Goldman Q3 Earnings Beat on Higher IB Revenues & Lower Expenses

The Goldman Sachs Group, Inc.’s GS third-quarter 2024 adjusted earnings per share of $8.40 surpassed the Zacks Consensus Estimate of $6.85. This compares favorably with $5.47 reported in the year-ago quarter.

Find the latest earnings estimates and surprises on the Zacks Earnings Calendar.

As expected, the investment banking (IB) business witnessed a solid growth. Equity underwriting fees jumped 25% and debt underwriting fees grew 45.8%. Also, advisory fees rose 5.3%. Overall, total IB fees were up 20% from the prior-year quarter to $2.27 billion. 

Goldman’s results benefited from a strong performance in its IB business and a solid Asset & Wealth Management division. A decline in expenses was another positive. However, a rise in provisions and a weak capital position remains a concern. 

Net earnings (GAAP basis) of $2.9 billion increased 45.3% from the prior-year quarter.

Goldman’s Revenues Increase and Expenses Fall

Net revenues for the quarter of $12.7 billion increased 7.5% from the year-ago quarter. Also, the top line surpassed the Zacks Consensus Estimate of $11.63 billion.

Total operating expenses decreased 8.2% year over year to $8.31 billion. The decline was due to a fall in compensation and benefits costs, depreciation and amortization costs, along with occupancy and other expenses. 

Provision for credit losses was $397 million, which increased significantly from $7 million in the third quarter of 2023.

Goldman’s Quarterly Segmental Performance Improves

The Asset & Wealth Management division generated revenues of $3.75 billion in the reported quarter, up 16.2% year over year. The improvement was driven by higher management and incentive fees, increased net revenues in private banking and lending fees and equity investments, partially offset by lower net revenues in debt investments.

Firmwide assets under supervision were a record $3.1 trillion, up 15.8% from the prior-year quarter.

The Global Banking & Markets division has recorded revenues of $8.6 billion, which increased 6.8% year over year. The improvement was driven by an increase in the IB business, along with a rise in equities revenues, partially offset by Fixed Income, Currency and Commodities Client Execution financing revenues.

The Platform Solutions division’s revenues were $391 million, down 32.4% year over year. The fall was due to lower revenues from consumer platforms as well as transaction banking and other.

Goldman’s Capital Ratios Deteriorate

As of Sept. 30, 2024, the standardized Common Equity Tier 1 capital ratio was 14.6%, down from 14.8% as of Sept. 30, 2023. The company’s supplementary leverage ratio was 5.5%, down from 5.6% as of Sept. 30, 2023.

Goldman’s Capital Distribution Update

During the reported quarter, Goldman returned $1.98 billion of capital to common shareholders. This included $1 billion in share repurchases and common stock dividends of $978 million.

Our View on Goldman

Goldman’s focus on IB and trading businesses, along with strong deal-making pipelines, will likely support the top line. Active client engagement and a solid position in announced and completed mergers and acquisitions globally are likely to act as tailwinds. However, a surge in provisions due to a challenging operating backdrop is a concern.  

The Goldman Sachs Group, Inc. Price, Consensus and EPS Surprise

Currently, Goldman carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Dates & Expectations of Banks

M&T Bank Corporation MTB is slated to report third-quarter 2024 results on Oct. 17. It carries a Zacks Rank #3 at present.

Over the past month, the Zacks Consensus Estimate for MTB’s quarterly earnings per share has moved marginally downward to $3.60.

Fifth Third Bancorp FITB is scheduled to release third-quarter 2024 earnings on Oct. 18. The company carries a Zacks Rank #3 at present.

The consensus estimate for FITB’s quarterly earnings has remained unchanged at 82 cents per share over the past month.

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The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report
 
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M&T Bank Corporation (MTB): Free Stock Analysis Report

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