The Financial Leader Theme: Profit Taking (GS, C, SCHW, JPM, FAS)

Goldman Sachs Group Inc. (NYSE: GS), Citigroup, Inc. (NYSE: C), and The Charles Schwab Corporation (NASDAQ: SCHW) have all reported earnings.  All came in above or in-line with estimates and there is not really anything wrong with the numbers when you compare them to expectations, yet there is some disappointment on the trading floors.  We noted yesterday how JPMorgan Chase & Co. (NYSE: JPM) set the bar extremely high for the rest of the financial leaders.  As a result, the common theme here is profit taking in all of the majors.  There is even enough profit taking that the highly volatile triple-leverage Direxion Daily Financial Bull 3X Shares (NYSE: FAS) ETF is selling off as well.

Goldman Sachs Group Inc. (NYSE: GS) posted a monster number on the surface with $3.03 billion in net income.  The investment banking giant, or bank holding company with no banking operations, posted $5.25 EPS.  This is above the Thomson Reuters figure of $4.24 and closer to the $5.00+ whisper number of yesterday and some now pointing to a post-JPMorgan whisper number of closer to $6.00.  This is also above the $1.81 EPS a year earlier.  The bonus cloud will continue as it set aside $5.4 billion for bonuses, and said it is on pace to pay out some $20 billion in bonuses this year.  The concern here is that so much of the profit came from trading gains that might not be sustainable.  Shares are down 1.6% at $189.11 ahead of the open.

Citigroup, Inc. (NYSE: C) posted -$0.27 EPS vs. Thomson Reuters consensus of -$0.38 EPS; revenues were $20.4 billion vs. right at $20 billion consensus.  The bank’s allowances for loan losses was up to $36.4 billion, or 5.9% of total loans. Vikram Pandit noted that consumer credit trends are improving in international markets, but noted that the domestic consumer credit environment remains challenging. The Tier-1 and Tier-1 Common ratios ended the quarter at 12.7% and 9.1%, respectively, and the bank said that its customer deposits grew by some $28 billion to $833 billion. The net credit losses were listed as $8 billion, down marginally from the $8.4 billion reported in Q2. Citi ended the quarter with $244 billion in cash vs. $209 billion in Q2.  Shares are down 2.6% at $4.87 ahead of the open.

The Charles Schwab Corporation (NASDAQ: SCHW) reported net income of $200 million for the third quarter, down 34% from a year ago.  This translates to $0.17 EPS, meeting the $0.17 EPS figure expected from Thomson Reuters.  Revenues fell 19% to $1.01 billion, which is slightly under the $1.03 billion consensus figure.  The company noted results were hurt by falling interest rates and generally lower equity market valuations. Shares are down 2.75% at $18.75 ahead of the open.

The highly volatile triple-leverage Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is following suit and shares are down about 2.6% at $91.42 on over 1.2 million shares in pre-market trading.  Even the cleanest of them all, JPMorgan Chase & Co. (NYSE: JPM), is down almost 1% at $46.70 in pre-market trading.

You can join our open email distribution list to get updates each morning on analyst upgrades and downgrades, top day trader alerts, IPO’s and secondary offerings, Warren Buffett and other guru activity, M&A and more.

JON C. OGG
OCTOBER 15, 2009