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Goldman (GS) Q1 Earnings Surpass, Revenues Lag Estimates
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The Goldman Sachs Group, Inc.’s (GS - Free Report) first-quarter 2023 earnings per share of $8.79 surpassed the Zacks Consensus Estimate of $8.14. Also, the bottom line fell significantly from $10.76 in the year-earlier quarter. Our estimate for earnings was $7.70 per share.
Shares tanked more than 2.2% in the pre-market trading on lower-than-expected revenues. 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, provision benefits and strength in the consumer banking business acted as tailwinds.
Net earnings of $3.23 billion plunged 18% from the prior-year quarter.
Revenues Decline, Expenses Rise
Net revenues of $12.22 billion fell 5% from the year-ago quarter. Also, the top line missed the Zacks Consensus Estimate of $13.03 billion. Our estimate for total revenues was $12.8 billion.
Total operating expenses increased 9% year over year to $8.40 billion. Our estimate for the metric was $8.47 billion.
Provision for credit losses was a net benefit of $171 million against net provisions of $561 million in the prior-year quarter.
Quarterly Segmental Performance Mixed
The Asset & Wealth Management division generated revenues of $3.22 billion in the reported quarter, up 24% year over year. Our estimate for the metric was $3.65 billion. Results reflect net gains in equity investments compared with net losses in the prior-year quarter, higher management and other fees, and rising net revenues in debt investments.
Firmwide assets under supervision were a record $2.67 trillion, up around 5% sequentially.
The Global Banking & Markets division recorded revenues of $8.44 billion, down 16% year over year. Our estimate for the metric was $8.73 billion. The fall indicated weakness in the IB business (down 26%), lower equities revenues (down 7%), and lower net revenues in FICC (down 17%).
The Platform Solutions division’s revenues were $564 million, more than doubling year over year. Our estimate for the metric was $414.9 million. The jump was driven by significantly higher credit card balances and an increase in total deposits.
Capital Ratios Improve
As of Mar 31, 2023, the standardized Common Equity Tier 1 capital ratio was 14.8%, up from the prior-year quarter’s 14.4%. The company’s supplementary leverage ratio was 5.8%, up from 5.6% in the prior-year quarter.
Capital Deployment Update
In the quarter under review, Goldman returned $3.41 billion of capital to common shareholders. This included $2.55 billion in share repurchases and common stock dividends of $868 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’s (WFC - Free Report) first-quarter 2023 earnings per share of $1.23 outpaced the Zacks Consensus Estimate of $1.15. The figure improved 35% year over year.
WFC’s results benefited from higher net interest income, rising rates and solid average loan growth. A fall in non-interest expenses acted as another tailwind. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC.
Citigroup Inc.’s (C - Free Report) first-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.86 outpaced the Zacks Consensus Estimate of $1.66. Our estimate for earnings was $1.40 per share.
Citigroup witnessed revenue growth in the quarter, backed by higher revenues in the Institutional Clients Group, and Personal Banking and Wealth Management segments. However, the higher cost of credit was a spoilsport.
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Goldman (GS) Q1 Earnings Surpass, Revenues Lag Estimates
The Goldman Sachs Group, Inc.’s (GS - Free Report) first-quarter 2023 earnings per share of $8.79 surpassed the Zacks Consensus Estimate of $8.14. Also, the bottom line fell significantly from $10.76 in the year-earlier quarter. Our estimate for earnings was $7.70 per share.
Shares tanked more than 2.2% in the pre-market trading on lower-than-expected revenues. 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, provision benefits and strength in the consumer banking business acted as tailwinds.
Net earnings of $3.23 billion plunged 18% from the prior-year quarter.
Revenues Decline, Expenses Rise
Net revenues of $12.22 billion fell 5% from the year-ago quarter. Also, the top line missed the Zacks Consensus Estimate of $13.03 billion. Our estimate for total revenues was $12.8 billion.
Total operating expenses increased 9% year over year to $8.40 billion. Our estimate for the metric was $8.47 billion.
Provision for credit losses was a net benefit of $171 million against net provisions of $561 million in the prior-year quarter.
Quarterly Segmental Performance Mixed
The Asset & Wealth Management division generated revenues of $3.22 billion in the reported quarter, up 24% year over year. Our estimate for the metric was $3.65 billion. Results reflect net gains in equity investments compared with net losses in the prior-year quarter, higher management and other fees, and rising net revenues in debt investments.
Firmwide assets under supervision were a record $2.67 trillion, up around 5% sequentially.
The Global Banking & Markets division recorded revenues of $8.44 billion, down 16% year over year. Our estimate for the metric was $8.73 billion. The fall indicated weakness in the IB business (down 26%), lower equities revenues (down 7%), and lower net revenues in FICC (down 17%).
The Platform Solutions division’s revenues were $564 million, more than doubling year over year. Our estimate for the metric was $414.9 million. The jump was driven by significantly higher credit card balances and an increase in total deposits.
Capital Ratios Improve
As of Mar 31, 2023, the standardized Common Equity Tier 1 capital ratio was 14.8%, up from the prior-year quarter’s 14.4%. The company’s supplementary leverage ratio was 5.8%, up from 5.6% in the prior-year quarter.
Capital Deployment Update
In the quarter under review, Goldman returned $3.41 billion of capital to common shareholders. This included $2.55 billion in share repurchases and common stock dividends of $868 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’s (WFC - Free Report) first-quarter 2023 earnings per share of $1.23 outpaced the Zacks Consensus Estimate of $1.15. The figure improved 35% year over year.
WFC’s results benefited from higher net interest income, rising rates and solid average loan growth. A fall in non-interest expenses acted as another tailwind. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC.
Citigroup Inc.’s (C - Free Report) first-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.86 outpaced the Zacks Consensus Estimate of $1.66. Our estimate for earnings was $1.40 per share.
Citigroup witnessed revenue growth in the quarter, backed by higher revenues in the Institutional Clients Group, and Personal Banking and Wealth Management segments. However, the higher cost of credit was a spoilsport.