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Given the strong capital markets performance, Goldman Sachs’ (GS - Free Report) first-quarter 2021 earnings per share of $18.60 significantly surpassed the Zacks Consensus Estimate of $9.79. Also, the bottom line compares favorably with $3.11 per share earned in the year-earlier quarter.
The stock rallied almost 1.2% during pre-market trading, reflecting investors’ optimism with the results. Notably, the full-day trading session will display a clearer picture.
The bank’s results were aided by higher Fixed Income, Currency and Commodities Client Execution (FICC) revenues. Also, the underwriting business displayed solid strength. In addition, wealth management and consumer banking business witnessed an upswing, reflecting rise in credit card loans.
Additionally, impressive financial advisory revenues, owing to the rise in industry-wide completed mergers and acquisitions transactions, acted as a tailwind. Moreover, provision benefit supported the results.
However, disappointing corporate lending revenues posed a headwind. Further, operating expenses increased during the quarter.
Net earnings of $6.84 billion increased substantially from $1.21 billion in the prior-year quarter.
Revenues Jump, Expenses Rise
Net revenues of $17.7 billion surged significantly from $8.74 billion in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $11.5 billion.
Total operating expenses increased 46% to $9.43 billion. Higher compensation and benefits, and transaction-based and technology expenses chiefly resulted in this rise.
Notably, net provisions for litigation and regulatory proceedings of $74 million were recorded compared with the prior-year quarter’s $184 million.
Provision for credit losses was a benefit of $70 million against provisions of $937 million in the prior-year quarter. Reserve reductions on wholesale and consumer loans were partially offset by portfolio growth, including provisions related to the proposed buyout of the General Motors co-branded credit card portfolio.
Solid Segment Performance
The Investment Banking division generated revenues of $3.77 billion, up 73% year over year. Results reflect higher underwriting revenues (up 155%), supported by robust equity and debt underwriting performance.
However, corporate lending declined 54%. Further, increased financial advisory revenues (up 43%) were on the upside owing to rise in industry-wide completed merger and acquisition transactions.
The Global Markets division recorded revenues of $7.58 billion, up 47%. This uptick indicated impressive net revenues in FICC (up 31%), fueled by solid revenues from FICC intermediation, credit products and commodities, partly offset by lower revenues in currencies. Further, FICC financing revenues grew marginally. Also, higher equities revenues (up 68%) were recorded, aided by elevated equities intermediation and financing.
The Consumer and Wealth Management division’s revenues of $1.73 billion came in 16% higher. Increased revenues from wealth management (up 13%) and consumer banking (up 32%) resulted in this upsurge.
The Asset Management division recorded revenues of $4.61 billion against negative revenues of $96 million in the prior year. This upside mainly resulted from higher net revenues in lending and debt investments, equity investments, and management and other fees. These were partially offset by lower incentive fees.
Assets under supervision were $2.20 billion, up 21% year over year.
Strong Capital Position
As of Mar 31, 2021, Common Equity Tier 1 ratio was 14.3% under the Basel III Standardized Approach, highlighting valid transitional provisions. The figure was up from the prior-year quarter’s 12.5%.
The company’s supplementary leverage ratio, on a fully phased-in basis, was 6.5% as of Mar 31, 2021, up from the prior-year quarter figure of 5.9%.
Return on average common shareholders’ equity, on an annualized basis, was 31% in the quarter.
Capital Deployment Update
During the quarter, Goldman returned $3.15 billion of capital to common shareholders. This included $2.70 billion of share repurchases and $448 million of common stock dividends.
Conclusion
Goldman’s results highlight another impressive quarter. Robust capital markets performance were the primary driving factors. The company’s well-diversified business, apart from its core investment banking operations, continues to ensure earnings stability.
The bank’s focus to capitalize on new growth opportunities through several strategic investments, including the digital consumer deposit platform, will likely bolster growth. Nonetheless, costs rising from technology investments and market development, though controlled, remain near- to medium-term headwinds.
The Goldman Sachs Group, Inc. Price, Consensus and EPS Surprise
Bank of America (BAC - Free Report) and Citigroup (C - Free Report) are scheduled to come out with quarterly numbers on Apr 15, while Morgan Stanley (MS - Free Report) will report on Apr 16.
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Goldman (GS) Q1 Earnings Outshine Estimates, Revenues Jump
Given the strong capital markets performance, Goldman Sachs’ (GS - Free Report) first-quarter 2021 earnings per share of $18.60 significantly surpassed the Zacks Consensus Estimate of $9.79. Also, the bottom line compares favorably with $3.11 per share earned in the year-earlier quarter.
The stock rallied almost 1.2% during pre-market trading, reflecting investors’ optimism with the results. Notably, the full-day trading session will display a clearer picture.
The bank’s results were aided by higher Fixed Income, Currency and Commodities Client Execution (FICC) revenues. Also, the underwriting business displayed solid strength. In addition, wealth management and consumer banking business witnessed an upswing, reflecting rise in credit card loans.
Additionally, impressive financial advisory revenues, owing to the rise in industry-wide completed mergers and acquisitions transactions, acted as a tailwind. Moreover, provision benefit supported the results.
However, disappointing corporate lending revenues posed a headwind. Further, operating expenses increased during the quarter.
Net earnings of $6.84 billion increased substantially from $1.21 billion in the prior-year quarter.
Revenues Jump, Expenses Rise
Net revenues of $17.7 billion surged significantly from $8.74 billion in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $11.5 billion.
Total operating expenses increased 46% to $9.43 billion. Higher compensation and benefits, and transaction-based and technology expenses chiefly resulted in this rise.
Notably, net provisions for litigation and regulatory proceedings of $74 million were recorded compared with the prior-year quarter’s $184 million.
Provision for credit losses was a benefit of $70 million against provisions of $937 million in the prior-year quarter. Reserve reductions on wholesale and consumer loans were partially offset by portfolio growth, including provisions related to the proposed buyout of the General Motors co-branded credit card portfolio.
Solid Segment Performance
The Investment Banking division generated revenues of $3.77 billion, up 73% year over year. Results reflect higher underwriting revenues (up 155%), supported by robust equity and debt underwriting performance.
However, corporate lending declined 54%. Further, increased financial advisory revenues (up 43%) were on the upside owing to rise in industry-wide completed merger and acquisition transactions.
The Global Markets division recorded revenues of $7.58 billion, up 47%. This uptick indicated impressive net revenues in FICC (up 31%), fueled by solid revenues from FICC intermediation, credit products and commodities, partly offset by lower revenues in currencies. Further, FICC financing revenues grew marginally. Also, higher equities revenues (up 68%) were recorded, aided by elevated equities intermediation and financing.
The Consumer and Wealth Management division’s revenues of $1.73 billion came in 16% higher. Increased revenues from wealth management (up 13%) and consumer banking (up 32%) resulted in this upsurge.
The Asset Management division recorded revenues of $4.61 billion against negative revenues of $96 million in the prior year. This upside mainly resulted from higher net revenues in lending and debt investments, equity investments, and management and other fees. These were partially offset by lower incentive fees.
Assets under supervision were $2.20 billion, up 21% year over year.
Strong Capital Position
As of Mar 31, 2021, Common Equity Tier 1 ratio was 14.3% under the Basel III Standardized Approach, highlighting valid transitional provisions. The figure was up from the prior-year quarter’s 12.5%.
The company’s supplementary leverage ratio, on a fully phased-in basis, was 6.5% as of Mar 31, 2021, up from the prior-year quarter figure of 5.9%.
Return on average common shareholders’ equity, on an annualized basis, was 31% in the quarter.
Capital Deployment Update
During the quarter, Goldman returned $3.15 billion of capital to common shareholders. This included $2.70 billion of share repurchases and $448 million of common stock dividends.
Conclusion
Goldman’s results highlight another impressive quarter. Robust capital markets performance were the primary driving factors. The company’s well-diversified business, apart from its core investment banking operations, continues to ensure earnings stability.
The bank’s focus to capitalize on new growth opportunities through several strategic investments, including the digital consumer deposit platform, will likely bolster growth. Nonetheless, costs rising from technology investments and market development, though controlled, remain near- to medium-term headwinds.
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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings Date of Other Banks
Bank of America (BAC - Free Report) and Citigroup (C - Free Report) are scheduled to come out with quarterly numbers on Apr 15, while Morgan Stanley (MS - Free Report) will report on Apr 16.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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