Stop me if you’ve heard this before: a big U.S. bank’s earnings declined from the previous year but still managed to beat out laughably low analyst expectations.
Goldman Sachs (NYSE: GS) became the latest big bank to pull off the stunt after this morning’s second-quarter earnings announcement. The investment-banking giant saw its profits fall 11% year over year last quarter. And yet the stock is up slightly in morning trading.
That’s because Goldman’s $1.78 per share in earnings exceeded the paltry $1.16 per share most analysts were expecting. Revenue was also down 9% from the same quarter a year ago, but that too exceeded consensus estimates.
Goldman’s performance followed a similar pattern to Citigroup (NYSE: C) and JPMorgan Chase (NYSE: JPM). Both reported declining earnings that still managed to top Wall Street estimates.
Yesterday Citigroup announced that its earnings had declined 12% from the previous year, and yet still managed to top analyst estimates — $1 per share (actual) to 89 cents per share (expected).
JPMorgan Chase’s treacherous second quarter included $4.4 billion in trading losses courtesy of the so-called “London Whale”. And yet even they managed to exceed analyst’s projections, posting earnings of $1.20 per share when only 70 cents per share was expected.
Citigroup shares are up slightly since its earnings announcement. JPMorgan’s climbed 6% on Friday after its earnings were released.
So the second quarter is shaping up much like the first for the big banks. That is, most of them – save Wells Fargo (NYSE: WFC) – are less profitable than they were a year ago. Many of them are struggling in the midst of this uncertain economic climate.
But because so little is expected of them, the big banks are managing to regularly hurdle such low bars. That’s why all of their stocks are up this year despite largely negligible earnings growth.