Buy the rumor...sell the...Goldman Sachs down 3 percent pre-open, S&P 500 futures dropped 10 points right after Goldman reported earnings far better than expectations ($5.25 vs. $4.24). Even topline was better than consensus: $12.37 billion vs. $11.02 billion.
How did Goldman beat by such a wide margin? There appears to be two factors:
1) big gains corporate and real estate principal investments ($911 million); and
2) they paid less salary relative to their revenues: the ratio of compensation to revenues dipped to 43%, compared to 48% in the last quarter.
Trading remained strong: even though Fixed Income, Currency and Commodities (FICC) made less than the second quarter, it still generated $6 billion in revenues, about half the total.
The investment banking backlog "increased significantly."