David Solomon, Goldman Sachs interview with David Faber, September 7, 2023.
CNBC
Goldman Sachs said there was a top profit and revenue forecast in the result of fixed income is better than expected and loan loss provision is smaller than expected.
Here is the company report:
- Earnings: $8.62 per share vs $8.34 per share LSEG estimates
- Revenue: $12.73 billion vs $12.46 billion estimate
Goldman said second quarter profit jumped 150% from the previous year to $3.04 billion, or $8.62 per share; bank results last year were hamstrung by the write-down connected to commercial real estate and the sale of consumer businesses.
The company’s revenue rose a slight 17% to $12.73 billion due to growth in the bank’s core trading, advisory and asset and wealth management operations.
Fixed income was the highlight for the quarter; revenue there jumped 17% to $3.18 billion, about $220 million more than StreetAccount’s estimate, in the activity in the interest rate, currency and mortgage trading market.
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 was below StreetAccount’s estimate of $435.4 million.
Elsewhere, the bank is only in line with expectations; for example, equity trading rose 7% to $3.17 billion, matching StreetAccount estimates, on strength in derivatives activity.
The bank’s asset and wealth management division posted revenue of 27% to $3.88 billion, also in line with StreetAccount’s estimates, as equity investment gains and management fees rose.
The company’s platform solutions division reported revenue rose 2% to $669 million, beating estimates of $652.1 million, on credit and deposit card balances.
But Goldman’s investment banking business is notoriously disappointing compared to its rivals; Investment banking costs rose 21% to $1.73 billion, slightly below the $1.8 billion StreetAccount estimate. The source of the miss appeared lighter than expected at $688 million, compared to the estimate of $757.3 million.
Goldman’s 21% increase in investment banking fees in the quarter looks mild compared to increases of more than 50% for both JPMorgan Chase and Citigroup; JPMorgan in particular recorded a lot of activity at the end of the period that boosted results.
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 the Wall Street business in the midst of a comeback after a dismal 2023. This is because of the six largest US banks, Goldman is the most dependent on investment banking and trading to generate revenue.
On Friday, rivals JPMorgan and Citigroup both beat expectations due to a rise in investment banking costs and better-than-expected equity trading results.
Bank of America and Morgan Stanley results report on Tuesday.
This story is evolving. Please check back for updates.