New York City, USA : Group, Inc. (GS) reported a better-than-expected quarterly profit on Tuesday, driven by its equities trading and investment banking businesses that offset weakness in bond trading.
The bank said fixed income, currency and commodity trading revenue fell 10 percent to $1.31 billion.
Goldman Sachs reported earnings per common share of $6.28 for the third quarter of 2018 compared to $5.02 for the third quarter of 2017. On average analysts expected the company to report profit per share of $5.38 for the quarter. Analysts’ estimates typically exclude special items. Net earnings applicable to common shareholders rose 21% year-over-year to $2.45 billion.
Net revenues were $8.65 billion for the third quarter of 2018, 4% higher than the third quarter of 2017. The company said the increase compared with the third quarter of 2017 reflected higher net revenues in Investment Banking and Investment Management. Analysts expected revenue of $8.38 billion for the quarter.
Net revenues in Investment Banking were $1.98 billion for the third quarter of 2018, 10% higher than the third quarter of 2017. Net revenues in Investment Management were $1.70 billion, 12% higher than previous year.
Operating expenses were $5.57 billion for the third quarter of 2018, 4% higher than the third quarter of 2017. The company said the increase compared with the third quarter of 2017 was due to higher non-compensation expenses, partially offset by slightly lower compensation and benefits expenses.
“We delivered solid results in the third quarter driven by contributions from across our diversified client franchise. Year-to-date earnings per share is the highest in our history and year-to-date return on equity is the highest in nine years, notwithstanding our continued investment in growth opportunities. We remain well positioned to continue delivering for our clients and shareholders,” said David Solomon, CEO.
This is Goldman’s last quarterly results under Lloyd Blankfein, who led the company as chief executive for 12 years before handing over the reins to David Solomon in October.
Annualized return on average common shareholders’ equity (ROE) was 13.1% for the third quarter of 2018. Annualized return on average tangible common shareholders’ equity (ROTE) was 13.8% for the third quarter of 2018.
Total shareholders’ equity was $86.76 billion (common shareholders’ equity of $75.56 billion and preferred stock of $11.20 billion) as of September 30, 2018. Book value per common share was $197.33 and tangible book value per common share was $186.62, as of September 30, 2018.
Goldman is typically more sensitive to swings in market volatility than its peers because its large trading business overshadows its other banking units.
Revenue from equities trading rose 8 percent to $1.79 billion. At Morgan Stanley (MS.N) Goldman’s traditional rival, revenue from equity trading rose 6 percent, while bond trading rose marginally.