Goldman's Profit Falls 21% as Trading Slows -- Update
15 April 2019 - 11:10PM
Dow Jones News
By Liz Hoffman
Goldman Sachs Group Inc.'s first-quarter profit fell 21% from a
year ago as quiet trading and underwriting took a toll across Wall
Street.
Goldman posted a quarterly profit of $2.25 billion, or $5.71 a
share, on revenue of $8.81 billion. Both are lower than a year ago,
when a newly amped-up market generated outsize trading fees.
The bank's profit beat the expectations of analysts polled by
Refinitiv, who predicted $1.97 billion, or $4.89 a share, though
revenue came in lighter than the expected $8.99 billion.
Lower expenses helped close the gap as the bank's new chief
executive, David Solomon, lives up to his reputation as a
cost-cutting operator. Expenses were down 11% from a year ago, led
by a 20% cut in pay and lower brokerage and exchange fees, which
are usually tied to trading activity.
The bank said it would raise its quarterly dividend a nickel to
85 cents. Shares were down 1.7% in premarket trading.
Trading revenue fell 18% to $3.61 billion compared with a
year-ago quarter, in which a suddenly vibrant market spurred
investors off the sidelines. That mirrors a 17% drop at JPMorgan
Chase & Co., which reported quarterly earnings last week.
Without the big consumer business that bolstered JPMorgan's
earnings last week, Goldman is more beholden to its Wall Street
traders and investment bankers to power earnings.
The firm has been investing heavily to change. It is growing a
consumer bank, partnering with Apple Inc. on its first credit card,
raising new investment funds it can collect fees to manage, and
building data services it hopes will lure new types of trading
clients.
Those business, though, "haven't yet hit their stride," Chief
Financial Officer Stephen Scherr said earlier this year. Meanwhile,
they have required more than $1 billion of investment spending, and
investors being asked for patience are looking for signs of
progress.
To that end, Mr. Scherr and his boss, Mr. Solomon, have set a
slew of financial targets and promised regular updates. That kind
of transparency is unusual for Goldman, which historically kept its
cards close and relied on steady profits to placate
shareholders.
One number they are hyping is net interest income, the
difference between what Goldman earns on assets and what it pays on
deposits and other liabilities. A number more traditionally
associated with Main Street lenders such as JPMorgan and Citigroup
Inc., it has been rising at Goldman as the firm leans into lending
and gathers retail deposits. It was $835 million in the first
quarter, up from $550 million a year ago.
Goldman's investment-banking revenue was flat from a year ago at
$1.81 billion. A rise in merger fees helped offset a slowdown in
securities offerings that hit across Wall Street, exacerbated by a
government shutdown that delayed approvals for new issuances.
The firm said its backlog of deals, a closely watched measure of
future fees, continued to fall.
Goldman's money-management unit posted revenue of $1.56 billion,
down from a year ago, while assets it manages or advises on rose to
a record $1.6 trillion, as the market recovered from a
late-December swoon.
The business has focused on high-touch service for big pension
funds and insurance companies, though it also offers a smattering
of low-fee, passive funds and is building a robo-investing service
for individual clients.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
April 15, 2019 08:55 ET (12:55 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From Apr 2024 to May 2024
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From May 2023 to May 2024