
That would be another improvement from 2016. The fund said a pickup in commodity prices and increased investment spending improved the outlook in the emerging world. And it is not the only group that is optimistic.
Emerging market stocks and bonds have attracted investors recently as President Trump’s anti-trade statements have faded, while the weaker dollar has lifted downtrodden currencies like the Mexican peso, the Turkish lira and the Brazilian real.
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