16 Apr

Goldman Sachs’s Q1 Earnings: What You Need to Know

WRITTEN BY Rekha Khandelwal, CFA

Goldman Sachs’ Q1 earnings

Goldman Sachs (GS) reported its first-quarter results yesterday. The stock tanked 3.8% on earnings day. The bank reported revenues of $8.8 billion, missing estimates by 2%. It reported EPS of $5.71, beating estimates of $4.89 per share for the quarter. Goldman Sachs’ EPS, however, fell compared to $6.04 in Q4 of 2018 and $6.95 in Q4 of 2017. Let’s take a deeper look into what caused the fall in Goldman Sachs’ Q1 revenue and earnings.

Goldman Sachs’s Q1 Earnings: What You Need to Know

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Revenue fell across segments

As the above graph shows, Goldman Sachs’ revenue fell year-over-year for its Institutional Client Services, Investing & Lending, and Investment Management segments. Several macro factors affected the bank’s performance during the quarter.

The first factor was lower volatility, resulting in lower trading activity during the quarter. The second factor was lower IPO activity, partly due to the government shutdown and its after-effects on issuer sentiment. The trade war with China and Brexit talks added to the uncertainty as well. The bank expects increased IPO activity in the second quarter and the rest of 2019.

At the Investment Banking segment, lower IPO activity contributed to a 34% year-over-year drop in equity underwriting revenue. In comparison, debt underwriting revenue fell 18% against exceptionally high Q1 2018 revenue.

Institutional Client Services segment’s revenue fell compared to strong Q1 2018 performance. However, the segment’s revenue rose sequentially. Investing & Lending segment’s revenue fell 14% and Investment Management revenue fell 12%.

Reduced expenses

Goldman Sachs reduced its operating expenses by 11% year-over-year. The decrease was driven by lower employee compensation and benefits expenses.

JPMorgan Chase (JPM) reported earnings on April 12, and Citigroup (C) reported on April 15. For the latest earnings coverage on financials stocks, check out Market Realist’s Financials page.

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