The Goldman Sachs Group, Inc.’s (GS - Free Report) second-quarter 2023 earnings per share of $3.08 missed the Zacks Consensus Estimate of $3.25. Also, the bottom line fell 60% from the year-earlier quarter.
Shares tanked around 1% in the pre-market trading on an earnings miss. Investors seem to be bearish on the stock because of a sharp decline in investment banking (IB) fees.
Goldman’s results have been adversely impacted by a slump in the IB business and lower revenues from Fixed Income, Currency and Commodities Client Execution (FICC) activities. Yet, strength in the consumer banking business acted as a tailwind.
Net earnings of $1.21 billion plunged 58% from the prior-year quarter. Our estimate for the metric was $2.71 billion.
Revenues Decline, Expenses Rise
Net revenues of $10.89 billion fell 8% from the year-ago quarter. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $10.79 billion.
Total operating expenses increased 12% year over year to $8.54 billion. Our estimate for the metric was $7.89 billion.
Provision for credit losses was $615 million lower than $667 million in the prior-year quarter. Our estimate for the metric was $502.8 million.
Quarterly Segmental Performance Mixed
The Asset & Wealth Management division generated revenues of $3.04 billion in the reported quarter, down 4% year over year. Our estimate for the metric was $3.57 billion. Results reflect higher fees from private banking and lending, offset by the net loss in equity investments, lower management and other fees, and a decline in net revenues in debt investments.
Firmwide assets under supervision were a record $2.71 trillion, up 1.6% sequentially.
The Global Banking & Markets division recorded revenues of $7.18 billion, down 14% year over year. Our estimate for the metric was $7.83 billion. The fall indicated weakness in the IB business (down 20%), and lower net revenues in FICC (down 26%), partially offset by higher equities revenues (up 1%).
The Platform Solutions division’s revenues were $659 million, 92% up year over year. Our estimate for the metric was $460.2 million. The jump was driven by significantly higher revenues from consumer platforms.
Capital Ratios Mixed
As of Jun 30, 2023, the standardized Common Equity Tier 1 capital ratio was 14.9%, up from the prior quarter’s 14.8%. The company’s supplementary leverage ratio was 5.6%, down from 5.8% in the prior quarter.
Capital Deployment Update
In the quarter under review, Goldman returned $1.61 billion of capital to common shareholders. This included $750 million in share repurchases and common stock dividends of $864 million.
Conclusion
While Goldman’s well-diversified business will ensure earnings stability going forward, macroeconomic uncertainty and recessionary fears will likely weigh on its financial performance. Strength in the consumer banking business is a tailwind. Robust client engagement and a solid position in announced and completed mergers and acquisitions globally are likely to act as tailwinds.
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 Other Big Banks
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2023 earnings per share of $1.25 outpaced the Zacks Consensus Estimate of $1.15. The figure improved 66.7% year over year.
Results of WFC benefited from higher net interest income (NII) and non-interest income. The improvement in capital and profitability ratios were other positives. However, higher provisions for credit losses and a rise in expenses were the undermining factors.
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 outpaced the Zacks Consensus Estimate of $1.31.
In the second quarter, C witnessed a decline in revenues due to lower revenues in the Institutional Clients Group. Also, the higher cost of credit was a spoilsport. Nonetheless, higher revenues in Personal Banking and Wealth Management segments were tailwinds.
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The Goldman Sachs Group, Inc.’s (GS - Free Report) second-quarter 2023 earnings per share of $3.08 missed the Zacks Consensus Estimate of $3.25. Also, the bottom line fell 60% from the year-earlier quarter.
Shares tanked around 1% in the pre-market trading on an earnings miss. Investors seem to be bearish on the stock because of a sharp decline in investment banking (IB) fees.
Goldman’s results have been adversely impacted by a slump in the IB business and lower revenues from Fixed Income, Currency and Commodities Client Execution (FICC) activities. Yet, strength in the consumer banking business acted as a tailwind.
Net earnings of $1.21 billion plunged 58% from the prior-year quarter. Our estimate for the metric was $2.71 billion.
Revenues Decline, Expenses Rise
Net revenues of $10.89 billion fell 8% from the year-ago quarter. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $10.79 billion.
Total operating expenses increased 12% year over year to $8.54 billion. Our estimate for the metric was $7.89 billion.
Provision for credit losses was $615 million lower than $667 million in the prior-year quarter. Our estimate for the metric was $502.8 million.
Quarterly Segmental Performance Mixed
The Asset & Wealth Management division generated revenues of $3.04 billion in the reported quarter, down 4% year over year. Our estimate for the metric was $3.57 billion. Results reflect higher fees from private banking and lending, offset by the net loss in equity investments, lower management and other fees, and a decline in net revenues in debt investments.
Firmwide assets under supervision were a record $2.71 trillion, up 1.6% sequentially.
The Global Banking & Markets division recorded revenues of $7.18 billion, down 14% year over year. Our estimate for the metric was $7.83 billion. The fall indicated weakness in the IB business (down 20%), and lower net revenues in FICC (down 26%), partially offset by higher equities revenues (up 1%).
The Platform Solutions division’s revenues were $659 million, 92% up year over year. Our estimate for the metric was $460.2 million. The jump was driven by significantly higher revenues from consumer platforms.
Capital Ratios Mixed
As of Jun 30, 2023, the standardized Common Equity Tier 1 capital ratio was 14.9%, up from the prior quarter’s 14.8%. The company’s supplementary leverage ratio was 5.6%, down from 5.8% in the prior quarter.
Capital Deployment Update
In the quarter under review, Goldman returned $1.61 billion of capital to common shareholders. This included $750 million in share repurchases and common stock dividends of $864 million.
Conclusion
While Goldman’s well-diversified business will ensure earnings stability going forward, macroeconomic uncertainty and recessionary fears will likely weigh on its financial performance. Strength in the consumer banking business is a tailwind. Robust client engagement and a solid position in announced and completed mergers and acquisitions globally are likely to act as tailwinds.
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 Other Big Banks
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2023 earnings per share of $1.25 outpaced the Zacks Consensus Estimate of $1.15. The figure improved 66.7% year over year.
Results of WFC benefited from higher net interest income (NII) and non-interest income. The improvement in capital and profitability ratios were other positives. However, higher provisions for credit losses and a rise in expenses were the undermining factors.
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 outpaced the Zacks Consensus Estimate of $1.31.
In the second quarter, C witnessed a decline in revenues due to lower revenues in the Institutional Clients Group. Also, the higher cost of credit was a spoilsport. Nonetheless, higher revenues in Personal Banking and Wealth Management segments were tailwinds.
Top 5 ChatGPT Stocks Revealed
Zacks Senior Stock Strategist, Kevin Cook names 5 hand-picked stocks with sky-high growth potential in a brilliant sector of Artificial Intelligence. By 2030, the AI industry is predicted to have an internet and iPhone-scale economic impact of $15.7 Trillion.
Today you can invest in the wave of the future, an automation that answers follow-up questions … admits mistakes … challenges incorrect premises … rejects inappropriate requests. As one of the selected companies puts it, “Automation frees people from the mundane so they can accomplish the miraculous.”
Download Free ChatGPT Stock Report Right Now >>
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