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Goldman Sachs, America's largest investment bank reported record first-quarter net profits and revenues from the firm’s investment banking and trading businesses. $GS results represented growth of 498% from a year earlier. Investment banking net revenues a record $3.77 billion

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Goldman Sachs Group Inc NYSE: GS Report Before Open Wednesday

$18.60 Beat $10.20 EPS and $17.70 Beat $12.60 Billion Forecast in Revenue

Earnings (updated)

  • Trading Revenue: Fixed Income: $3.89 billion, Equities: $3.69 billion
  • Investment Banking: $3.77 billion

Goldman Sachs crushed analysts’ expectations with a record first-quarter net profits and revenues from the firm’s investment banking and trading businesses. GS posted per-share earnings of $18.60, smashing the $10.22 estimate of analysts surveyed by Refinitiv.

The results represented growth of 498% from a year earlier. Revenue of $17.7 billion easily topped expectations of $12.6 billion.

At Goldman SPACs manis helped push investing banking net revenues to a record $3.77 billion for the quarter, including record equity underwriting. The headline investment banking revenue number exceeded the $2.9 billion estimate and represented a 73% surge from a year earlier.

 

Goldman Sachs Consensus Expectations

Expectations are for EPS of $10.20, on revenue of $12.60 billion.

Goldman Sachs Group, Inc. (GS)  is expected to report adjusted net income of $3.7 billion, or $10.20 a share, on sales of $12.6 billion before the market opens on Wednesday, based on a FactSet survey of 19 analysts.

In the same period a year ago the company posted earnings of $3.11 a share on sales of $8.7 billion. It reported a net income of $1.9 billion. Goldman Sachs is moving to offer its wealthy clients investment options for bitcoin and other digital assets. 

Goldman Sachs blew away estimates in January with revenues of $11.74bn and profits of $12.08c a share. The banks equities division saw a 40% jump in revenues from a year earlier to $2.39bn. Investment banking had growth of 27% to $2.61bn.

Particular attention is likely to be on the bank’s equities operation after the blow up of Archegos Capital, and in particular how much the liquidations cost the bank. CEO David Solomon has embarked on a restructuring with a greater focus on wealth management.

The stock has risen 12.6% since the company last reported earnings on Jan. 19.

 Big Banks Kick Off First Quarter 2021 Earnings Season

The bank rally has been fueled by expectations for the economy reopening and infrastructure spending.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.  

Goldman Sachs Group Inc NYSE: GS

Market Reaction: Pre-market 331.30 +3.62 (+1.10%) 

Highlights

Financial advisory revenues totaled $1.12 billion.

“The increase in Underwriting net revenues was due to significantly higher net revenues in both Equity underwriting, primarily driven by strong initial public offerings activity,” the bank said in its release. “The increase in Financial advisory net revenues reflected a significant increase in completed mergers and acquisitions transactions.”

  • Both EPS and revenue set quarterly records for the banking bellwether while ROE of 31.0% reached the highest level since 2009.

Asset management generated record quarterly net revenues of $4.61 billion

Reflecting record net revenues from equity investments. “Goldman is converting mind share to market share probably better than any player” quarter over quarter and year over year, wrote Wells Fargo analyst Mike Mayo. “The main question is sustainability, but our view is that Goldman is in the sweet spot for a booming [investment banking]/advisory business as each company in each industry globally has a rethink of its business strategy post-pandemic.” '

In addition to the SPAC boom, activity for more traditional IPOs soared

Robust due to healthy investor demand for high-growth investments. There were over 117 IPOs priced during Q1, illustrating investors' high comfort level with riskier investments.

Trading Revenue Soared

In its Global Markets unit, traders produced a 47% bump in revenue from a year earlier to $7.58 billion. With $3.89 billion in fixed-income trading and $3.69 billion in equities, which reflected year-over-year growth of 31% and 68%, respectively. The bank said the strong growth in fixed-income trading was thanks in part to “significantly higher” net sales in mortgages and interest rate products.

Net interest income grew by 13% to $1.48 bln, missing analysts' expectations.

Credit Loss Boost

Goldman's bottom line got  a modest boost from a $70 mln benefit to provision for credit losses, the impact pales in comparison to JPMorgan Chase (JPM), which reported a net benefit of $4.2 bln on the provision for credit losses line.  The difference between GS and JPM is that GS has much lighter exposure to consumer-oriented products, such as credit cards, auto loans, and mortgages. Consumer loan defaults are a more significant risk factor for JPM, necessitating higher reserves.

Source: Goldman Sachs

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