GS (Goldman Sachs) 3Q 2022 results

Goldman Sachs released third-quarter results on Tuesday that beat analysts’ earnings and revenue expectations on better-than-expected business results.

Here are the numbers:

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  • Earnings: $8.25 per share vs. $7.69 per share estimate according to Refinitiv
  • Revenue: $11.98 billion vs. $11.41 billion estimated

The company said earnings fell 43% to $3.07 billion, or $8.25 per share, beating analysts’ estimate of $7.69 polled by Refinitiv. Revenue fell 12% to $11.98 billion, beating estimates of more than $500 million. Goldman’s revenue decline was expected after last year’s IPO boom slowed this year.

Shares of the bank rose more than 4% in morning trading.

Goldman CEO David Solomon said the results showed the “strength, breadth and diversification” of the business and formally announced a corporate reorganization that was announced earlier this week.

“Today, we are entering the next phase of our growth, introducing a realignment of our business that will allow us to further capitalize on One Goldman Sachs’ predominant operating model,” Solomon said. “We are confident that our strategic evolution will generate higher and more sustainable returns and unlock long-term shareholder value.”

Goldman fixed income traders generated $3.53 billion in revenue, a 41% jump from the year-ago period and about $500 million more than analysts had expected , as traders took advantage of increased client activity in bonds and currencies in choppy markets.

Equity traders reported $2.68 billion in revenue, down 14% from a year earlier that topped the estimate of $2.59 billion.

Strong business results more than offset a failure in investment banking, where revenue fell 57% to $1.58 billion, below analysts’ estimate of $1.84 billion.

The bank’s other divisions, asset management and consumer goods management, also beat expectations.

Asset management revenue fell 20% to $1.82 billion due to lower earnings from private equity holdings, but it still beat expectations of $1.65 billion of income.

Consumer and wealth management revenue increased 18% to $2.38 billion, beating the estimate of $2.19 billion, helped by growth in credit card balances and rising interest rates.

The results were consistent with Goldman’s competitors in the quarter. While rivals including JPMorgan Chase and Morgan Stanley saw sharp declines in investment banking revenue in the third quarter, better-than-expected bond results amid volatile markets helped support their institutional businesses.

An open question is how long the bank’s consumer business will continue to lose money, a hot topic among investors due to its downturn on the business as the stock was depressed.

Solomon’s corporate reorganization will combine the bank’s four main divisions into three, according to people familiar with the plan. The move splits Goldman’s consumer operations and places the parties in two of the new businesses, the people said.

The new divisions will be called Asset & Wealth Management, Global Banking & Markets and Platform Solutions, Solomon said Tuesday in a memo obtained by CNBC. The changes will take effect in December, he said.

Solomon’s memo made little mention of the firm’s Marcus business, except to say it was now integrated into broader asset and wealth management operations.

During a conference call with analysts, Solomon announced a pivot in its retail funding strategy, saying the bank will now focus on existing Marcus customers and potential customers available through the Wealth at Work channels and personal, “rather than seeking to acquire customers at scale.”

The change will help Goldman “streamline” spending on future products and customer acquisition costs, he said.

Partnerships with a tech giant Applewhich include a credit card and a new savings account, were expanded and extended through the end of the decade, Solomon said.

The company will hold an investor day at the end of February, he added.

Goldman shares trade for the lowest price-to-book ratio of the six largest U.S. banks, excluding Citigroup, a situation Solomon surely wants to remedy.

Shares of the bank have fallen nearly 20% this year through Monday, compared to the 26% drop in the KBW banking index.

Last week, JPMorgan and Wells Fargo beat third quarter earnings and revenue expectations by generating higher than expected interest income. Citigroup also beat analysts’ estimates, and Morgan Stanley missed the mark as choppy markets hurt its investment management business.

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