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Goldman (GS) Q2 Earnings Miss on Weak IB, Revenues Fall Y/Y
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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.
The Goldman Sachs Group, Inc. Price, Consensus and EPS Surprise
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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Goldman (GS) Q2 Earnings Miss on Weak IB, Revenues Fall Y/Y
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.
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 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.