Goldman Sachs Crushes Earnings Estimates

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Goldman Sachs Group Inc. (NYSE: GS) has managed to absolutely crush its earnings expectations for the fourth quarter of 2013. The bulge bracket broker, or the bank holding company without a bank operation, reported that fourth-quarter earnings came in at $2.33 billion, or $4.60 per common share, on net revenues of $8.78 billion. Thomson Reuters had estimates of $4.21 in earnings per share and $7.71 billion in revenue. This also compares to results from a year ago of $5.60 per share and $9.24 billion in revenue.

Goldman Sachs is attributing its client franchise and continued cost discipline in its strength. Highlights in the quarter were as follows:

  • Net revenues in Institutional Client Services were $3.41 billion, 22% lower than the fourth quarter of 2012 and 19% higher than the third quarter of 2013.
  • Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.72 billion, 15% lower than the fourth quarter of 2012, due to significantly lower net revenues in mortgages and interest rate products, currencies and commodities.
  • Net revenues in credit products (including a gain on the sale of European insurance business) were higher compared with the fourth quarter of 2012.
  • Net revenues in equities were down 27% to $1.68 billion due to the sale of the Americas reinsurance business and due to the sale of the firm’s hedge fund administration business.
  • Net revenues in Investing & Lending were $2.06 billion for the fourth quarter of 2013, 4% higher than the fourth quarter of 2012 and 40% higher than the third quarter of 2013.
  • Net revenues in Investment Management were $1.60 billion for the fourth quarter of 2013, 5% higher than the fourth quarter of 2012 and 31% higher than the third quarter of 2013.

For the year, operating expenses and compensation were mixed. Operating expenses were $22.47 billion for 2013, 2% lower than 2012. Compensation and benefits expenses were down 3% in 2013 to $12.61 billion. The compensation and benefits ratio to net revenues for 2013 was 36.9%, down from 37.9% for 2012. Goldman Sachs also said that its total staff increased 2% compared with the end of 2012.

The firm also reported that its Tier 1 capital ratio was 16.7% (up from 16.3% in September) and the Tier 1 common ratio was 14.6% (up from 14.2% in September).

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