US Markets
Monday, July 15th, 2024 3:48 pm EDT
Key Points
- Earnings and Revenue Exceed Expectations: Goldman Sachs reported earnings of $8.62 per share and revenue of $12.73 billion, surpassing estimates of $8.34 per share and $12.46 billion respectively, driven by strong fixed income results and reduced loan loss provisions.
- Strong Performance in Fixed Income and Reduced Credit Loss Provisions: The fixed income segment saw a 17% revenue increase to $3.18 billion, while provisions for credit losses dropped 54% to $282 million, significantly lower than expected.
- Mixed Results in Investment Banking: Investment banking fees rose 21% to $1.73 billion but fell short of the $1.8 billion estimate, with advisory fees particularly underperforming, contrasting with stronger results from competitors JPMorgan Chase and Citigroup.
Goldman Sachs reported stronger-than-expected profits and revenues for the second quarter, driven by robust performance in fixed income and smaller-than-anticipated loan loss provisions. The bank posted earnings of $8.62 per share, surpassing the LSEG estimate of $8.34 per share, and generated revenues of $12.73 billion, exceeding the expected $12.46 billion. This marked a 150% increase in profit from the previous year, reaching $3.04 billion, or $8.62 per share, compared to a period marked by write-downs related to commercial real estate and the sale of a consumer business. Companywide revenue saw a 17% rise to $12.73 billion, propelled by growth in trading, advisory, and asset and wealth management operations.
The standout for the quarter was the fixed income segment, where revenue surged 17% to $3.18 billion, surpassing the StreetAccount estimate by approximately $220 million, driven by activity in interest rate, currency, and mortgage trading markets. Goldman also benefited from reduced exposure to consumer loans, with provisions for credit losses dropping 54% to $282 million, well below the StreetAccount estimate of $435.4 million.
Other areas met expectations, such as equities trading, which rose 7% to $3.17 billion, in line with the StreetAccount estimate, supported by strong derivatives activity. The asset and wealth management division experienced a 27% revenue increase to $3.88 billion, aligning with estimates, due to gains in equity investments and higher management fees. The platform solutions division saw a modest revenue increase of 2% to $669 million, slightly above the $652.1 million estimate, driven by rising credit card balances and deposits.
However, Goldman’s investment banking sector underperformed compared to its rivals, with investment banking fees rising 21% to $1.73 billion, falling short of the $1.8 billion estimate. The shortfall was primarily due to lighter-than-expected advisory fees of $688 million, compared to the expected $757.3 million. This contrasted with significant increases in investment banking fees at competitors JPMorgan Chase and Citigroup, which both saw over 50% rises, attributed to a surge of activity late in the quarter.
Goldman CFO Denis Coleman emphasized that the bank maintained a leading market share in mergers and acquisitions, attributing the relative underperformance to stronger comparative results from the previous year. Despite these mixed results, shares of Goldman Sachs showed minor fluctuations in premarket trading, reflecting high expectations from investors as Wall Street businesses rebound from a challenging 2023. Goldman, more reliant on investment banking and trading than other major U.S. banks, faced high expectations amid this recovery.
In comparison, JPMorgan and Citigroup both exceeded expectations, largely due to increased investment banking fees and strong equities trading results, highlighting the competitive landscape and the high stakes for Goldman Sachs in maintaining its market position.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/15/goldman-sachs-gs-earnings-2q-2024.html
