Goldman Q1 Earnings Beat Estimates, Revenues Rise Y/Y

The Goldman Sachs Group, Inc.'s GS first-quarter 2024 earnings per share of $11.58 surpassed the Zacks Consensus Estimate of $8.54. Also, the bottom line increased 16.3% from the year-earlier quarter.
Shares of the company gained 4.02% in the pre-market trading on an earnings beat. Investors seem to be bullish on the stock because of higher revenues reported in the quarter.
Goldman's results have benefited from the strength in the consumer banking and investment banking business, along with improved fee income. However, increased expenses and provisions were the undermining factors.
Net earnings of $4.13 billion rose 27.8% from the prior-year quarter. Our estimate for the metric was pegged at $2.96 billion.

Quarterly Revenues Increase

Net revenues for the quarter of $14.21 billion increased 16.3% from the year-ago quarter. Also, the top line surpassed the Zacks Consensus Estimate of $12.89 billion.
Total operating expenses increased 3% year over year to $8.66 billion. Our estimate for the metric was pinned at $9.12 billion. The year-over-year rise in expenses was mainly due to increased compensation and benefit costs, along with higher transaction-related costs, as well as incremental expenses for the FDIC special assessment fee. This was partially offset by lower impairments related to consolidated real estate investments.
Provision for credit losses was $318 million against a net provision benefit of $171 million in the first quarter of 2023.

Quarterly Segmental Performance Improves

The Asset & Wealth Management division generated revenues of $3.79 billion in the reported quarter, up 17.8% year over year. Our estimate for the metric was pegged at $4.04 billion. The improvement was driven by higher management and incentive fees, equity investments and a rise in revenues from private banking and lending.
Firmwide assets under supervision were a record $2.85 trillion, up from $2.67 trillion reported in the prior quarter.
The Global Banking & Markets division has recorded revenues of $9.73 billion, which increased 15.2% year over year. Our estimate for the metric was $7.83 billion. The improvement was due to an increase in the investment banking business (up 12%), higher revenues in FICC (up 10%), along with a rise in equities revenues (up 10%).
The Platform Solutions division's revenues were $698 million, up 23.8% year over year. Our estimate for the metric was $1.13 billion. The jump was driven by higher revenues from consumer platforms.

Capital Ratios: Mixed Bag

As of Mar 31, 2024, the standardized Common Equity Tier 1 capital ratio was 14.7%, up 14.4% on a sequential basis. The company's supplementary leverage ratio was 5.4%, down from the previous quarter's 5.8%.

Capital Deployment Update

In the first quarter of 2024, Goldman returned $2.43 billion of capital to common shareholders. This included $1.50 billion in share repurchases and common stock dividends of $929 million.

Our View

While Goldman's well-diversified business will ensure earnings stability going forward, macroeconomic uncertainty and recessionary fears will likely weigh on its financial performance. Strength in the consumer banking and investment banking business is a tailwind. Active client engagement, and a solid position in announced and completed mergers and acquisitions globally are likely to act as tailwinds. However, increased expenses and provisions remain a concern.

The Goldman Sachs Group, Inc. Price, Consensus and EPS Surprise

 

The Goldman Sachs Group, Inc. price-consensus-eps-surprise-chart | The Goldman Sachs Group, Inc. Quote

Currently, Goldman carries a Zacks Rank #3 (Hold).

Performance of Other Big Banks

Citigroup Inc.'s C first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter.
Citigroup witnessed declines in total loans and deposits in the quarter. Also, a decline in revenues and deteriorating credit quality are near-term woes.
Wells Fargo & Company's WFC first-quarter 2024 adjusted earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.10. The adjusted figure excludes the impacts of expenses from the FDIC special assessment. In the prior-year quarter, the company reported earnings per share of $1.23.
WFC's results benefited from higher non-interest income. An improvement in capital ratios and a decline in provisions were other positives. However, the decrease in net interest income and loan balances and an increase in expenses were the undermining factors.

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