Goldman Sachs Crushes First Quarter Estimates on Underwriting, Investment Banking Strength

Goldman Sachs Group GS crushed earnings estimates for the first quarter of 2013 in its release Tuesday morning, showing that it is still the leading global bank. The beat was clear on both the top and bottom line as mergers and acquisitions banking and underwriting services were very strong.

For the first quarter of 2013, Goldman Sachs reported earnings per share of $4.29, above the consensus estimate of $3.84 by a whopping 11.7 percent. Revenue was also strong at $10.09 billion compared to forecasts of $9.6 billion, representing approximately a 5 percent beat.

Goldman noted that, in the quarter, the firm maintained its dominance in global investment banking, ranking first in worldwide mergers and acquisitions to date in terms of number of deals completed. Also, the firm ranked first in worldwide equity offerings in the quarter and debt underwriting revenue rose to a record $694 million.

Also, the strong performance was passed along to shareholders in both higher book values and strong returns on equity. Book value per share and tangible book value per share both increased 3 percent in the quarter to $148.41 and $138.62 respectively. ROE was strong at an annualized rate of 12.4 percent.

Global core excess liquidity, a measure of the firms liquid capital buffer, was strong at $174 billion in the quarter. Also, the Basel I Tier 1 capital ratio was a solid 14.4 percent in the quarter, reflecting revised market risk regulatory capital requirements which became effective on January 1, 2013.

“We are pleased with our performance for the quarter,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “Our strong client franchise across our businesses drove generally solid results. Still, the potential for macro-economic instability was felt in the quarter and constrained overall corporate and investor activity. We continue to be very focused on controlling our costs and efficiently managing our capital.”

Net revenues in Investment Banking were $1.57 billion for the first quarter of 2013, 36% higher than the first quarter of 2012 and 12% higher than the fourth quarter of 2012. Net revenues in Financial Advisory were $484 million, essentially unchanged compared with the first quarter of 2012. Net revenues in the firm's Underwriting business were $1.08 billion, 63% higher than the first quarter of 2012.

Net revenues in Institutional Client Services were $5.14 billion, 10% lower than the first quarter of 2012 and 18% higher than the fourth quarter of 2012. Meanwhile, Fixed Income, Currency and Commodities Client Execution generated net revenues of $3.22 billion, 7% lower than the first quarter of 2012. "Net revenues were lower across most businesses, primarily reflecting significantly lower net revenues in interest rate products compared with a strong first quarter of 2012."

Lastly, Goldman continued to repurchase shares and increased the size of its share buyback program. The Board of Directors authorized the repurchase of an additional 75.0 million shares, or $11.05 billion, of common stock pursuant to the firm's existing share repurchase program. The remaining share authorization under the firm's existing repurchase program, including the newly authorized amount, is 86.4 million shares, or $12.73 billion.

Goldman Sachs shares traded higher in the pre-market following the stronger than expected results. Shares rose 0.57 percent to $147.29, above Monday's closing price of $146.26.