Goldman Sachs (GS) Posts Q3 adj.-EPS of $2.64

(Updated - October 15, 2015 7:36 AM EDT)

Goldman Sachs (NYSE: GS) reported Q3 EPS of $2.64, which may not compare with the analyst estimate of $3.00. Revenue for the quarter came in at $6.86 billion versus the consensus estimate of $7.14 billion.

“We experienced lower levels of activity and declining asset prices during the quarter, reflecting renewed concerns about global economic growth,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “We continue to see strong levels of activity in Investment Banking and growth in Investment Management, and looking ahead, are encouraged by the competitive positioning of our global client franchise. Our focus on serving our clients and improving operating leverage puts us in a strong position to generate superior returns for our shareholders.”

• Goldman Sachs ranked first in worldwide announced and completed mergers and acquisitions for the year-to-date, and also ranked first in worldwide equity and equity-related offerings and common stock offerings for the year-to-date. (2)
• Investment Banking produced year-to-date net revenues of $5.48 billion, its highest performance for the first nine months of the year since 2007.
• Investment Management generated year-to-date net revenues of $4.65 billion, a record for the first nine months of the year. Assets under supervision (3) ended the quarter at a record $1.19 trillion, with net inflows in long-term assets under supervision of $41 billion (4) during the quarter.
• Book value per common share and tangible book value per common share (5) of $171.45 and $162.11, respectively, were both 5% higher compared with the end of 2014.
• The firm continues to maintain strong capital ratios and liquidity. As of September 30, 2015, the firm¡¦s Common Equity Tier 1 ratio (6) as computed in accordance with both the Standardized approach and the Basel III Advanced approach was 12.4% (7) and 12.7% (7), respectively. In addition, the firm¡¦s global core liquid assets (3) were $193 billion (7) as of September 30, 2015.

Investment Banking

Net revenues in Investment Banking were $1.56 billion for the third quarter of 2015, 6% higher than the third quarter of 2014 and 23% lower than a strong second quarter of 2015. Net revenues in Financial Advisory were $809 million, 36% higher than the third quarter of 2014, reflecting a significant increase in industry-wide completed mergers and acquisitions. Net revenues in Underwriting were $747 million, 14% lower than the third quarter of 2014, due to significantly lower net revenues in equity underwriting, reflecting a significant decrease in industry-wide activity. This decrease was partially offset by significantly higher net revenues in debt underwriting, reflecting higher net revenues from investment-grade and leveraged finance activity. The firm’s investment banking transaction backlog increased compared with both the end of the second quarter of 2015 and the end of 2014.

Institutional Client Services

Net revenues in Institutional Client Services were $3.21 billion for the third quarter of 2015, 15% lower than the third quarter of 2014 and 11% lower than the second quarter of 2015. Results for the third quarter of 2014 included a gain of $270 million related to the extinguishment of certain of the firm’s junior subordinated debt, of which $157 million was included in Fixed Income, Currency and Commodities Client Execution and $113 million in Equities ($28 million and $85 million included in equities client execution and securities services, respectively).

Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.46 billion for the third quarter of 2015, 33% lower than the third quarter of 2014. Excluding the gain related to the extinguishment of debt, net revenues in Fixed Income, Currency and Commodities Client Execution were 27% lower than the third quarter of 2014, due to significantly lower net revenues in mortgages and, to a lesser extent, currencies and interest rate products. In addition, net revenues in commodities were lower. These decreases were partially offset by higher net revenues in credit products. As compared with the second quarter of 2015, Fixed Income, Currency and Commodities Client Execution operated in an environment characterized by lower levels of client activity and more challenging market-making conditions.

Net revenues in Equities were $1.75 billion for the third quarter of 2015, 9% higher than the third quarter of 2014. Excluding the gain related to the extinguishment of debt, net revenues in Equities were 18% higher than the third quarter of 2014, primarily due to significantly higher net revenues in equities client execution, reflecting significantly higher net revenues in cash products, partially offset by lower net revenues in derivatives. In addition, commissions and fees were higher, reflecting higher volumes in the United States. Excluding the gain related to the extinguishment of debt, securities services net revenues were higher, reflecting the impact of higher average customer balances. As compared with the second quarter of 2015, Equities operated in an environment characterized by a significant decrease in global equity prices and lower client activity levels.

Investing & Lending

Net revenues in Investing & Lending (8) were $670 million for the third quarter of 2015, 60% lower than the third quarter of 2014 and 63% lower than the second quarter of 2015. The decrease in net revenues compared with the third quarter of 2014 was primarily due to a significant decrease in net revenues from investments in equities, as net revenues in public equities were negatively impacted by a significant decrease in global equity prices during the third quarter of 2015. In addition, net revenues in debt securities and loans were significantly lower compared with the third quarter of 2014, reflecting lower net gains from certain investments.

Investment Management

Net revenues in Investment Management were $1.42 billion for the third quarter of 2015, 3% lower than the third quarter of 2014 and 14% lower than the second quarter of 2015. The decrease in net revenues compared with the third quarter of 2014 was due to lower incentive fees, partially offset by higher transaction revenues. During the quarter, total assets under supervision (3) increased $6 billion to $1.19 trillion. Long-term assets under supervision increased $11 billion, including net inflows of $41 billion (4) (which includes $18 billion related to an acquisition), primarily reflecting net inflows in fixed income and equity assets, partially offset by net market depreciation of $30 billion, primarily in equity assets. Liquidity products decreased $5 billion.

For earnings history and earnings-related data on Goldman Sachs (GS) click here.

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