Goldman Sachs, America’s largest investment bank reported first quarter earnings before the bell Monday that missed on revenue due to the trading, investing and lending segments. $GS lowered employee compensation and cuts workforce by 2%.
Goldman Sachs, America’s largest investment bank reported first quarter earnings before the bell Monday that missed on revenue due to the trading, investing and lending segments. $GS lowered employee compensation and cuts workforce by 2%.
Will the Giant Squid Deliver?
Goldman Sachs Group Inc NYSE: GS Reported Before Open Monday
$5.71 Beat $4.89 EPS BUT $8.81B Missed on $8.90 Billion Forecast in Revenue
Earnings
Goldman Sachs Group Inc. (NYSE: GS) report first quarter earnings of $2.25 billion of profit in the period, or $5.71 a share ahead of the $4.89 estimate but revenue fell 13% to $8.81 billion less than analyst’s $8.9 billion expected. The miss was blamed on lower results in the bank’s Wall Street trading and investing and lending segment. The Whisper number was $5.21.
Shares closed Friday at $207.84 with a 52-week range of $151.70 to $262.25.
Goldman’s a new CEO will be questioned about $GS place in the current macro environment but also over the 1MDB corruption probe; the stock has been rocked with inconclusive details on how to quantify the impact to the back and legal reserves needed by GS.
It is also gives another chance to rate the new CEO David Solomon and his new management team. The conference call will therefore focus more on future strategy. Asset management and consumer banking are expecting to be at the forefront. Analysts had cut estimates for Goldman, Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, and Wells Fargo & Co. by an average of 8.1 percent prior to last quarter’s earnings reports. Goldman estimates had been slashed by 27 percent, underscoring the uncertainty.
Goldman Sachs Group Inc NYSE: GS
Market Reaction > Pre-market $202.58 USD −$5.24 (2.52%)
Highlights
“We are pleased with our performance in the first quarter, especially in the context of a muted start to the year,” Goldman CEO David Solomon said in the release. “Our core businesses generated solid results driven by our strong franchise positions. We are focused on new opportunities to grow and diversify our business mix and serve a broader range of clients globally.”
- GS announced $3.26 billion in pay and benefits for the quarter, 20% less than a year ago and well below the $3.58 billion estimate.
- The firm also trimmed headcount by 2% from the fourth quarter.
- Its institutional client services trading division posted $3.61 billion in revenue for the quarter, an 18 percent decline from a year earlier.
- Revenues from fixed income and equities trading came in at $1.84 billion and $1.77 billion.
- investment banking division revenue of $1.81 billion, roughly unchanged from a year earlier
- Advisory revenue jumped 51% to $887 million on robust mergers and acquisitions activity.
- The investing and lending segment posted $1.84 billion in revenue, a 14 percent decline driven by “significantly lower net gains” from stakes in private equities and debt holdings.
- Goldman’s smallest division, investment management revenue dropped by 12% to $1.56 billion, below analysts’ $1.71 billion estimate, on “significantly lower incentive fees and lower transaction revenues” amid tough markets.
- The firm’s provision for credit losses climbed to $224 million in the quarter, roughly unchanged from the previous period but surging from the first quarter of 2018, where it was $44 million, as Goldman expanded its retailing lending operations.
The bank’s board voted to increase its quarterly dividend by 5 cents to 85 cents per share, a move that had been expected by investors.
Goldman Sachs Group Q4 Earnings Recap
$6.04 Beat $4.57 EPS AND $8.08B Beat $7.54 Billion Forecast in Revenue
Earnings
Goldman Sachs Group Inc. (NYSE: GS) reported fourth quarter EPS of $6.04 on revenue of $8.08 billion beating the expected 4Q adj. EPS est. $4.57 (range $2.29 to $6.88) on 4Q net revenue est. $7.54b (range $6.02b to $8.60b). 4Q total trading revenue. est. $2.5b, with equities $1.57b, FICC $976.3m and I-banking revenue est. $1.93b were also expected (see breakdown below)
Goldman’s a new CEO will be questioned about $GS place in the current macro environment but also over the 1MDB corruption probe; the stock has been rocked with inconclusive details on how to quantify the impact to the back and legal reserves needed by GS.
It is also gives a chance to rate the new CEO David Solomon and his new management team. The conference call will therefore focus more on future strategy. Asset management and consumer banking are expecting to be at the forefront. Analysts have cut estimates for Goldman, Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, and Wells Fargo & Co. by an average of 8.1 percent since the last quarter’s earnings reports. Goldman estimates have been slashed by 27 percent, underscoring the uncertainty.
Goldman Sachs Group Inc NYSE: GS
Market Reaction > Pre-market Pre-market $186.22 +6.31 (+3.51%)
Highlights
- Fixed income trading revenue fell 18% to $822 million
- Equities trading rose 17% to $1.6 billion.
- Investment banking revenue fell 5% to $2.04 billion.
- Financial advisory revenue jumped 56% to $1.2 billion, led by increased M&A volume.
- Investing and lending revenue dipped 2% to $1.9 billion.
- Investment management revenue rose 2% to $1.7 billion.
“We are pleased with our performance for the year, achieving stronger top and bottom line results despite a challenging backdrop for our market-making businesses in the second half,” said Chairman and CEO David Solomon. “For the year, we delivered double-digit revenue growth, the highest earnings per share in the firm’s history and the strongest return on equity since 2009.”
Last year the Federal Reserve restricted the payout plans of $GS after the bank’s numbers they submitted for annual stress tests fell below Fed targets. The Fed opted not to fail the bank regardless, instead giving them a “conditional” pass.
Source: Goldman Sachs, AlphaStreet
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