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Goldman (GS) Q3 Earnings Top Estimates, IB Revenues Slump Y/Y
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The Goldman Sachs Group, Inc.’s (GS - Free Report) third-quarter 2022 earnings per share of $8.25 have surpassed the Zacks Consensus Estimate of $7.47. However, the bottom line fell 44.7% from the year-earlier quarter. Our estimate for earnings was $8.24 per share.
The stock rose 3.7% during the pre-market trading, reflecting investors’ optimism regarding the better-than-expected results. The full-day trading session will display a clearer picture.
While strength in the Fixed Income, Currency and Commodities Client Execution (“FICC”) and consumer banking businesses acted as a tailwind, the bank’s results were hurt by lower investment banking (IB) revenues.
Goldman also introduced a realignment of its businesses to further capitalize on its operating model. It has put its businesses into three operating segments — Asset & Wealth Management, Global Banking & Markets, and Platform Solutions.
Net earnings of $3.07 billion decreased 43% from the prior-year quarter.
Revenues Dip, Expenses Rise
Net revenues of $11.98 billion fell 12% from the year-ago quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $11.26 billion.Our estimate for the metric was $11.13 billion.
Total operating expenses increased 17% year over year to $7.7 billion.We had projected non-interest expenses of $6.79 billion.
Provision for credit losses was $515 million, higher than $175 million in the prior-year quarter.
Segmental Performance Mixed
The IB division generated revenues of $1.58 billion in the reported quarter, down 57% year over year. Results reflect a significant decline in net revenues in Underwriting, Financial advisory and Corporate lending.
The Global Markets division recorded revenues of $6.20 billion, up 11% year over year. The uptick indicated a rise in net revenues in FICC (up 41%), partially offset by lower equities revenues (down 14%).
The Consumer and Wealth Management division’s revenues were a record $2.38 billion, 18% higher than the year-ago figure. While net revenues from Wealth management were essentially unchanged from the third quarter of 2021, consumer banking net revenues nearly doubled from the comparable period.
The Asset Management division recorded revenues of $1.82 million, indicating a 20% year-over-year decline. The downside resulted from notably lower net revenues in Equity investments and Lending and debt investments, partially offset by an increase in net revenues from Management and other fees.
Firmwide assets under supervision were $2.42 trillion, down 2.7% sequentially.
Capital Position Mixed, Profitability Declines
As of Sep 30, 2022, the standardized Common Equity Tier 1 capital ratio was 14.3%. The figure was up from the prior-year quarter’s 14.1%. The company’s supplementary leverage ratio was 5.6% as of Sep 30, 2022, unchanged from the prior-year quarter.
Also, return on average common shareholders’ equity (on an annualized basis) decreased 11.5 basis points year over year to 11% in the reported quarter.
Capital Deployment Update
In the quarter under review, Goldman returned $1.89 billion of capital to common shareholders. This included $1 billion in share repurchases and common stock dividends of $893 million.
Conclusion
Goldman’s quarterly results have been decent. Lower net revenues in the Asset Management and IB segments were concerning. While its well-diversified business, apart from its core IB operations, will ensure earnings stability going forward, macroeconomic uncertainty and fears will likely weigh on the financial performance.
Nonetheless, strength in the consumer banking business is a tailwind. Robust client engagement, a solid position in announced and completed mergers and acquisitions globally, and a decent IB backlog are likely to support the company’s IB revenues.
The Goldman Sachs Group, Inc. Price, Consensus and EPS Surprise
Higher loan balance, rising rates and solid markets performance drive JPMorgan’s (JPM - Free Report) third-quarter 2022 earnings of $3.12 per share, which surpassed the Zacks Consensus Estimate of $2.97. The results included $959 million or 24 cents of net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share.
Disappointing IB performance, bigger reserve build and increase in operating expenses hampered JPM’s quarterly performance to some extent.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Results excluded $2 billion or 45 cents per share of charges related to a number of “historical matters, including litigation, customer remediation, and regulatory matters.”
Results benefited from higher net interest income, rising rates and solid average loan growth. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC. Also, the rise in non-interest expenses acted as a headwind.
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Goldman (GS) Q3 Earnings Top Estimates, IB Revenues Slump Y/Y
The Goldman Sachs Group, Inc.’s (GS - Free Report) third-quarter 2022 earnings per share of $8.25 have surpassed the Zacks Consensus Estimate of $7.47. However, the bottom line fell 44.7% from the year-earlier quarter. Our estimate for earnings was $8.24 per share.
The stock rose 3.7% during the pre-market trading, reflecting investors’ optimism regarding the better-than-expected results. The full-day trading session will display a clearer picture.
While strength in the Fixed Income, Currency and Commodities Client Execution (“FICC”) and consumer banking businesses acted as a tailwind, the bank’s results were hurt by lower investment banking (IB) revenues.
Goldman also introduced a realignment of its businesses to further capitalize on its operating model. It has put its businesses into three operating segments — Asset & Wealth Management, Global Banking & Markets, and Platform Solutions.
Net earnings of $3.07 billion decreased 43% from the prior-year quarter.
Revenues Dip, Expenses Rise
Net revenues of $11.98 billion fell 12% from the year-ago quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $11.26 billion.Our estimate for the metric was $11.13 billion.
Total operating expenses increased 17% year over year to $7.7 billion.We had projected non-interest expenses of $6.79 billion.
Provision for credit losses was $515 million, higher than $175 million in the prior-year quarter.
Segmental Performance Mixed
The IB division generated revenues of $1.58 billion in the reported quarter, down 57% year over year. Results reflect a significant decline in net revenues in Underwriting, Financial advisory and Corporate lending.
The Global Markets division recorded revenues of $6.20 billion, up 11% year over year. The uptick indicated a rise in net revenues in FICC (up 41%), partially offset by lower equities revenues (down 14%).
The Consumer and Wealth Management division’s revenues were a record $2.38 billion, 18% higher than the year-ago figure. While net revenues from Wealth management were essentially unchanged from the third quarter of 2021, consumer banking net revenues nearly doubled from the comparable period.
The Asset Management division recorded revenues of $1.82 million, indicating a 20% year-over-year decline. The downside resulted from notably lower net revenues in Equity investments and Lending and debt investments, partially offset by an increase in net revenues from Management and other fees.
Firmwide assets under supervision were $2.42 trillion, down 2.7% sequentially.
Capital Position Mixed, Profitability Declines
As of Sep 30, 2022, the standardized Common Equity Tier 1 capital ratio was 14.3%. The figure was up from the prior-year quarter’s 14.1%. The company’s supplementary leverage ratio was 5.6% as of Sep 30, 2022, unchanged from the prior-year quarter.
Also, return on average common shareholders’ equity (on an annualized basis) decreased 11.5 basis points year over year to 11% in the reported quarter.
Capital Deployment Update
In the quarter under review, Goldman returned $1.89 billion of capital to common shareholders. This included $1 billion in share repurchases and common stock dividends of $893 million.
Conclusion
Goldman’s quarterly results have been decent. Lower net revenues in the Asset Management and IB segments were concerning. While its well-diversified business, apart from its core IB operations, will ensure earnings stability going forward, macroeconomic uncertainty and fears will likely weigh on the financial performance.
Nonetheless, strength in the consumer banking business is a tailwind. Robust client engagement, a solid position in announced and completed mergers and acquisitions globally, and a decent IB backlog are likely to support the company’s IB revenues.
The Goldman Sachs Group, Inc. Price, Consensus and EPS Surprise
The Goldman Sachs Group, Inc. price-consensus-eps-surprise-chart | The Goldman Sachs Group, Inc. Quote
Currently, Goldman has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Big Banks
Higher loan balance, rising rates and solid markets performance drive JPMorgan’s (JPM - Free Report) third-quarter 2022 earnings of $3.12 per share, which surpassed the Zacks Consensus Estimate of $2.97. The results included $959 million or 24 cents of net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share.
Disappointing IB performance, bigger reserve build and increase in operating expenses hampered JPM’s quarterly performance to some extent.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Results excluded $2 billion or 45 cents per share of charges related to a number of “historical matters, including litigation, customer remediation, and regulatory matters.”
Results benefited from higher net interest income, rising rates and solid average loan growth. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC. Also, the rise in non-interest expenses acted as a headwind.