Goldman Sachs beats by $0.45, misses on revs; raises dividend
Reports Q3 (Sep) earnings of $2.88 per share, $0.45 better than the Capital IQ Consensus Estimate of $2.43; revenues fell 19.5% year/year to $6.72 bln vs the $7.23 bln consensus.
Investment Banking •Net revenues in Investment Banking were $1.17 billion, essentially unchanged compared with the third quarter of 2012 and 25% lower than the second quarter of 2013. Net revenues in Financial Advisory were $423 million, 17% lower than the third quarter of 2012, reflecting a decrease in industry-wide completed mergers and acquisitions. Net revenues in the firm's Underwriting business were $743 million, 13% higher than the third quarter of 2012. This increase reflected significantly higher net revenues in equity underwriting, primarily due to higher net revenues from initial public offerings. Net revenues in debt underwriting were essentially unchanged compared with the third quarter of 2012. The firm's investment banking transaction backlog increased significantly compared with the end of the second quarter. Institutional Client Services • Net revenues in Institutional Client Services were $2.86 billion, 32% lower than the third quarter of 2012 and 34% lower than the second quarter of 2013. Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.25 billion, 44% lower than the third quarter of 2012, reflecting significantly lower net revenues in mortgages and interest rate products, as well as in currencies. In addition, net revenues in credit products were lower, while net revenues in commodities were higher compared with the third quarter of 2012. •Net revenues in Equities were $1.62 billion, 18% lower than the third quarter of 2012, primarily due to the sale of the firm's Americas reinsurance business. Net revenues in equities client execution and commissions and fees were both essentially unchanged compared with the third quarter of 2012. In addition, securities services net revenues were lower compared with the third quarter of 2012, primarily due to the sale of the firm's hedge fund administration business in 2012. Expenses •Operating expenses were $4.56 billion, 25% lower than the third quarter of 2012 and 24% lower than the second quarter of 2013. •Compensation and Benefits The accrual for compensation and benefits expenses was $2.38 billion for the third quarter of 2013, 35% lower than the third quarter of 2012. The ratio of compensation and benefits to net revenues for the first nine months of 2013 was 41.0%, compared with 43.0% for the first six months of 2013 and 44.0% for the first nine months of 2012. •Non-compensation expenses were $2.17 billion, 9% lower than the third quarter of 2012 and 4% lower than the second quarter of 2013. The decrease compared with the third quarter of 2012 included a decline in insurance reserves, reflecting the sale of the firm's Americas reinsurance business, and lower depreciation and amortization expense, primarily reflecting lower expenses related to consolidated investments. These decreases were partially offset by increased net provisions for litigation and regulatory proceedings and higher brokerage, clearing, exchange and distribution fees. The third quarter of 2013 included net provisions for litigation and regulatory proceedings of $142 million. Capital •Book value per common share was $153.58 and tangible book value per common share was $143.86, both approximately 2% higher compared with the end of the second quarter of 2013. Book value and tangible book value per common share are based on common shares outstanding, including restricted stock units granted to employees with no future service requirements, of 458.5 million as of September 30, 2013. Under the regulatory capital requirements currently applicable to bank holding companies, the firm's Tier 1 capital ratio was 16.3% and the firm's Tier 1 common ratio was 14.2% as of September 30, 2013, up from 15.6% and 13.5%, respectively, as of June 30, 2013. Level 3 assets were $42 billion as of September 30, 2013, compared with $43 billion as of June 30, 2013, and represented 4.5% of total assets. •The Board of Directors of The Goldman Sachs Group, Inc. increased the firm's quarterly dividend to $0.55 per common share from $0.50 per common share.