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Goldman (GS) Q2 Earnings Top Estimates, Revenues Dip Y/Y
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The Goldman Sachs Group, Inc.’s (GS - Free Report) second-quarter 2022 earnings per share of $7.73 have surpassed the Zacks Consensus Estimate of $6.99. However, the bottom line fell 48.5% from the year-earlier quarter.
The stock rose 3.7% during the pre-market trading, reflecting investors’ optimism regarding the better-than-expected results. Notably, the full-day trading session will display a clearer picture.
While strength in the Fixed Income, Currency and Commodities Client Execution (“FICC”), wealth management, and consumer banking businesses acted as a tailwind, the bank’s results were hurt by lower debt and equity underwriting revenues.
Net earnings of $2.93 billion decreased 47% from the prior-year quarter.
Revenues Dip, Expenses Decline
Net revenues of $11.86 billion fell 23% from the year-ago quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $11.05 billion.
Total operating expenses declined 11% year over year to $7.63 billion.
Provision for credit losses was $667 million against a net benefit of $92 million in the prior-year quarter.
Segmental Performance Mixed
The Investment Banking (IB) division generated revenues of $2.13 billion in the reported quarter, down 41% year over year. Results reflect a decline in underwriting revenues, partially offset by a rise in corporate lending revenues that improved 121% from the prior-year quarter.
The Global Markets division recorded revenues of $6.46 billion, up 32% year over year. The uptick indicated a rise in net revenues in FICC (up 55%) and equities revenues (up 11%).
The Consumer and Wealth Management division’s revenues were $2.17 billion, 25% higher than the year-ago figure. Increased revenues from wealth management (up 13%) and consumer banking (up 67%) resulted in the upsurge.
The Asset Management division recorded revenues of $1.08 million, indicating a 79% 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 were $2.50 trillion, up 8.2% year over year.
Capital Position Mixed, Profitability Declines
As of Jun 30, 2022, the standardized Common Equity Tier 1 capital ratio was 14.2%. The figure was down from the prior-year quarter’s 14.4%. The company’s supplementary leverage ratio was 5.6% as of Jun 30, 2022, down from the prior-year quarter figure of 5.5%.
Also, return on average common shareholders’ equity (on an annualized basis) decreased 13.1 basis points year over year to 10.6% in the reported quarter.
Capital Deployment Update
In the quarter under review, Goldman returned $1.22 billion of capital to common shareholders. This included $500 million in share repurchases and common stock dividends of $719 million.
On Jul 14, the company’s board of directors announced a third-quarter dividend of $2.50 per common share, indicating a 25% sequential increase. The dividend is scheduled to be paid out on Sep 29 to shareholders of record as of Sep 1, 2022.
Conclusion
Goldman’s quarterly results were decent. Lower net revenues in the Asset Management and IB segments were concerning. While its well-diversified business, apart from its core IB operations, will ensure earnings stability going forward, macroeconomic uncertainty and fears will likely weigh on the financial performance.
Nonetheless, strength in wealth management and consumer banking businesses are tailwinds. Robust client engagement, solid position in announced and completed mergers and acquisitions globally, and IB backlog are likely to support the company’s IB revenues.
The Goldman Sachs Group, Inc. Price, Consensus and EPS Surprise
Higher reserve build and a decline in investment banking fees affected JPMorgan’s (JPM - Free Report) second-quarter 2022 earnings of $2.76 per share, which missed the Zacks Consensus Estimate of $2.85. The reported quarter’s results included a net credit reserve build of $428 million.
Higher interest rates and a solid rise in loan balances aided JPM’s net interest income. Operating expenses recorded a year-over-year rise.
First Republic Bank’s second-quarter 2022 earnings per share of $2.16 surpassed the Zacks Consensus Estimate of $2.05. Additionally, the bottom line improved 10.8% from the year-ago quarter.
FRC’s results were supported by an increase in net interest income and non-interest income. The company’s capital position was strong in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.
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Goldman (GS) Q2 Earnings Top Estimates, Revenues Dip Y/Y
The Goldman Sachs Group, Inc.’s (GS - Free Report) second-quarter 2022 earnings per share of $7.73 have surpassed the Zacks Consensus Estimate of $6.99. However, the bottom line fell 48.5% from the year-earlier quarter.
The stock rose 3.7% during the pre-market trading, reflecting investors’ optimism regarding the better-than-expected results. Notably, the full-day trading session will display a clearer picture.
While strength in the Fixed Income, Currency and Commodities Client Execution (“FICC”), wealth management, and consumer banking businesses acted as a tailwind, the bank’s results were hurt by lower debt and equity underwriting revenues.
Net earnings of $2.93 billion decreased 47% from the prior-year quarter.
Revenues Dip, Expenses Decline
Net revenues of $11.86 billion fell 23% from the year-ago quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $11.05 billion.
Total operating expenses declined 11% year over year to $7.63 billion.
Provision for credit losses was $667 million against a net benefit of $92 million in the prior-year quarter.
Segmental Performance Mixed
The Investment Banking (IB) division generated revenues of $2.13 billion in the reported quarter, down 41% year over year. Results reflect a decline in underwriting revenues, partially offset by a rise in corporate lending revenues that improved 121% from the prior-year quarter.
The Global Markets division recorded revenues of $6.46 billion, up 32% year over year. The uptick indicated a rise in net revenues in FICC (up 55%) and equities revenues (up 11%).
The Consumer and Wealth Management division’s revenues were $2.17 billion, 25% higher than the year-ago figure. Increased revenues from wealth management (up 13%) and consumer banking (up 67%) resulted in the upsurge.
The Asset Management division recorded revenues of $1.08 million, indicating a 79% 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 were $2.50 trillion, up 8.2% year over year.
Capital Position Mixed, Profitability Declines
As of Jun 30, 2022, the standardized Common Equity Tier 1 capital ratio was 14.2%. The figure was down from the prior-year quarter’s 14.4%. The company’s supplementary leverage ratio was 5.6% as of Jun 30, 2022, down from the prior-year quarter figure of 5.5%.
Also, return on average common shareholders’ equity (on an annualized basis) decreased 13.1 basis points year over year to 10.6% in the reported quarter.
Capital Deployment Update
In the quarter under review, Goldman returned $1.22 billion of capital to common shareholders. This included $500 million in share repurchases and common stock dividends of $719 million.
On Jul 14, the company’s board of directors announced a third-quarter dividend of $2.50 per common share, indicating a 25% sequential increase. The dividend is scheduled to be paid out on Sep 29 to shareholders of record as of Sep 1, 2022.
Conclusion
Goldman’s quarterly results were decent. Lower net revenues in the Asset Management and IB segments were concerning. While its well-diversified business, apart from its core IB operations, will ensure earnings stability going forward, macroeconomic uncertainty and fears will likely weigh on the financial performance.
Nonetheless, strength in wealth management and consumer banking businesses are tailwinds. Robust client engagement, solid position in announced and completed mergers and acquisitions globally, and IB backlog are likely to support the company’s IB revenues.
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 Companies
Higher reserve build and a decline in investment banking fees affected JPMorgan’s (JPM - Free Report) second-quarter 2022 earnings of $2.76 per share, which missed the Zacks Consensus Estimate of $2.85. The reported quarter’s results included a net credit reserve build of $428 million.
Higher interest rates and a solid rise in loan balances aided JPM’s net interest income. Operating expenses recorded a year-over-year rise.
First Republic Bank’s second-quarter 2022 earnings per share of $2.16 surpassed the Zacks Consensus Estimate of $2.05. Additionally, the bottom line improved 10.8% from the year-ago quarter.
FRC’s results were supported by an increase in net interest income and non-interest income. The company’s capital position was strong in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.