Goldman Sachs beats Wall Street’s lowered earnings expectations

Analysts tracked by FactSet expected Goldman Sachs to report earnings of $5.42 a share.

Third-quarter revenue fell to $11.82 billion from $11.98 billion in the year-ago quarter, ahead of the estimate of $11.15 billion.

Goldman Sachs stock fell 0.7% as bond yields rose sharply on the heels of a stronger-than-expected retail-sales report. The 10-year rate rose 13 basis points to around 4.84%, on its way to the highest 3 p.m. Eastern time level since Aug. 8, 2007. 

At Goldman Sachs, net revenues generated by global banking and markets rose 6% to $8 billion, driven by performance in fixed income, currency and commodities and in equities. The bank also said it booked record quarterly revenue in financing.

Net revenue for equities rose 8% to $2.96 billion, as the bank booked higher equities-financing revenue, which reflected “significantly higher net revenue in prime financing,” the bank said. This was offset by lower portfolio-financing revenue, while revenue increased in equities intermediation, primarily in derivatives.

Investment-banking fees were unchanged at $1.55 billion, as the bank benefited from debt underwriting, which was driven by leveraged finance activity, while a decline in mergers and acquisitions weighed on its advisory business.

Asset and Wealth Management revenue of $3.2 billion fell 20% from year ago but rose 6% from the previous quarter. 

Chief Executive David Solomon said the bank continues to make progress on its efforts to realign its business, such as the recent sale of its GreenSky consumer-lending unit.

“I also expect a continued recovery in both capital markets and strategic activity if conditions remain conducive,” Solomon said.

Goldman Sachs reported a $203 million impact on earnings from GreenSky and a $37 million impact from its loan portfolio at its Marcus consumer-banking unit.

Keefe, Bruyette & Woods analyst David Konrad said that Goldman Sachs delivered a “noisy” quarter of one-time items, but that exiting GreenSky was a good decision.

“All key revenue items beat our estimate, including strong beats in investment banking and trading,” Konrad said.

Goldman Sachs was expected to earn $7.78 a share at the start of the quarter, according to FactSet consensus estimates.

Goldman Sachs bought back $1.5 billion of its own stock in the third quarter, up from $750 million in the second quarter. Looking ahead, the firm expects stock buybacks in the fourth quarter to drop.

Chief Financial Officer Denis Coleman said the bank has marked or pared down its commercial-real-estate exposure by about 50% in 2023, a move he said was significant.

The bank entered 2023 with about $15 billion of commercial-real-estate alternative investments and has now reduced that figure by about $5 billion.

“We’re making very, very significant progress against those positions,” Coleman said.

Goldman Sachs’s stock holds the distinction of being the only big U.S. bank stock with a positive performance in the third quarter, with a slim 0.3% gain.

However, the stock has fallen 8.5% in the past month, compared with a 1.9% drop by the Dow Jones Industrial Average
DJIA.

Solomon has been under scrutiny after disclosing losses in the consumer-banking unit and drawing criticism from within the company’s ranks.

Analysts have also been tempering their expectations for Goldman Sachs amid a lackluster deal environment for mergers and acquisitions and initial public offerings.

Along with Goldman Sachs, Bank of America Corp.
BAC,
+2.33%
reported third-quarter earnings on Tuesday, with Morgan Stanley
MS,
+2.03%
set to report on Wednesday. JPMorgan Chase & Co.
JPM,
-0.22%,
Citigroup Inc.
C,
+0.61%
and Wells Fargo & Co.
WFC,
+0.79%
reported earnings on Friday.

Also read: Goldman Sachs sheds GreenSky lending platform but still faces lack of low-cost deposits, analyst says