Goldman Sachs Seeks Higher Start After Beating Expectations (GS)

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Last Update: 16-Jan-19 09:10 ET

Goldman Sachs (GS 189.56, +9.65, +5.36%) opened higher by 3.9% after the financials company reported better than expected results for the fourth quarter.

Unlike Citigroup (C 61.90, +0.52, +0.86%) and JPMorgan Chase (JPM 101.89, +0.21, +0.21%), Goldman Sachs sailed past estimates, reporting fourth quarter earnings of $6.04 per share on revenue that decreased 0.5% year/year to $8.08 bln but was comfortably ahead of expectations. However, like Citigroup and JPMorgan Chase, Goldman Sachs reported a significant decline in fixed income trading revenue.

Annualized return on average common shareholders' equity hit 12.1% during the fourth quarter, down from the full-year rate of 13.3%. Return on average tangible common shareholders' equity hit 12.8% during the fourth quarter, down from the full-year rate of 14.1%.

Common Equity Tier 1 ratio, calculated in accordance with the standardized approach, increased to 13.3% from 11.9% one year ago. The Basel III Advanced approach points to Common Equity Tier 1 ratio of 13.1%, up from 10.7% one year ago.

Investment banking net revenue decreased 5% year/year to $2.04 bln. The decline was mostly due to a 38% drop in Underwriting revenue, which fell to $843 mln due to lower leveraged finance activity and a decline in secondary offerings. Financial Advisory net revenue grew 56% to $1.20 bln due to an increase in completed mergers and acquisitions. The segment's transaction backlog showed a sequential decrease.

Institutional Client Services net revenue in the quarter increased 2% year/year to $2.43 bln. Fixed Income, Currency, and Commodities Client Execution revenue decreased 18% to $822 mln due to significantly lower revenue in credit products and lower revenue in interest rate products. Revenue in commodities, currencies, and mortgages was little changed. Equities revenue grew 17% year/year to $1.60 bln.

Investing & Lending net revenue decreased 2% to $1.91 bln. Revenue in debt securities and loans grew 23% to $912 mln due to higher net interest income. Equity securities net revenue declined 18% to $994 mln.

Investment management revenue increased 2% to $1.70 bln due to higher incentive fees and transaction revenue. Management and other fees showed little year/year change. Total assets under supervision decreased by $8 bln to $1.54 trillion. Long-term assets under supervision decreased $47 bln, entirely due to net market depreciation.