There’s a few interesting nuggets in Goldman Sachs latest 10q, which the bank filed on Wednesday.
As Goldman’s 3Q earnings suggested, it was a volatile quarter on the trading floors. Goldman traders lost money on 21 single days over the quarter, the highest number of days since 4Q 2008. Here’s our favourite chart as usual:
And here’s Goldman’s reported daily Value at Risk (VaR), which picked up in the second half of the last quarter, suggesting when those losses may have taken place:
On the legal front, there were scant updates on FHFA, Libya, and all the other things keeping litigators in tailored suits. Nevertheless, the bank is setting aside an additional $600m ($2.6bn, up from $2bn) to cover “reasonable possible loss[es]“. The total amount of MBS involved in various suits increased 30-fold, however, to $15.8bn from $485m last quarter, as the FHFA and others sued Goldman before statues of limitations expired.
Of more immediate interest, though, is the bank’s increase in “gross funded” credit exposure to Italy, to $2.32bn from $700m in the last quarter:
This fits the pattern — US banks selling more CDS on European sovereigns — that we noted in the latest BIS data on US banks’ exposure to Europe, which we all know should carry a huge health warning. The “gross” here, of course, means that the position is hedged. Though as Bloomberg notes, “the company also has $750m of unfunded lending commitments to borrowers in those five countries, according to the filing.”
For those wondering about the full extent of Goldman’s cross-border exposure, here’s the chart, sans four of the GIIPS (click to expand):
There’s not a great deal we can say about all this yet, for as we’re all learning the leverage and the shape of exposure is just as important — if not more important — than the headline figures.
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (FASB Accounting Standards Codification (ASC) 820). In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU No. 2011-04 clarifies the application of existing fair value measurement and disclosure requirements, changes certain principles related to measuring fair value, and requires additional disclosures about fair value measurements. ASU No. 2011-04 is effective for periods beginning after December 15, 2011. The firm is currently evaluating the impact of adoption.
Which means there could be yet more fun to come after December 15.
By Izabella Kaminska and John McDermott
Related links:
MF Global and echoes of Repo 105 - FT Alphaville
Goldman Sachs hit by $428m loss – FT