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Goldman Sachs Signals Growth Concerns in 2017

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Goldman Sachs Signals Growth Concerns in 2017 PART 1 OF 5

Goldman Sachs Fell 4.7% on This

Earnings review

Goldman Sachs (GS) reported 1Q17 EPS (earnings per share) of $5.15, which was lower than consensus estimates of $5.31 and higher than its 1Q16 EPS of $2.68. The earnings were lower than estimated, mainly due to a surprise 2% decline in trading revenues, as compared to the strong trading revenue growth among commercial banking (XLF) peers Citigroup (C), Bank of America (BAC), and J.P. Morgan (JPM).

GS posted revenues of $8.03 billion, as compared to $6.34 billion in 1Q16, and the stock fell 4.7% on these results, mainly due to a surprise drop in trading revenues, which is usually a strong area of operations for the company.

Goldman Sachs Fell 4.7% on This

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Mixed operating environment

Chair and CEO (chief executive officer) Lloyd Blankfein stated the following in the earnings release: “The operating environment was mixed, with client activity challenged in certain market-making businesses and a more attractive backdrop for underwriting in our investment banking franchise. As the economy improves, we are well positioned to not only meet our clients’ diverse needs but also to generate operating leverage for our shareholders.”

Goldman Sachs managed an annualized return on equity of 11.4% in 1Q17. The company did well in M&As (mergers and acquisitions) as well and ranked number one in equity-related offerings on a year-to-date basis. Its common equity tier-1 ratio on standardized and Basel III approaches stayed healthy at 14.2% and 12.9%, respectively.

In the subsequent parts of this series, we’ll analyze the performance of GS’s divisions, operating margins, outlook, dividends, and valuations in 2017.

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