Issue link: https://maltatoday.uberflip.com/i/740013
maltatoday, WEDNESDAY, 19 OCTOBER 2016 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way Goldman Sachs' profi t climbs as trading revenue surges Goldman Sachs quarterly earn- ings rose 47% and handily beat expectations as the Wall Street fi rm's trading division bounced back from a slow start to 2016. "We saw solid performance across the franchise that helped counter typical seasonal weakness," Chief Executive Lloyd Blankfein said. The New York-based firm reported a profit of $2.09 billion, or $4.88 a share, surpassing the $1.43 billion, or $2.90 a share, it reported in the same period last year. Revenue grew 19% to $8.17 billion from $6.86 billion a year earlier, when sluggish trading activity across Wall Street— particularly in fixed-income, where Goldman is strongest— dragged down earnings. The firm's return on equity, a closely watched measure of profitability, rose to 11.2% in the third quarter. It was 7% a year ago and hadn't exceeded 10%— its theoretical cost of capital— since early 2015. The firm's ROE nearly eclipsed that of Wells Fargo & Co., which posted an 11.6% ROE in the third quarter and has recently enjoyed a profitability advantage over more Wall Street- focused peers such as Goldman. Goldman shares have risen nearly 14% since the end of the second quarter, nearly overcoming a weak first half. They remain down 6% year to date, slightly worse than the KBW Nasdaq Bank index, which is down about 3%. Investors had expected a strong quarter from Goldman after rivals including J.P. Morgan Chase & Co. and Citigroup Inc. reported big boosts for their trading businesses. Goldman got a similar bump. Trading revenue rose 17% to $3.75 billion from $3.21 billion in the same quarter last year. And it made more money while taking less risk: Average daily value-at-risk, a measure of how much the firm could lose on an average day, fell to $42 million in the quarter. That is down from $45 million last quarter and a postcrisis low. The New York firm is more reliant than many of its rivals on trading, which typically makes up half of Goldman's revenue. During the third quarter, fixed income, currency and commodity trading revenue rose 34% to $1.96 billion, excluding an accounting adjustment, from $1.46 billion a year earlier, which was among that business's worst quarters since the crisis. Stock-trading revenue rose 2% to $1.78 billion, the best among muted equities results at other big trading firms this quarter. Ryanair profi t forecast down after fall in pound Ryanair, Europe' biggest budget airline, warned yesterday that earnings will grow more slowly than expected after the slump in the British currency following the Brexit vote. The budget airline said net profit would be €1.3 billion to €1.35 billion, 5% below its earlier forecast. Ryanair said the pound's fall would cut the revenues they receive from fares in the second half by 13% to 15%. Ryanair boss Michael O'Leary said while better cost control and stronger growth would help to offset the impact it was "prudent" to adjust its guidance. He also cautioned that the airline's revised guidance was "heavily dependent" on no further falls in the pound and no more cuts in the average revenues it received from fares. Earlier this month, rival Easyjet also warned the drop in the pound would cost it about £90m in the current financial year, more than double the £40 million it estimated in July. Sterling has fallen by about 18% against the dollar since the referendum. Aside from the hit from the falling pound, Ryanair said it was performing well. It expects to carry 119 million passengers this financial year, up 12% on the previous year. It also said its load factor - basically how full its planes are - was expected to be 94%, slightly better than it originally forecast. "The recent sharp decline in sterling post Brexit will weaken second half yields by slightly more than we had originally expected," O'Leary said. "While higher load factors, stronger traffic growth and better cost control will help to ameliorate these weaker revenues, it is prudent now to adjust full year guidance which will rise by approx. 7% ([for the full year] rather than our original guidance of 12%." The pound's loss in value against the euro and other major currencies isn't the only issue airlines in Europe have been grappling with this year. Fierce competition has caused ticket prices to fall, particularly with the decline in demand for travel to many destinations after terrorist attacks in Europe and Turkey this year. The industry has also endured operational disruptions from repeated air- traffic control strikes across the continent. German airline Lufthansa in July said the effect of terrorist attacks on sales would cause profit to fall this year, days before Air France-KLM said savings from lower fuel were more than wiped out by the fall in ticket prices. Ryanair said average ticket prices now are expected to fall 13% to 15%, down from a 10% to 12% retreat previously estimated. The carrier said it partially mitigated the impact of lower ticket prices through cost reductions. Full-year nonfuel costs are now expected to decline 3% compared with a previous projection of a 1% retreat.