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Goldman Sachs, America's largest investment bank reported worse than expected third quarter earnings before the bell Tuesday. $GS saw lower revenues in investment management and investment banking, partially offset by higher revenues in investing & lending.

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Goldman Sachs Group Inc NYSE: GS Reported Before Open  Tuesday

$4.79 Missed $4.84 EPS and $8.32 Bil Missed $8.42 Billion Forecast in Revenue

Earnings

Goldman Sachs (NYSE: GS) reported earnings for the three months ending September of $4.79 per share, down 23.7% from the same period last year and 5 cents less than Street consensus forecast. It's the first miss for Goldman Sachs in at least two years, according to Refinitiv data. Group revenues fell 6% to $8.32 billion, again missing analysts' estimates of an $8.42 billion.

Goldman's still 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.

Goldman Sachs Group Inc NYSE: GS

Market Reaction > Pre-market $201.00 −4.82 (-2.34%)

Highlights

  • Net earnings applicable to common shareholders fell 27% year-over-year to $1.79 billion while EPS fell 24% to $4.79.
  • Book value per common share was $218.82, 10.9% higher compared to the end of Q3 2018.
  • Provision for credit losses rose 67% to $291 million from last year, mainly due to higher impairments.
  • Net revenues in Investment Banking fell 15% year-over-year to $1.69 billion, hurt by declines in Financial Advisory and Underwriting.
  • Revenues in Financial Advisory dropped 22% due to a decrease in M&A transactions.
  • Declines in IPOs and leveraged finance transactions hurt underwriting revenues during the quarter.
  • Revenues in Institutional Client Services rose 6% year-over-year to $3.29 billion, helped by growth in FICC and Equities.
  • Strength in commodities and credit products coupled with higher commissions and fees helped drive revenue growth in FICC and Equities.
  • Investing & Lending revenues fell 17% year-over-year to $1.68 billion, hurt by a 40% drop in equity securities revenues.
  • Revenues in debt securities and loans rose 10% from last year.
  • Investment Management revenues dipped 2% to $1.67 billion, due to lower incentive fees.
  • Fixed income division revenues much less than the 25% surge reported by JPMorgan Chase .
  • Equity market revenues rose 5% to $1.88 billion with higher fees and increased client activity.

Goldman Sachs Q3 2019 Earnings

 

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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