Global Courant 2023-04-18 18:21:57
David Solomon, CEO of Goldman Sachs Group Inc., at a Bloomberg Television address at the Goldman Sachs Financial Services Conference in New York, U.S., on Tuesday, December 6, 2022.
Michael Nagel | Bloomberg | Getty Images
Goldman Sachs posted in the first quarter Results on Tuesday that missed analysts’ expectations for earnings after a $470 million hit tied to consumer loan sales.
Here’s what the company reported:
Revenue: $8.79 per share versus $8.10 Refinitiv estimate Revenue: $12.22 billion versus $12.79 billion
The couch said earnings fell 18% to $3.23 billion, or $8.79 per share, higher than the estimate of analysts polled by Refinitiv.
That earnings-per-share was also driven by the sale of Goldman’s loan, as debt forgiveness allowed it to release $440 million in reserves for loan-loss losses, adding about $1.20 per share to earnings, it said. Mike Mayo of Wells Fargo in a research note.
Company-wide revenue fell 5% to $12.22 billion, below estimates of the consumer loan hit and weaker-than-expected results in bond trading and wealth and wealth management.
Shares of the New York-based bank fell 3.8% in premarket trading.
Unlike its more diversified rivals, Goldman derives most of its revenue from Wall Street activities, primarily trade and investment banking. Ahead of the quarter, analysts wondered whether the March turmoil — in which two U.S. banks failed and a global investment bank was forced to merge with an old rival — would be a good or bad backdrop for trading.
While JPMorgan Chase and Citigroup beat estimates for the first quarter, in part because of better-than-expected fixed income trading, Goldman’s traders didn’t fare as well.
Bad compositions
Fixed income revenue fell 17% to $3.93 billion, about $230 million below StreetAccount’s estimate, due to lower activity in currencies and commodities. Equity trading revenue fell 7% to $3.02 billion, beating the $2.9 billion estimate.
While investment banking revenues remained weak, falling 26% from a year earlier to $1.58 billion, that beat the $1.44 billion estimate.
Goldman’s results show how closely tied the bank is to the fortunes of Wall Street. With both trade and investment banking well below year-ago results, the bank had few options for generating revenue growth.
The combined decline in the bank’s trading and advisory revenues was a “worst-in-class decline” of 16%, according to Mayo.
A metric closely watched by investors, the bank’s return on tangible equity reached 12.6% year-on-year in the quarter. That is below the bank’s long-term target of $15 to 17% return.
The other parts of the company posted mixed results. Goldman’s wealth and wealth management division posted a 24% year-over-year revenue increase to $3.22 billion, well below the $3.7 billion estimate. The bank’s platform solutions generated $564 million in revenue, up 110% from a year earlier and beating the $535.1 million estimate.
So far, major banks, including JPMorgan Chase and Bank of America, have outperformed their smaller counterparts this earnings season, helped by an inflow of deposits following the collapse of Silicon Valley Bank. But as retail banking plays a small – and shrinking – role at Goldman, there will be a lot more focus on trade and investment banking and what the outlook is for the rest of the year.
More to come?
In fact, it was the bank’s foray into consumer banking pulled out in recent months after losses and management churn weighed on the quarter’s results.
Goldman said it posted a loss of about $470 million on the partial sale of its Marcus loan portfolio, moving the rest of the loans to the “held for sale” category.
On that subject, analysts will likely ask CEO David Solomon if there’s any more relaxation left. The CEO said in February that Goldman was “strategically weighing alternativesfor its consumer platform business, which has been interpreted as potentially selling the GreenSky business it recently acquired or offloading credit card partnerships with Apple and others.
And they’ll likely ask for details on Goldman’s role in helping Apple offer new savings accounts; launched the product with a higher interest rate than the bank’s own Marcus product.
Goldman shares are down 1.1% this year before Tuesday, a better result than the nearly 17% fall in the KBW Bank index.
earlier Tuesday, bank of America exceeded estimates of higher net interest income. Last week, JPMorgan Chase, Citi group And Wells Fargo all beat earnings expectations amid rising interest rates. Morgan Stanley is scheduled to release the results on Wednesday.
This story is evolving. Check back later for updates.
