9:51 AM, Oct 15, 2019 — Goldman Sachs Group (GS) on Tuesday reported third-quarter results that missed analyst expectations as investment banking revenue fell on lower merger and initial public offering activity.
The New York-based bank reported per-share earnings of $4.79 on a diluted basis for the period ended Sept. 30, down from $6.28 in the prior-year period and below the consensus compiled by Capital IQ for $4.89. Net revenue slid to $8.32 billion from $8.82 billion the year before, and just under the Street’s view for $8.33 billion.
“Our results through the third quarter reflect the underlying strength of our global client franchise and its ability to produce solid results in the context of a mixed operating environment,” said Chief Executive David Solomon. “We continue to execute our strategic priorities, including investing in important growth opportunities in our existing and new businesses and in delivering for our clients in the most efficient and effective manner possible.”
Investment banking revenue fell 15% from the year before to $1.69 billion, pulled down by a 22% drop in financial advisory revenue to $716 million due to a decline in completed mergers and acquisition transactions. Underwriting revenue fell 9% to $971 million, “reflecting a significant decline in industry-wide initial public offerings, and in debt underwriting, reflecting a decrease in industry-wide leveraged finance transactions,” the bank said.
Revenue from Goldman’s institutional client services rose 6% to $3.29 billion as fixed income, currency and commodities client execution added 8% to $1.41 billion on higher revenue from its commodities, credit, mortgages and interest-rate products.
“FICC client execution operated in an environment generally characterized by solid client activity,” Goldman said.
Equities revenue ended 5% higher to $1.88 billion due to higher commissions and fees as the business “operated in an environment generally characterized by lower client activity compared with the second quarter of 2019,” the bank said.
Investing and lending revenue fell 17% as equity securities dropped 40% to $662 million on lower net gains from private equities investments. Debt securities and loans revenue rose 10% to $1.02 billion on “significantly higher net interest income,” Goldman said. Net interest income rose to $1.01 billion from $856 million last year.
Investment management revenue dipped 2% to $1.67 billion on “significantly lower incentive fees,” the bank said. “The decrease was partially offset by higher management and other fees (including the impact of the acquisition of United Capital Financial Partners Inc.), reflecting higher average assets under supervision, partially offset by shifts in the mix of client assets and strategies.”
Total assets under supervision rose $102 billion to $1.76 trillion while long-term assets under supervision rose $85 billion, including net inflows of $69 billion. Provision for credit losses was $291 million, 67% higher from last year.
Operating expenses were unchanged at $5.62 billion while net provisions for litigation and regulatory proceedings dropped to $47 million from $136 million the year before.
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