In contrast to Wall Street peers such as Morgan Stanley (MS - Get Report), Goldman is on a trajectory to report EPS figures near pre-crisis highs, even as new regulations and tepid economic growth cast a pall on overall revenue.
A Jan. 14 analysis by Keefe, Bruyette & Woods shows that among large banks submitting capital plans to the Fed, there are just five that have been able to consistently reduce their share count through repurchases in the wake of the crisis, including Goldman, American Express, U.S. Bancorp (USB), Wells Fargo (BK) and State Street (STT).
"Looking forward, capital management will be critical in a slow-growth, highly regulated, banking world, in our view, and the most successful banks will need to be reducing shares outstanding to achieve strong EPS growth," KBW analyst Fred Cannon wrote.
Among primary Wall Street competitors Morgan Stanley, Bank of America, Citigroup and JPMorgan, only Goldman Sachs is a net buyer of shares.It is no surprise then that Buffett now says he will use a cheaply priced crisis-time warrant contract to take a large position in Goldman Sachs shares. Buffett's warrant amounts to about 2% of Goldman's shares at current prices and his March statement of a "significant" investment indicates a growing long-term position. Such is currently the case with Wells Fargo, now Berkshire's largest investment. Still, until Buffett takes his stake in mid-October according to an agreement reached between Berkshire Hathaway and Goldman Sachs, the "Oracle of Omaha" may prove to be an overhang for Goldman's shares, given the prospect of near-term dilution. On Tuesday, the bank reported better than expected earnings of $2.26 billion, on revenue of $10.09 billion, beating adjusted estimates of $1.97 billion and $9.65 billion respectively. Earnings of the nation's top standalone investment bank reflected record quarterly debt underwriting revenue of $694 million. Goldman's investment banking unit and debt trading business posted particularly strong results, while equity trading revenue of $1.92 billion came in lower than some analyst estimates. Goldman Sachs shares fell over 1.5% to $143.93 in early Monday trading. For more on Goldman Sachs see why the company's bottom line will be its key earnings driver in 2013. See what Warren Buffett's Goldman Sachs stake means for Wall Street. Follow @AntoineGara -- Written by Antoine Gara in New York