Goldman posts first quarterly loss in six years.
Goldman once seemed invincible. Its trading business was a profit machine.
This morning it posted a quarterly loss in part because of the poor performance in its trading unit.
• $1.9 billion. Goldman’s fourth-quarter loss.
• $4.4 billion. The charge Goldman took related to the new tax law, which wiped out nearly half of Goldman’s earnings for the year, according to the WSJ.
• $5.68. The Wall Street firm’s profit per share excluding the tax-related charge, beating the consensus estimate of $4.90 from Wall Street analysts.
•$7.8 billion. Goldman’s revenue for the quarter, down 4 percent. Goldman is the only big bank to report a decline in revenue so far.
• $2.37 billion. Goldman’s trading revenue for the fourth quarter, down 34 percent from a year ago. That was the steepest decline of any of banks reporting so far. Citigroup, JPMorgan and Bank of America have reported declines in trading revenue of 19 percent, 17 percent and 9 percent.
• $1 billion. Goldman’s revenue from buying and selling bonds, commodities and currencies, half of what it generated a year ago. To put that in perspective: Goldman’s fixed-income division at its peak churned out nearly a billion dollars every two weeks.
Excluding tax hit, BofA posts biggest profit in more than a decade.
Bank of America reported $2.4 billion in fourth-quarter profit, after taking a $2.9 billion charge tied to the new tax law.
• $5.3 billion, or 47 cents a share. BofA’s profit in the fourth quarter excluding the tax-related charge. Analysts had expected the bank to report earnings of 44 cents per share.
• $21.1 billion. BofA’s earnings for 2017, excluding the tax-related charge. That matches its biggest annual profit since 2006.
•$20.4 billion. The bank’s revenue for the fourth quarter, up from $19.99 billion a year ago.
•$2.66 billion. BofA’s fourth-quarter trading revenue, down about 9 percent from a year ago.
• $11.46 billion. The bank’s net-interest income, up 11 percent.
The new tax code and banks: short-term pain, long-term gain
Let’s recount the hits that U.S. banks took from the tax overhaul:
• Citigroup: $22 billion
• JPMorgan Chase: $2.4 billion
• Goldman Sachs: $4.4 billion
We’ll ignore Wells Fargo for now (it gained). The bigger point is that, thanks to lower corporate rates and preferential treatment for pass-through entities, financial institutions are some of the new code’s biggest winners.
More from Jim Tankersley of the NYT:
“The good news is that tax reform has produced both current and future benefits for our shareholders,” PNC’s president and chief executive, Bill Demchak, told analysts on Friday. He said the bank’s preference would be to divert the tax savings “toward dividend” — which is to say, to return a higher dividend to shareholders.
G.E.’s problems have investors thinking ‘breakup’
The conglomerate itself isn’t planning on going that far just yet.
Here’s John Flannery, its chief, on a conference call yesterday:
“We are looking aggressively at the best structure or structures for our portfolio to maximize the potential of our businesses. Our results, over the past several years, including 2017 and the insurance charge, only further my belief that we need to continue to move with purpose to reshape G.E.”
Mr. Flannery didn’t say anything out of line with his past remarks. It’s just that he said it as G.E. announced an unrelated $6.2 billion charge connected to its legacy insurance portfolio.
Other conglomerates, from Honeywell to United Technologies to Tyco, have explored restructuring to varying degrees, as Wall Street analysts question the viability of the model.
G.E. and its advisers are still thinking about how to reshape the 125-year-old group, whose complexity may mask yet more problems. The company promises an update in spring, and is unlikely to announce something that only fiddles around the edges. But don’t expect plans for it to become three or four fully separate companies.
Critics demand more boldness
• Lex writes, “Once a paragon of management acumen, it is now a rolling train wreck of unexpected and expensive blunders.” (FT)
• Brook Sutherland writes, “The reasons for keeping G.E. together — shared resources and technology — look increasingly tenuous.” (Gadfly)
• Justin Lahart and Spencer Jakab write, “The problem is that G.E.’s parts might be worth a lot less than even the company’s sharply diminished value today.” (Heard on the Street)
Government shutdown forecast: cloudy
The deadline: 12:01 a.m. Eastern on Saturday
• Immigration, of course: President Trump still insists on funding for a border wall and Democrats are fuming over his comments on African countries.
• Republicans are weighing whether to use funding for the Children’s Health Insurance Program as a carrot — or stick — for Democrats to join a stopgap funding measure.
The state of play
Red-state Democrats are uneasy about allowing a shutdown in an election year. Some Republicans are irked by a stream of temporary funding resolutions, rather than a full agreement that would permit more military spending.
House Speaker Paul Ryan’s proposal for a continuing resolution — which includes delays to several health care taxes in addition to CHIP funding — has support among many, but not all, Republicans. It has little among House Democrats.
The politics flyaround
• Steve Bannon has been subpoenaed by both Robert Mueller and the House Intelligence Committee. (NYT)
• The C.F.P.B. will reconsider rules on high-interest payday loans, in a potential win for the industry. (WSJ)
• N.Y. Governor Andrew Cuomo unveiled a state budget meant to counter the tax-code changes that hurt high-tax states: “Washington hit a button and launched an economic missile and it says ‘New York’ on it, and it’s headed our way.” (NYT)
• Support for the new tax code has grown, according to a SurveyMonkey poll. (NYT)
• G.M.’s chief, Mary Barra, urged Mr. Trump to be cautious about withdrawing from Nafta. (NYT)
• How Michael Wolff got into the White House. (Bloomberg)
Forget the Bitcoin frenzy
More from Mr. Johnson:
What Nakamoto ushered into the world was a way of agreeing on the contents of a database without anyone being “in charge” of the database, and a way of compensating people for helping make that database more valuable, without those people being on an official payroll or owning shares in a corporate entity.
We’ll count him as a skeptic: Dick Kovacevich, the former Wells Fargo C.E.O., told CNBC that he thinks Bitcoin is “a pyramid scheme” that “makes no sense.”
Beware cryptoheists: North Korea looks to be using the same malware found in the Sony Pictures hack and the Wannacry assault against digital currency investors.
Virtual currency quote of the day, from Bloomberg:
“I have a Zen philosophy that you just go with the flow,” said George Tasick, a part-time cryptocurrency trader in Hong Kong whose day job is making fireworks. “I’m not really changing my behavior in any way.”
The issues in selling the Weinstein Company
Issue one: Some potential buyers may want to pick up the troubled studio through the bankruptcy process, to cleanse it of legal liabilities.
Issue two: Advocates for women who have brought allegations against Harvey Weinstein worry that could deny them justice.
More from Jonathan Randles and Peg Brickley of the WSJ:
A Chapter 11 filing would halt lawsuits brought by women against the studio, forcing them to line up with low-ranking creditors to await their fate. Once the money from a sale comes in, bankruptcy law dictates who gets paid first — the banks that kept Weinstein Co. in business — and who gets paid last — women claiming that Weinstein Co. was part of Mr. Weinstein’s pattern of alleged sexual misconduct.
But it’s complicated. A bankruptcy filing could provide legal structures for Mr. Weinstein’s accusers, like a judge’s supervision of sales and settlements.
A suitor from the past: Among the bidders is the previous studio founded by the Weinstein brothers, Miramax, according to Bloomberg.
What about RICO? DealBook’s White Collar Watch takes a look at using the racketeering law against Mr. Weinstein and his company:
RICO lawsuits are tempting. They allow a plaintiff to sue a variety of defendants by claiming that they acted together and seek an award of triple damages, a bonanza in some business disputes that can run into millions of dollars. But these cases should also come with a bright red warning sign: Tread lightly or see your case thrown out of court before it even gets started.
The M. & A. flyaround
• Qualcomm had a busy deal day yesterday. It made its case against Broadcom’s $105 billion hostile bid, as its own $38.5 billion offer for NXP Semiconductor was rejected by the money manager Ramius. (Qualcomm, Ramius)
• Silver Lake put up a hefty $1.7 billion equity check as part of its $3.5 billion bid for Blackhawk Network. (NYT)
• Celgene is in talks to buy Juno Therapeutics, maker of a cancer treatment, according to unidentified people. (WSJ)
The Speed Read
• Bill Miller, the value investor who beat the S. & P. 500 15 years running (and whose faith in banks was mocked in the movie “The Big Short”), has donated $75 million to the philosophy department of Johns Hopkins University. (NYT)
• YouTube said it had altered the threshold at which videos could accept advertisements and pledged more oversight of top-tier videos. It’s said similar things before. (NYT)
• Amazon has advertised for an expert in health privacy regulations, suggesting it plans to work with outside partners that manage personal health information. (CNBC)
• A federal judge indicated he would approve a $290 million settlement by Pershing Square Capital Management and Valeant Pharmaceuticals with Allergan shareholders who accused them of profiting improperly from a failed takeover bid. (WSJ)
• Informa, which owns the shipping journal Lloyd’s List, is in talks to buy the exhibitions and events company UBM, creating a company worth more than 9 billion pounds, or about $12.4 billion. (FT)
• The National Retail Federation’s annual trade show is starting to look more like CES. (NYT)
• Joseph A. Rice, who fought a hostile takeover of the Irving Bank Corporation as its chairman and chief executive in the 1980s, died on Jan. 8 at 93. (NYT)
• Greenlight Capital’s David Einhorn is betting on Twitter, saying revenue should grow after user-experience improvements. (Bloomberg)
• Melrose Industries, which specializes in turning around manufacturers, has made a hostile public bid worth about $10 billion for GKN, a British maker of aerospace and automotive parts that could face trading issues as Brexit looms. (Bloomberg)
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