Unlike the other big banks, Goldman’s earnings release is a breeze: since the bank has virtually no balance sheet to use as a source of income (or loss), it is all about the income statement. And it was here that there was a big surprise, because despite expectations of a blowout result, with whisper numbers well above consensus estimates, Goldman unexpectedly disappointed, reporting Q1 revenues of $8.03BN, below the $8.53BN expected, translating to EPS of $5.15, fractionally below the $5.17 estimate, which nonetheless was 92% higher compared to EPS of $2.68 reported one year ago.
Unlike other banks Goldman did not benefit as much from a pick-up in trading activity during the period: net revenues from the institutional client services division were up 25% from a year earlier to $3.4bn, below the $3.62bn expected, of which FICC contributed $1.685 billion, which also missed expectations of a $2 billion number.
Despite the miss in FICC, Goldman reported beats in virtually every other revenue line time,
“The operating environment was mixed, with client activity challenged in certain market-making businesses and a more attractive backdrop for underwriting in our investment banking franchise,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “As the economy improves, we are wellpositioned to not only meet our clients’ diverse needs, but also to generate operating leverage for our shareholders.”
Broken down by key operating group, most segments reported numbers that beat expectations with the exception of FICC:
- FICC sales & trading revenue was $1.695bn, missing estimates of $2.03bn
- Overall sales and trading revenue $3.36 billion, missing estimates of $3.62 billion
- Investment banking revenue of $1.7bn beating estimates of $1.56bn.
- Investment and Lending, formerly known as prop, reported $1.48bn in revenue, virtually unchanged from a year ago.
The full breakdown of Goldman’s various revenue segments is shown in the chart below:
Other metrics:
- Q1 return on avg. equity 11.4%
- Q1 Basel III common equity Tier 1 ratio 12.9%
- Assets under management $1.37t
Goldman also reported Q1 compensation expenses, which while rising from $2.662 billion to $3.291 billion, came in modestly below the expected $3.52 billion. Also notable: Goldman staff decreased 7% Y/Y, with the firm closing the first quarter with 34,100 workers. As the following chart shows, the average accrued banker compensation rose from $338,576 to $360,000, the highest since Q3, 2015.
Finally, for all those Goldman bankers who sold their stock at the top, congratulations. As of this moment, GS shares are down over 3%, and back to levels not seen since the election.
via http://ift.tt/2px0OhI Tyler Durden