Goldman Sachs Q3 Profit Down 44%, But Results Top Estimates

Investment banking major Goldman Sachs Group Inc. (GS) reported Tuesday that net profit for the third quarter declined 44 percent from last year, reflecting a 12 percent drop in net revenues, 17 percent rise in operating expenses and higher provisions for bad loans. However, earnings per share and quarterly revenues topped Analysts’ estimates.

In Tuesday’s pre-market trading, GS is currently trading at $312.00, up $5.29 or 1.72 percent.

“Goldman Sachs’ third quarter results reflect the strength, breadth and diversification of our global franchise. Against the backdrop of uncertainty and volatility in the markets, we continue to prudently manage our resources and remain focused on risk management as we serve our clients,” said Chairman and CEO David Solomon.

For the quarter, net earnings applicable to common shareholders declined to $2.96 billion or $8.25 per share from $5.28 billion or $14.93 per share in the prior-year quarter.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $7.69 per share for the quarter. Analysts’ estimates typically exclude special items.

Provision for credit losses for the quarter was $515 million, compared to a $175 million last year, primarily reflected consumer portfolio growth, net chargeoffs and the impact of continued broad concerns on the macroeconomic outlook.

Total operating expenses were $7.70 billion for the quarter, 17 percent higher than last year, reflecting higher compensation and benefits expenses, higher net provisions for litigation and regulatory proceedings and higher transaction based expenses.

Total net revenues for the quarter declined 12 percent to $11.98 billion from $13.61 billion in the same quarter last year, reflecting significantly lower net revenues in Asset Management and Investment Banking, partially offset by higher net revenues in Global Markets and Consumer & Wealth Management. Analysts expected revenue of $11.41 billion for the quarter.

Net interest income grew 31 percent to $2.04 billion, while non-interest income declined 18 percent to $9.93 billion in the year-ago quarter.

Quarterly net revenues in Investment Banking were $1.58 billion, 57 percent lower than last year, reflecting significantly lower net revenues in underwriting, Financial advisory and Corporate lending.

Net revenues in Global Markets were $6.20 billion for the third quarter, up 11 percent from the previous year, primarily reflecting strong performances in both Fixed Income, Currency and Commodities (FICC) and Equities, particularly in financing.

Net revenues in Asset Management were $1.82 billion for the quarter, 20 percent lower than the prior year, reflecting significantly lower net revenues in Equity investments and Lending and debt investments, partially offset by significantly higher Management and other fees.

Net revenues in Consumer & Wealth Management were a record $2.38 billion, 18 percent higher than last year, reflecting a surge consumer banking net revenues.

Firmwide Management and other fees were a record $2.24 billion for the third quarter, 15 percent higher than the last year.

On Monday, the Board of Directors approved a quarterly dividend of $2.50 per common share, payable on December 29, 2022 to common shareholders of record on December 1, 2022.

Goldman Sachs also announced a major reorganization of its business lines, combining the trading and investment-banking divisions. The move would also cause the side-lining of the loss-making consumer unit as well as Marcus, the digital consumer bank.

“Today, we enter the next phase of our growth, introducing a realignment of our businesses that will enable us to further capitalize on the predominant operating model of One Goldman Sachs as we better serve our clients,” Solomon added.

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