Back to top

Image: Bigstock

Goldman (GS) Q4 Earnings Miss Estimates, Revenues Improves

Read MoreHide Full Article

The Goldman Sachs Group, Inc.’s (GS - Free Report) fourth-quarter 2021 earnings per share of $10.81 have lagged the Zacks Consensus Estimate of $12.10. Further, the bottom line fell 10.5% from the year-earlier quarter.

The stock dipped 3.9% during the pre-market trading, reflecting investors’ concerns over the results. Notably, the full-day trading session will display a clearer picture.

While strength in the debt underwriting, wealth management and consumer banking businesses acted as a tailwind, the bank’s results were hurt by lower Fixed Income, Currency and Commodities Client Execution (“FICC”) revenues.

Impressive financial advisory revenues, owing to the rise in industry-wide completed mergers and acquisition transactions, acted as tailwinds.

Net earnings of $3.94 billion decreased 13% from the prior-year quarter.

For 2021, earnings per share of $59.45 were higher than the year-ago period’s $12.08. However, earnings lagged the Zacks Consensus Estimate of $60.70. Results included the impacts of $9.51 related to net provisions for litigation and regulatory proceedings during the year.

Revenues Jump, Expenses Rise

Net revenues of $12.64 billion rose 8% from the year-ago quarter. The top line beat the Zacks Consensus Estimate of $12.09 billion.

For 2021, the company reported revenues of $59.34 billion, up 33% year over year. Further, revenues beat the Zacks Consensus Estimate of $58.72 billion.

Total operating expenses flared up 23% year over year to $7.27 billion.

Provision for credit losses was $344 million, lower than $293 million in the prior-year quarter.

Mixed Segmental Performance

The Investment Banking (IB) division generated revenues of $3.79 billion in the reported quarter, up 45% year over year. Results reflect higher net revenues in financial advisory, supported by a significant increase in completed mergers and acquisition volumes. Corporate lending revenues of $192 million significantly increased from the prior-year quarter. Tough comps from the prior-year quarter resulted in a decline in equity underwriting revenues.

The Global Markets division recorded revenues of $3.99 billion, down 7% year over year. The downtick indicated a decline in net revenues in FICC due to lower intermediation net revenues. Also, a decline in equities revenues (11%) was recorded due to lower equities intermediation.

The Consumer and Wealth Management division’s revenues were $1.97 billion, 19% higher than the year-ago reported figure. Increased revenues from wealth management (up 22%) and consumer banking (up 8%) resulted in the upsurge.

The Asset Management division recorded revenues of $2.89 billion, indicating a 10% year-over-year decline. The downside resulted from notably lower net revenues in equity investments as well as lending and debt investments.

Firmwide assets under supervision reached a record $2.47 trillion, up 15.5% year over year.

Capital Position Weak, Profitability Down

As of Dec 31, 2021, the standardized Common Equity Tier 1 capital ratio was 14.2%. The figure was down from the prior-year quarter’s 14.7%. The company’s supplementary leverage ratio was 5.6% as of Dec 31, 2021, down from the prior-year quarter figure of 7%.

Also, return on average common shareholders’ equity (on an annualized basis) decreased to 15.6% in the reported quarter.

Capital Deployment Update

In the quarter under review, Goldman returned $1.20 billion of capital to common shareholders. This included share repurchases worth $500 million and common stock dividends of $698 million.

Conclusion

Goldman’s results highlight a disappointing end to the year. Elevated mergers and acquisition deals were the driving factors. The company’s well-diversified business, apart from its core IB operations, will ensure earnings stability going forward.

However, increasing expenses hurt bottom-line growth.

The Goldman Sachs Group, Inc. Price, Consensus and EPS Surprise

 

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Banks

First Republic Bank’s (FRC - Free Report) fourth-quarter 2021 earnings per share of $2.02 have surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter.

First Republic’srevenues were $1.37 billion in the December-end quarter, up 26.9% year over year. The figure also surpassed the Zacks Consensus Estimate of $1.34 billion.

Citigroup (C - Free Report) delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 handily outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter.

Citigroup’s revenues increased 1% year over year to $17.02 billion in the December-ended quarter. The top line, however, lagged the Zacks Consensus Estimate of $17.06 billion.

Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2021 earnings per share of $1.38 surpassed the Zacks Consensus Estimate of 1.09. Also, the bottom line improved 86% year over year.

Wells Fargo’s total quarterly revenues were $20.86 billion, surpassing the Zacks Consensus Estimate of $18.73 billion. Moreover, the top line was higher than the year-ago quarter’s $18.5 billion.