Goldman Sachs beats by $0.59, beats on revs (157.22)
Reports Q1 (Mar) earnings of $4.02 per share, $0.59 better than the Capital IQ Consensus Estimate of $3.43; revenues fell 7.5% year/year to $9.33 bln vs the $8.74 bln consensus.
- Annualized return on average common shareholders' equity (ROE) was 10.9% for the first quarter of 2014.
- Net revenues in Institutional Client Services were $4.45 billion for the first quarter of 2014, 13% lower than the first quarter of 2013 and 31% higher than the fourth quarter of 2013.
- Net revenues in Fixed Income, Currency and Commodities Client Execution were $2.85 billion, 11% lower than the first quarter of 2013, reflecting significantly lower net revenues in interest rate products, currencies and mortgages, as well as lower net revenues in credit products. These results were partially offset by significantly higher net revenues in commodities compared with the first quarter of 2013. During the quarter, market-making conditions generally improved compared with the fourth quarter of 2013. However, Fixed Income, Currency and Commodities Client Execution continued to operate in a challenging environment and levels of activity generally remained low.
- Net revenues in Equities were $1.60 billion, 17% lower than the first quarter of 2013.
- Net revenues in equities client execution were significantly lower compared with the same prior year period, primarily reflecting the sale of the firm's Americas reinsurance business. In addition, net revenues were significantly lower in both derivatives and, to a lesser extent, cash products.
- Commissions and fees were slightly higher compared with the first quarter of 2013, primarily reflecting an increase in European equity volumes.
- Securities services net revenues were higher compared with the first quarter of 2013, reflecting growth in customer balances.
- During the quarter, Equities experienced challenging market-making conditions, particularly in Japan and certain emerging markets as equity prices declined. The net gain attributable to the impact of changes in the firm's own credit spreads on borrowings for which the fair value option was elected was $15 million (all related to Fixed Income, Currency and Commodities Client Execution) for the first quarter of 2014, compared with a net loss of $77 million for the first quarter of 2013.
- Net revenues in Investing & Lending were $1.53 billion for the first quarter of 2014, 26% lower than both the first quarter of 2013 and the fourth quarter of 2013. Results for the first quarter of 2014 included net gains of $702 million from investments in equities, primarily driven by private equities, principally reflecting company-specific events.
- Net revenues in Investment Management were $1.57 billion for the first quarter of 2014, 20% higher than the first quarter of 2013 and 2% lower than the fourth quarter of 2013. The increase in net revenues compared with the first quarter of 2013 reflected significantly higher incentive fees, as well as higher management and other fees primarily due to higher average assets under supervision.
- Operating expenses were $6.31 billion, 6% lower than the first quarter of 2013 and 21% higher than the fourth quarter of 2013.
- Compensation and Benefits was $4.01 billion for the first quarter of 2014, 8% lower than the first quarter of 2013, reflecting a decrease in net revenues. The ratio of compensation and benefits to net revenues for the first quarter of 2014 was 43.0%, consistent with the first quarter of 2013.
- Non-Compensation Expenses were $2.30 billion, 3% lower than the first quarter of 2013 and 24% lower than the fourth quarter of 2013. The decrease compared with the first quarter of 2013 was due to a decline in insurance reserves, reflecting the sale of the firm's Americas reinsurance business, as well as lower other expenses, primarily due to lower operating expenses related to consolidated investments.
- The first quarter of 2014 included net provisions for litigation and regulatory proceedings of $115 million compared with $110 million for the first quarter of 2013.
- Book value per common share was $154.69 and tangible book value per common share was $145.04, both approximately 1% higher compared with the end of 2013.
- During the quarter, the firm repurchased 10.3 million shares of its common stock at an average cost per share of $166.58, for a total cost of $1.72 billion.
- Tier 1 capital ratio was 16.3% and the firm's Common Equity Tier 1 ratio was 14.6% as of March 31, 2014.
- As of March 31, 2014, the firm's Common Equity Tier 1 ratio computed under this approach was 11.3%.