Wall Street Brokers Give Very Mixed Earnings Reports with Weak Trading Bias (GS, AMTD, SCHW)

If you were just looking at Goldman Sachs Group Inc. (NYSE: GS) you might think that all was well on Wall St. after the bulge-bracket firm beat its earnings estimates. When you look elsewhere you start to get a different picture that is not quite so clear. TD Ameritrade Holding Corp. (NYSE: AMTD) and The Charles Schwab Corp. (NYSE: SCHW) are showing some very mixed reports as well. Unfortunately that commentary is just nothing to write home about at all. Keep in mind that the market has what is traditionally a weak, or at least a slow, six weeks ahead of it as well.

Goldman Sachs Group Inc. (NYSE: GS) posted an 11% drop in earnings, but the report of $962 million, or $1.78 per share, handily beat the consensus from Thomson Reuters of $1.17 per share. Revenue was down 9% to $6.63 billion, also above the $6.2 billion expected. While higher, the tone is still negative and at some point turning in “less-bad than expected” only goes so far. Its book value was at $137 per share.

Goldman’s commentary discussed market conditions deteriorating and activity levels being lower from retail and institutional clients due to Europe and the slowing global growth. Compensation costs were down 9% to $2.9 billion in the quarter, but investment banking revenue fell by a sharp 17% to $1.2 billion with M&A revenue down 26% and underwriting down 9%.

Now look at TD Ameritrade Holding Corp. (NYSE: AMTD),which reported a 2% drop in profits, but this was also ahead of estimates at $153.8 million or $0.28 EPS versus estimates of $0.26 EPS. Revenue was down 3% to $667.3 million versus estimates of almost $660 million. What the company is now saying is that year-to-date activity shows that trading volume is down a whopping 12.4% from a year ago, and the rate year-to-date is now the lowest level in five years. Five Years! Now you know where the trading volume has gone!

The Charles Schwab Corp. (NYSE: SCHW) may be the only “good” report out there. It announced that second-quarter earnings rose 16% to $275 million but that includes a gain of $70 million from a vendor dispute. Earnings per share came in flat at $0.20 EPS versus a Thomson Reuters consensus of $0.18 EPS.

Schwab’s commentary on activity noted, “Even as trading activity weakened during the period, we saw other signs of sustained client engagement, including $16.0 billion in net new assets, up 4% from a year ago …” Based on today’s reports from these three players, it appears that Schwab is doing the least bad, if you just compare raw numbers without looking at consensus estimates.

We have not seen trading in Schwab shares, but TD Ameritrade is up 0.6% at $16.50 and Goldman Sachs is up 2.6% at $100.02.

JON C. OGG