Goldman Sachs earnings 1Q 2019 beat expectations


Goldman Sachs shares declined after posting first-quarter income beneath analysts’ estimates on more durable market situations for the agency’s buying and selling and investing divisions.

The financial institution mentioned Monday that income dropped 13 % to $8.81 billion, beneath analyst’s $8.9 billion estimate. In the meantime, the agency generated $2.25 billion of revenue within the interval, or $5.71 a share, exceeding the $4.89 estimate, the New York-based agency mentioned in a launch. That was largely from reining in compensation greater than analysts had anticipated, in keeping with a analysis word from Citigroup.

Goldman shares fell 3% to $201.50 at 10:38 a.m.

“We’re happy with our efficiency within the first quarter, particularly within the context of a muted begin to the yr,” Goldman CEO David Solomon mentioned within the launch. “Our core companies generated strong outcomes pushed by our sturdy franchise positions. We’re targeted on new alternatives to develop and diversify our enterprise combine and serve a broader vary of shoppers globally.”

Contemplating the affect that powerful buying and selling situations had on income, Goldman pulled a lever at its disposal: It lowered compensation for its workers. The financial institution booked $3.26 billion in pay and advantages for the quarter, 20% lower than a yr in the past and effectively beneath the $3.58 billion estimate. The agency additionally trimmed headcount by 2% from the fourth quarter.

Its institutional shopper companies buying and selling division, the agency’s greatest enterprise by far, posted $3.61 billion in income for the quarter, an 18 % decline from a yr earlier. Revenues from fastened earnings and equities buying and selling got here in at $1.84 billion and $1.77 billion, basically matching analysts’ estimates.

The corporate’s funding banking division posted income of $1.81 billion, roughly unchanged from a yr earlier, because the agency’s advisory income jumped 51% to $887 million on strong mergers and acquisitions exercise. That handily exceeded the $744 million estimate.

The investing and lending phase posted $1.84 billion in income, a 14 % decline that was simply shy of analysts’ $1.87 billion estimate. The drop was pushed by “considerably decrease web beneficial properties” from stakes in non-public equities and debt holdings.

Nevertheless it was in Goldman’s smallest division, funding administration, the place outcomes missed analysts expectations by the largest margin. Income dropped by 12% to $1.56 billion, beneath analysts’ $1.71 billion estimate, on “considerably decrease incentive charges and decrease transaction revenues” amid powerful markets.

The agency’s provision for credit score losses climbed to $224 million within the quarter, roughly unchanged from the earlier interval however surging from the primary quarter of 2018, the place it was $44 million, as Goldman expanded its retailing lending operations.

The financial institution’s board voted to extend its quarterly dividend by 5 cents to 85 cents per share, a transfer that had been anticipated by buyers.

It is solely Solomon’s second quarter working the financial institution, however analysts could have loads of questions for him.

The funding financial institution, which traditionally counted governments, firms and hedge funds as shoppers, took a notable step in its journey into client finance final month when its joint credit card with Apple was introduced. Analysts will need to know what the economics of the deal imply for the New York financial institution.

The agency is working to develop current companies, diversify its companies with new services and enhance effectivity, Solomon mentioned Monday.

Nonetheless, of the six greatest U.S. banks, Goldman is essentially the most depending on Wall Road actions, and that exposes them to the decline in buying and selling within the quarter. J.P. Morgan Chase said last week that first-quarter buying and selling income dropped 17 % to $5.5 billion.

Solomon or CFO Stephen Scherr may also present updates on a strategic overview introduced in October and progress on the financial institution’s $5 billion revenue-boosting plan, in keeping with analyst Jason Goldberg of Barclays.

The financial institution is chopping bills and capital from underperforming components of the commodities enterprise, Scherr mentioned.

One other matter of dialogue could be the financial institution’s 1MDB scandal. Goldman’s shares had been battered final yr partly due to the scandal, through which an ex-Goldman associate admitted to serving to a Malaysian financier loot an funding fund of billions of {dollars}.

The shares have partially recovered this yr, climbing greater than 20 %.

Here is what Wall Road anticipated:

Earnings: $4.89 a share, down 30% from a yr in the past, in keeping with Refinitiv.
Income: $8.9 billion, down 10% from a yr earlier.
Buying and selling income: Equities $1.81 billion; fastened earnings $1.77 billion, in keeping with FactSet
Investing banking: $1.65 billion

Additionally Monday, Citigroup reported mixed first-quarter results, saying its earnings had been boosted by share buybacks whereas revenues fell amid a pointy decline in equities buying and selling. J.P. Morgan and Wells Fargo reported quarterly earnings on Friday that topped analyst expectations.



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