The Banking and Strategy Initiative

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Bank Results Season: Goldman Sachs earnings jumps to $1.51 B, a RoE jump of 60%

The firm reported a revenue of $8.35B and earnings jump of 60% sequentially to $2.85 per share (diluted) from just $1.78 per share in the June quarter. Earnings estimates for the firm had been billed at below $2 per share as late as end September  after the UBS downgrade in Mid September while the expected EPS was still $2.20 per share and we would have hoped for $2.50 per share minutes ago. The tope end of the estimates beaten the earnings surprise in this announcement is more than the vaunted 50% always a hallmark of Goldman Sachs quarterly announcements, billing a 40% surprise to the analysts waiting for earnigns to come online(released before the press conference later today morning at 7:45 am EDT)

The firm;’s revenues have improved sequentially by more than 25% from $6.6 B to $8.35 B and a jump of over 100% from the disastrous year ago quarter when it reported less than $4 B in revenues but is still below $10 B mark it touched in Q1.

Return on Common Equity has improved from under 5% in Q2 when expectations were low to 8.60 %  for Q3 2012 and 8.8% YTD. The bank leads Dealogic and Mergermarket rankings in Equities and M&A this year again after it lost the Facebook mandate last year

Trading revenues in Institutional Client Services grew 8% sequentially after a dip in the second quarter to $4.18 B while Dealmaking and underwriting revenues improved to $1.16 B helped by improvement in debt fee income this quarter. Fixed Income and Commodities roared back with a 28% increase on year to $2.22 B while Equities were still marginally below $2 B

Proprietary book and Lending income increased steadily at $1.8 B but Operating Expenses increased by 16% sequentially keeping the Compensation Ratio to revenues at 44% at the end of a good qarter. outgoing CFO David Viniar has joined the firm’s Board as a Non independent Director last month while co Head of Global Equities, Harry Schwartz has taken over as CFO. The Comp Expense for the third quarter was $3.68 B

The bank’s Balance sheet was stable at $949 B and common equity at $68.54 B. The bank has outstanding $5 B in preferred Capital and Book Value has improved $5 to $140 per share with tangible Book value and liquidity keeping pace and improving

The Asset management Business has improved AUM by $20 B to $856 B but lower management fees brought down revenues by 10% sequentially. The firm also claims lack of transaction volumes in equities have caused the increase in non operating expenses by 4% to $2.38B




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