Goldman Sachs smashes earnings estimates

Goldman Sachs Group, Inc. Chairman and Chief Executive Officer Lloyd Blankfein participates in a panel discussion during the White House Summit on Working Families in Washington June 23, 2014.

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Goldman Sachs Group, Inc. Chairman and Chief Executive Officer Lloyd Blankfein participates in a panel discussion during the White House Summit on Working Families in Washington June 23, 2014.
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Jonathan Ernst/Reuters

Goldman Sachs reported third-quarter earnings results Tuesday, posting earnings per share of $5.02, way ahead of the $4.19 number expected by analysts.

“Our overall performance this year has been solid and provides a good foundation on which to execute and deliver our growth initiatives,” said Lloyd Blankfein, chairman and chief executive officer.

The biggest driver of the beat was a surge in investing and lending revenue.

“I&L was far and away the biggest driver of the quarter’s revenue upside,” Credit Suisse analysts said in a note after the results.

Here are the key figures:

    Revenues: $8.3 billion, above the $7.5 billion expected. Net income: $2.1 billion, higher than the $1.7 billion expected. Investing and lending had its best performance in three years, with $1.9 billion in revenues, up 35% year-on-year. That was driven by gains from investments in private equities, which Goldman said were “positively impacted by corporate performance and company-specific events.” Investment banking revenues were $1.8 billion, up quarter-on-quarter and year-on-year. Institutional client services, which can be thought of as the sales and trading business, had $3.1 billion in revenues, up quarter-on-quarter, but still down year-on-year.

Goldman Sachs took a hit to its trading business, as expected. The bank saw a 26% year-on-year decline in fixed income, currency and commodity revenues, to $1.45 billion. That was comparable with the drop at the likes of Bank of America (-22%) and JPMorgan (-27%).

“Although market-making conditions improved in most businesses compared with the second quarter of 2017, Fixed Income, Currency and Commodities Client Execution continued to operate in a challenging environment characterized by low levels of volatility and low client activity,” the bank said in a statement.

Still, third quarter FICC revenues were an improvement on the terrible second quarter.

Here’s a breakdown of Goldman’s FICC revenue in recent quarters:

    Q3 2017 – $1.45 billion Q2 2017 – $1.16 billion Q1 2017 – $1.685 billion Q4 2016 – $2 billion Q3 2016 – $1.96 billion Q2 2016 – $1.93 billion Q1 2016 – $1.66 billion Q4 2015 – $1.12 billion