David Solomon, Goldman Sachs interview with David Faber, September 7, 2023.
CNBC
Goldman Sachs said Monday that it topped profit and revenue estimates on better-than-expected fixed income results and smaller-than-expected loan loss provisions.
Here’s what the company reported:
- Earnings: $8.62 per share vs. $8.34 per share LSEG estimate
- Revenue: $12.73 billion vs. $12.46 billion estimate
Goldman said second-quarter profit jumped 150% from a year earlier to $3.04 billion, or $8.62 per share; the bank’s results a year ago were hamstrung by write-downs tied to commercial real estate and the sale of a consumer business.
Companywide revenue rose a more modest 17% to $12.73 billion on growth in the bank’s core trading, advisory and asset and wealth management operations.
Fixed income was a highlight for the quarter; revenue there jumped 17% to $3.18 billion, roughly $220 million more than the StreetAccount estimate, on activity in interest rate, currency and mortgage trading markets.
Another boost for Goldman came thanks to the firm’s shrinking exposure to consumer loans: The bank’s provision for credit losses in the quarter fell 54% to $282 million; that is significantly below the $435.4 million StreetAccount estimate.
In other places, the bank was merely in line with expectations; for instance, equities trading climbed 7% to $3.17 billion, matching the StreetAccount estimate, on strength in derivatives activity.
The bank’s asset and wealth management division produced a 27% increase in revenue to $3.88 billion, also essentially matching the StreetAccount estimate, on gains in equity investments and rising management fees.
The firm’s platform solutions division saw revenue climb 2% to $669 million, edging out the $652.1 million estimate, on rising credit card balances and deposits.
But Goldman’s well-known investment banking business disappointed compared to rivals; investment banking fees rose 21% to $1.73 billion, slightly under the $1.8 billion StreetAccount estimate. The source of the miss appeared to be lighter-than-expected advisory fees of $688 million, compared to the $757.3 million estimate.
Goldman’s 21% increase in investment banking fees in the quarter compared to jumps of over 50% for both JPMorgan Chase and Citigroup; JPMorgan in particular cited a flurry of activity towards the end of the period that boosted results.
Goldman CFO Denis Coleman said that the bank was still No. 1 in market share for mergers and the comparison had to do with better relative performance a year ago.
“If you have a consistently extremely strong business, then your year-on-year change may be more muted,” Coleman told CNBC during a media call. “If you have a less-strong business, as markets were recovering, then you could look like you’ve had a real big improvement in your business.”
Shares of New York-based Goldman fluctuated between gains and losses of less than 1% in premarket trading.
Expectations have been set high for Goldman Sachs, with Wall Street businesses in the midst of a rebound after a dismal 2023. That’s because out of the six biggest U.S. banks, Goldman is the most reliant on investment banking and trading to generate revenue.
On Friday, rivals JPMorgan and Citigroup both topped expectations thanks to surging investment banking fees and better-than-expected equities trading results.
Bank of America and Morgan Stanley report results on Tuesday.
This story is developing. Please check back for updates.
