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Author: Anatol Antonovici
Senior Reporter
Anatol Antonovici

Goldman Sees Quarterly Revenue Below Expectations

US banking giant Goldman Sachs reported mixed results for the first quarter of this year. The company’s earnings beat analysts’ expectations, but the revenue figures fell more than anticipated on more difficult market conditions.

Wall Street Waited For More

According to Goldman Sachs, whose stock is listed on the New York Stock Exchange with the ticker GS, the earnings per share in the first quarter were $5.71, while analysts expected $4.89. However, revenue of $8.81 billion was below economists’ forecasts at over $9 billion.

During the quarter, the return on equity was 11.1%, while return on tangible equity was 11.7%.

For comparison, in the first quarter of last year, the fifth largest bank in the US by assets reported the earnings per share at $6.95 and revenue at $10.04 billion.

Investing & Lending was among the best performing departments during the first quarter of this year, with net interest income in debt securities and loans hitting $825 million.

The bank was the best performer in the world in terms of completed mergers and acquisitions (M&A) year-to-date, which pushed the net revenues of its Financial Advisory unit at $887 million. Besides this, Goldman ranked first worldwide in equity offerings and common stock offerings for the first quarter.

As for other segments of the bank, they performed as follows:

  • Investment Banking revenues added 1% in annual terms, to $1.81 billion
  • Fixed income, currencies and commodities (FICC) revenues fell 11% to $1.84 billion
  • Equities revenues tumbled 24% to $1.77 billion
  • Investment Management revenues declined by 12% to $1.56 billion
  • Investing & Lending revenues fell 14% to $1.84 billion

Goldman to Focus More on Consumer Lending

The banking giant has commonly relied on its investment banking and trading segment. However, the company has been working on cutting its dependence on trading business and focussing more on consumer lending, where it has never previously operated.

The bank announced its plans to boost retail deposits by no less than $10 billion per year over the next few years. This will enable Goldman to cut its cost of funding by about 1%. Besides, the bank is making efforts to become more efficient, which might reduce revenue-related costs by 1% and increase return on equity by 0.4% on average.

Goldman Sachs became famous for its ability to generate profits even though the management was secretive about the bank’s goals and how its businesses functioned. Generally, investors and analysts were comfortable with this position given that the company showed higher returns than competitors.

However, the tighter regulations imposed after the 2008 crisis and the changing market situation affected Goldman’s core units, which is why the bank is shifting to consumer lending and other businesses and promises to become more transparent.

In practice, being more open to investors and analysts seems to be a bit challenging. Earlier, the bank said it would report on its progress to diversify its business, but we still don’t have any review. The management said to provide the bank-wide performance goals early in 2020 while investors hoped to read the full report this spring.

David Hendler, the analyst at Viola Risk Advisors, commented:

There's a lot of work that needs to be done at this company to reposition it for growth over the next decade. Not completing the strategic review until 2020 is ridiculous. It should be done by the next quarter.

CEO David Solomon, which has been at the helm since October 2018, revealed that he was satisfied with the company’s financial results “in the context of a muted start to the year.”

On Monday, the share price of Goldman Sachs fell 3.82% and is currently trading at around $199.9 per share.

Meet The Author
Anatol Antonovici
Anatol Antonovici
Senior Reporter

Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets.

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