Goldman Sachs (GS 228.05, -3.39, -1.46%) changed little in
pre-market but has slipped slightly since the open after beating quarterly
In addition to reporting its results, Goldman Sachs announced that Chairman and CEO Lloyd Blankfein will step down from his post on September 30 and will retire from the firm at the end of 2018. Mr. Blankfein will become Senior Chairman after retirement while his successor, David Solomon, will join the company's Board of Directors on October 1. Mr. Solomon became President and Co-COO in 2016.
The investment banking giant reported above-consensus second quarter earnings of $5.98/share on a 19.2% year/year jump in revenue to $9.40 bln, which was also better than what the market expected.
Annualized return on average common shareholders' equity was 12.8%, down from 15.4% reported in the previous quarter. Book value per common share increased 4.1% quarter/quarter to $194.37. Global core liquid assets averaged $237 bln, up from $229 bln in the previous quarter and from $221 bln year/year. Common Equity Tier 1 ratio was reported at 12.6%, up from 12.1% in the previous quarter and down from 13.9% year/year.
Looking at the segment breakdown, Investment banking revenue grew 18.2% year/year to $2.045 bln while Financial Advisory revenue grew 7.3% year/year to $804 mln. The increase in Financial Advisory revenue was due to an increase in completed mergers and acquisitions. Underwriting revenue increased 26.5% year/year to $1.24 bln due to higher net revenue from IPOs.
Institutional Client Services revenue grew 17.0% year/year to $3.57 bln. Fixed Income, Currency, and Commodities Client Execution revenue totaled $1.68 bln, up 45% year/year. Higher net revenue across all major businesses and significant increases in commodities, interest rate products, and credit products fueled the growth rate. Equities net revenue was little changed year/year at $1.89 bln. Higher net revenue in cash products was offset by lower net revenue in derivatives.
Investing & Lending revenue jumped 23.4% year/year to $1.94 bln. Net revenue in equities grew 8.6% to $1.28 bln due to net gains from private equities, which were partially offset by lower net gains from public equities. Debt securities net revenue grew 67.4% to $663 mln due to higher net interest income.
Investment Management revenue increased 20% to $1.84 bln. Higher incentive fees drove the growth rate while management and other fees increased slightly. Long-term assets under supervision increased by $5 bln during the quarter, and total assets under supervision increased by $15 bln during the quarter and by $107 bln from the prior year $1.51 trln. The increase was due to net inflows of $8 bln and market depreciation of $3 bln.
Operating expenses grew 13.9% year/year to $6.13 bln. Compensation and benefits expenses grew 7.2% year/year to $3.47 bln while total non-compensation expenses increased 24.0% to $2.66 bln.
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