Goldman Sachs Q2 profits beat Street estimates on better-than-expected fixed income

July 15, 2024 05:35 AM PDT | By Invezz

Goldman Sachs Q2 profits beat Street estimates on better-than-expected fixed income — Image source: Invezz

Goldman Sachs Q2 earnings snapshot

Goldman Sachs’ profit surged by 150% from the same quarter last year, reaching $3.04 billion or $8.62 per share.

This notable increase was partly due to the absence of write-downs that had previously impacted the bank’s performance, including those related to commercial real estate and the sale of a consumer business.

Analysts, in comparison, were at $8.34 per share and $12.46 billion, respectively. David Solomon – the chief executive of GS said in a press release today:

Our One Goldman Sachs operating approach is allowing us to bring the whole firm to our clients, deepening our relationships and serving them in an improving, but complex environment

The multinational reported $10.9 billion in revenue and $1.22 billion of net income in the same quarter last year.

What drove strength in GS Q2 financial results

Goldman Sachs ended its recent quarter with $184 billion of loans and $433 billion of deposits.

The New York listed giant had $2.24 billion in net interest income in its fiscal Q2 – up 33% on a year-over-year basis. According to CEO David Solomon:

We are pleased with our solid second quarter results and our overall performance in the first half of the year, reflecting strong year-on-year growth in both Global Banking & Markets and Asset & Wealth Management

Shares of Goldman Sachs Group Inc are now trading near their all-time high. They are currently priced at close to 3.5 times their low during the pandemic in 2020.

What else was noteworthy in Goldman Sachs release

A particularly bright spot for Goldman Sachs in its second fiscal quarter was fixed-income that went up 17% year-on-year and topped expectations by some $220 million.

Investment banking brought in $1.73 billion for the Wall Street bank in its recently concluded quarter – a significant increase from $1.43 billion a year ago. Annualised return on equity (ROE) stood at 10.9% in Q2, as per the press release on Monday.

Earlier in July, Jim Mitchell of Seaport Research Partners downgraded Goldman Sachs stock to “neutral” citing overvaluation.

Previously, our Buy was predicated on GS’s heavily discounted valuation, above-average leverage to a capital markets recovery, and underappreciated benefits from simplifying its business model.

Book value of Goldman Sachs on a per-share basis is currently $327.

Investment banking performance and competitive landscape

While Goldman Sachs’ investment banking division reported a 21% increase in fees to $1.73 billion, it fell slightly short of the $1.8 billion StreetAccount estimate.

The discrepancy was mainly due to lower-than-expected advisory fees, which totalled $688 million compared to the anticipated $757.3 million.

Despite the shortfall, Goldman’s 21% increase in investment banking fees was significant, though it paled in comparison to the over 50% increases reported by rivals JPMorgan Chase and Citigroup.

JPMorgan, in particular, highlighted a surge in activity towards the end of the quarter as a factor in its strong performance.

Goldman’s performance in investment banking was notable but did not match the explosive growth seen by some of its competitors. JPMorgan Chase and Citigroup both exceeded expectations in investment banking fees and equities trading.

JPMorgan cited a significant uptick in deal-making activity towards the end of the period, which contributed to its exceptional results.

This competitive context highlights the varying dynamics within the investment banking sector, where Goldman Sachs continues to play a leading role but faces strong competition from other major financial institutions.

The post Goldman Sachs Q2 profits beat Street estimates on better-than-expected fixed income appeared first on Invezz

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