Goldman’s 10Q was released this morning and it adds some interesting detail to its mixed Q2 earnings.

There were 15 days when it posted a trading loss in daily trading revenues, compared to just one day in Q1.

Here, via Zero Hedge, is how it looks in pictorial terms.

First, Q2…

… and now compare with Q1.

Further more colour from the filing:

Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.60 billion, 53% lower than the second quarter of 2010, reflecting significantly lower results in mortgages, commodities and interest rate products. … The effect of these macro concerns was more pronounced within our Asian and European franchises.

It also posted a loss in its equity investment in ICBC, though it registered an overall net gain in equities:

Results in Investing & Lending for the second quarter of 2011 included a loss of $176 million from our investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), net gains of $686 million from other investments in equities and net revenues of $200 million from debt securities and loans, primarily reflecting net interest income.

There was also an interesting cash flow line, revealing a little bit more about that deposit crisis. The consolidated statement below has a line for “securities sold under agreements to repurchase, net of securities purchased under agreements to resell and federal funds sold”. The six months to June 2010 saw an negative flow of $3.45bn, whereas the most recent six months show a positive flow of $19.2bn.

Goldman is also announcing a$1.2bn round of cut-backs including in compensation:

In the context of more difficult economic and financial conditions, the firm launched an initiative to identify areas where we can operate more efficiently and reduce our operating expenses. We have targeted approximately $1.2 billion in annual run rate compensation and non-compensation reductions. This initiative will be achieved through a combination of a reduction in total staff and planned expenditures, and we expect to complete it before year-end.

We didn’t spot any brand new legal claims but the filing mentions that there are $2bn provisioned to cover litigation losses.

With respect to matters described below, management has estimated the upper end of the range of reasonably possible loss as being equal to (i) the amount of money damages claimed, where applicable, (ii) the amount of securities that the firm sold in cases involving underwritings where the firm is being sued by purchasers and is not being indemnified by a party that the firm believes will pay any judgment, or (iii) in cases where the purchasers are demanding that the firm repurchase securities, the price that purchasers paid for the securities less the estimated value, if any, as of June 2011 of the relevant securities. As of June 2011, the firm has estimated the aggregate amount of reasonably possible losses for these matters to be approximately $2.0 billion.

Last but far from least, European exposure!

During the second quarter of 2011 a number of European member states, including Portugal, Ireland, Italy, Greece and Spain, experienced credit deterioration. As of June 2011, our combined current credit exposure, net of collateral and economic hedges, to these countries, including sovereign and corporate counterparties or borrowers, was approximately $1.89 billion, with no one country representing a majority of the exposure. The combined current credit exposure to these countries excluding economic hedges was approximately $3.13 billion as of June 2011. In addition to current exposure, we held unfunded lending commitments to borrowers in these countries of approximately $700 million as of June 2011.

Related link:
Goldman earnings disappoint – FT
Morgan Stanley and that downgrade – FT Alphaville

This entry was posted by John McDermott on Tuesday, August 9th, 2011 at 16:00 and is filed under Capital markets. Tagged with 10-Q, goldman sachs, GS, US bank earnings. Edit this entry.