Goldman Sachs and Morgan Stanley, with three of their rivals vanquished this year, on Tuesday vowed to remain independent as Wall Street faces its biggest shake-out since the Great Depression hit nearly 80 years ago.
The last two major independent investment houses both posted third-quarter profits despite continued chaos in the financial markets. And their top brass rejected suggestions they must find partners to survive the ongoing credit crisis.
Global banks and brokerages have written down more than US$350 billion from wrong-way bets on mortgage investments and other risky securities during the past year. The upheaval in the US financial system has driven Merrill Lynch & Co and Bear Stearns Cos into emergency sales, and Lehman Brothers Holdings Inc into bankruptcy.
Now, more than ever, analysts are questioning if the stand-alone investment banks that have dominated Wall Street for generations are close to extinction. Eroding investor confidence in the financial industry has prompted questions about whether Goldman and Morgan Stanley need to partner with commercial banks, whose deposits are a more stable.
Commercial banks tend to have slower growth but more dependable earnings since a bulk of the business comes from retail operations. Investment bank earnings are more volatile, and rise or fall on businesses like investment banking and trading.
However, both Goldman Sachs and Morgan Stanley are demonstrating that they have the business model needed to take advantage of the market’s dislocation and remain independent.
Goldman Sachs on Tuesday reported its biggest slump since going public in 1999. Still, the larger of the two remaining major US investment banks beat profit expectations despite a 71 percent decline from last year.
Goldman Sachs posted a profit after paying preferred dividends of US$810 million, or US$1.81 per share, compared to US$2.81 billion, or US$6.13 per share, a year earlier. Revenue for the three months ended Aug. 29 skidded 51 percent to US$6.04 billion.
The results beat Wall Street projections for US$1.71 per share, according to analysts polled by Thomson Reuters.
Revenue fell short of the US$6.23 billion expected by analysts.
On a conference call with analysts, Goldman chief financial officer David Viniar was questioned about the investment bank’s viability without doing some kind of deal.
“We cannot stop the rumors and we cannot stop the fear,” Viniar told reporters during a conference call. “Right now, we think our business model works because our business works. Our performance speaks for itself and will continue to speak for itself.”
His counterpart at Morgan Stanley, Colm Kelleher, made similar comments after the investment bank announced quarterly results one day ahead of schedule. Results were initially scheduled for yesterday.
Morgan Stanley reported a profit of US$1.43 billion, or US$1.32 per share, compared with US$1.54 billion, or US$1.44 per share in the year-ago period.
Thomson Reuters said analysts expected earnings of US$0.78 per share.
Revenue rose modestly to US$8.05 billion from US$7.96 billion.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
China's military today said it began joint army, navy and rocket force exercises around Taiwan to "serve as a stern warning and powerful deterrent against Taiwanese independence," calling President William Lai (賴清德) a "parasite." The exercises come after Lai called Beijing a "foreign hostile force" last month. More than 10 Chinese military ships approached close to Taiwan's 24 nautical mile (44.4km) contiguous zone this morning and Taiwan sent its own warships to respond, two senior Taiwanese officials said. Taiwan has not yet detected any live fire by the Chinese military so far, one of the officials said. The drills took place after US Secretary