US Markets
Tuesday, October 17th, 2023 1:46 pm EDT
Key Points
- Strong Financial Results: Goldman Sachs reported third-quarter earnings and revenue that exceeded analysts’ estimates. The bank posted earnings of $5.47 per share, surpassing the expected estimate of $5.31 per share. Additionally, its revenue of $11.82 billion outperformed the anticipated revenue of $11.19 billion.
- Trading Revenue Strength: Goldman Sachs experienced robust trading revenue, with bond trading revenue increasing by 6% year-on-year to $3.38 billion, which was nearly $600 million more than analysts had expected. The strength in interest rate products and mortgages helped offset declines in trading of currencies, commodities, and credit. Equities trading revenue also climbed 8% year-on-year to $2.96 billion due to higher activity in derivatives.
- Challenges and Diversification Efforts: Goldman Sachs, despite its efforts to diversify its revenue streams under CEO David Solomon, remains reliant on investment banking and trading revenue. The bank has faced challenges, including losses from its strategic retrenchment from retail banking and exposure to commercial real estate, resulting in write-downs. Goldman also reported a $506 million write-down related to lending business GreenSky and $358 million in real estate impairments. Analysts are eager to hear more about the bank’s outlook for investment banking and its strategy for consumer services, such as the Apple Card business. Despite the challenges, Goldman Sachs shares have declined by 8.4% year-to-date, which is comparatively better than the 21% decline in the KBW Bank Index.
Goldman Sachs reported third-quarter earnings and revenue that surpassed analysts’ expectations, largely due to stronger-than-expected trading revenue. Here are the key points from the article:
- Earnings: Goldman Sachs posted earnings of $5.47 per share, exceeding the estimated $5.31 per share from LSEG (formerly known as Refinitiv).
- Revenue: The bank reported revenue of $11.82 billion, surpassing the expected revenue of $11.19 billion.
- Despite a 33% decrease in profit to $2.058 billion, or $5.47 per share, compared to the previous year, the revenue declined by 1% to $11.82 billion. However, this revenue figure still exceeded expectations by approximately $600 million.
- Bond trading revenue fell by 6% compared to the previous year, reaching $3.38 billion. Nevertheless, this figure exceeded analyst expectations by nearly $600 million, driven by the strength in interest rate products and mortgages.
- Equities trading revenue increased by 8% year-on-year, reaching $2.96 billion, primarily due to higher activity in derivatives.
- Investment banking revenue edged up by 1% to $1.55 billion, slightly surpassing the estimated revenue of $1.48 billion.
- Goldman Sachs, as compared to its peers, relies more heavily on investment banking and trading revenue. It has made efforts to diversify its revenue streams, such as its foray into retail banking and a focus on asset and wealth management, but trading and advisory services still account for a significant portion of its revenue.
- Analysts are keeping an eye on Goldman’s outlook for investment banking and its pipeline of deals. Recent activity has shown signs of improvement, but the bank has faced challenges due to the Federal Reserve’s interest rate hikes, which have impacted mergers, initial public offerings, and debt issuance.
- Goldman has incurred losses from its strategic shift away from retail banking and its exposure to commercial real estate, resulting in write-downs, such as the $506 million write-down related to lending business GreenSky and $358 million in real estate impairments.
- CEO David Solomon expressed optimism about the bank’s strategic priorities and the potential for a recovery in capital markets and strategic activity. Analysts will be eager to hear more about Goldman’s plans and its consumer efforts, including the Apple Card business.
- Goldman Sachs shares have experienced an 8.4% decline year-to-date, which is relatively better than the 21% drop in the KBW Bank Index.
- Other major banks, including JPMorgan, Wells Fargo, and Citigroup, have recently reported better-than-expected third-quarter profits, partly attributed to improved credit costs. Morgan Stanley was scheduled to report its results the following day.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/10/17/goldman-sachs-gs-earnings-3q-2023.html
