On a day when Goldman Sachs should have been celebrating its strong first-quarter results, Wall Street’s golden child spent the day defending itself against an increasingly skeptical investment community.
Questions surrounding the firm’s earnings — and whether that momentum can be sustained — helped drive the stock down nearly 12 percent to $115.11, and forced Goldman to cut short its victory lap in order to put on a full-court press to address suggestions its results were juiced by nearly $13 billion in counterparty payments from fallen insurance giant American International Group.
Yesterday, Goldman CFO David Viniar hit the press circuit, saying he was “mystified” by the perception that the AIG payments kept the bank in the black.
“They’re one of thousands and thousands and thousands of counterparties and the results of any trading with AIG are completely immaterial to what we do,” Viniar told Bloomberg. “I am mystified by this fascination with AIG.”
The venerable firm also took the unusual step of having spokesman Lucas van Praag pen a caustic response to an editorial in The Wall Street Journal yesterday defending its risk-management skills and outlining its AIG exposure.
“Far from miscalculating the creditworthiness of AIG, we acted in a way which most people would think of as a good example of responsible risk management,” van Praag wrote.
Goldman’s defensive posture seemed at odds with the $1.81 billion profit the company reported Monday, besting Wall Street projections.
However, bank analysts, including David Hendler of CreditSights, noted that Goldman’s earnings were driven in large part by its trading platform and likely will be hard to duplicate in future quarters.
“A favorable steep yield curve and high interest rate risk appetite [combined] for fixed-income trading windfalls, not balanced revenue growth in other key areas and not indicative of a turnaround,” Hendler said in a research note.
Hendler and others also suggested that Goldman had put considerable taxpayer money at risk even as the markets became dicey at the beginning of the year.
Van Praag, the spokesman, told The Post, “Our increase in [money at risk] was a function of greater volatility in mortgages and credit products. We have significantly reduced risk on our balance sheet since 2007 and we feel comfortable with our levels.”
Goldman’s defensive campaign came on the same day that it sold $5 billion in shares in an effort to repay the government funds it got under the Troubled Asset Relief Program. Sources tell The Post that the equity offering got a strong response from investors.