Goldman delivered a strong 3Q result, with equities trading and investment banking comfortably ahead of expectations, offsetting a softer quarter in fixed income. The key takeaway being that activity levels across equity markets and dealmaking remain healthy despite the higher-rate backdrop.
3Q highlights:
- Revenue: US$18.68bn, up 23% YoY, beating consensus of US$16.83bn by 11%.
- EPS: US$17.01, up 39% YoY, beating consensus of US$12.86 by 32%.
- Net profit: US$5.12bn, beating consensus of US$4bn by 32%.
- Equities trading revenue: US$6.44bn vs US$5.09bn expected.
- FICC trading: US$3.47bn vs US$3.72bn expected.
- Investment banking revenue: US$3.22bn vs US$2.86bn expected.
Equities were the standout, with revenue more than US$1.3bn ahead of consensus, while advisory and both equity and debt underwriting also beat expectations. Asset management remains another bright spot, with the division generating record management fees.
The weak spot was fixed income, particularly rates, mortgages and credit, but the overall earnings mix remains solid. Goldman is benefiting from renewed capital-markets activity and continues to generate very strong returns on equity, although higher compensation costs are following the improved revenue environment. GS is trading on 12.5x vs historical average of 11.6x, and was higher initially, but sold off during the session to close lower. They look heavy here.
