Published: Tue, July 16, 2019
Markets | By Otis Pena

Despite Earnings Beat, Are There Growth Concerns at Goldman Sachs?

Despite Earnings Beat, Are There Growth Concerns at Goldman Sachs?

Goldman Sachs Group Inc (GS.N) reported a higher-than-expected quarterly profit on Tuesday as the Wall Street investment bank benefited from higher equities trading revenues.

Shares of Goldman Sachs closed Monday at $211.58, in a 52-week range of $151.70 to $245.08.

Taking an even closer look, the net revenues for the FICC Client Execution were $1.47 billion.

Solomon elaborated on this during a conference call with analysts Tuesday, saying that the firm still expects the USA economy to grow 2.5% this year and that the global economy will rise 3.4% - despite "subdued" growth in Europe.

Goldman is shifting the focus of its business model away from trading to a more stable, consumer-oriented revenue stream.

The results are among the first from large banks against a backdrop of uncertainty over worldwide trade and an anticipated loosening of monetary policy, with the Federal Reserve expected to cut interest rates later this month. The exam was easier on capital-markets businesses than in previous years, allowing the firm to increase dividends and share repurchases.

Institutional client revenue, which includes trading, slipped 3%, while investment banking revenue was down 9%.

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"We're encouraged by the results for the first half of the year", Chief Executive Officer David Solomon said in a statement.

The business also recently disclosed a quarterly dividend, which was paid on Monday, July 15th. Total operating expenses were almost flat at $6.12 billion.

While the final strategy is not expected until early next year, the bank has already made moves to expand its consumer division, by growing online bank Marcus and launching a credit card with Apple Inc.

It is aiming to generate $5 billion in new revenue by 2020.

Goldman Sachs BDC (NYSE:GSBD) last issued its quarterly earnings results on Thursday, May 9th. Banks can not announce dividend increases or new plans to buy back stock unless the Fed gives their capital plans a green light.

Goldman Sachs on July 16 reported net income of $2.4 billion for the second quarter of 2019, equating to diluted earnings of $5.81 per share, nearly 3% less than the previous year but higher than analyst forecasts of $4.91, according to data from Refinitiv. During the same quarter in the prior year, the firm posted $6.95 earnings per share. Northern Oak Wealth Management Inc. lifted its position in shares of Goldman Sachs BDC by 5.0% during the 4th quarter.

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