Trading Revenues Continue to Drag on Goldman Sachs Earnings

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Goldman Sachs Group Inc. (NYSE: GS) reported third-quarter 2017 results before markets opened Tuesday morning. The investment bank reported diluted quarterly earnings per share (EPS) of $5.02 on net revenue of $8.33 billion. In the same period a year ago, the bank reported EPS of $4.88 on revenue of $8.17 billion. Third-quarter results also compare to the consensus estimates for EPS of $4.17 on revenue of $7.54 billion.

Trading revenues fell 7% from $1.78 billion to $1.67 billion. Net revenues in Fixed Income, Currency and Commodities Client Execution (bond trading) were $1.45 billion for the second quarter of 2017, 26% lower than the third quarter of 2016, due to significantly lower net revenues in commodities, interest rate products and credit products and lower net revenues in currencies, partially offset by higher net revenues in mortgages. Goldman noted that the group operated in a challenging environment of low volatility and low client activity.

Book value per common share rose by 1.8% year over year to $190.73.

In the bank’s investment management group, assets under supervision increased by $50 billion from a year ago to $1.46 trillion. Long-term assets under supervision increased by $36 billion, including net market appreciation of $23 billion, primarily in equity and fixed income assets, and net inflows of $13 billion, reflecting inflows in fixed income assets. Liquidity products increased by $14 billion.

Investment banking revenues rose 17% to $1.8 billion.

Operating expenses totaled $5.35 billion, essentially unchanged both sequentially and year over year. Compensation expenses remained essentially unchanged as well at $3.17 billion, and non-compensation expenses came in 4% higher at $2.18 billion.

During the quarter, Goldman repurchased 9.6 million shares of its common stock at an average cost per share of $225.12, for a total cost of $2.17 billion.

Bank CEO Lloyd Blankfein said:

Our overall performance this year has been solid and provides a good foundation on which to execute and deliver our growth initiatives.

The bank did not offer guidance in its press release, but the consensus estimates call for fourth-quarter EPS of $5.02 on revenues of $7.67 billion. The EPS estimate for the 2017 fiscal year is $18.19, on revenues of $31.08 billion.

Shares traded down about 1.2% shortly after the opening bell to $239.09. The current 52-week range is $171.10 to $255.15. The consensus 12-month price target was $241.96 before results were announced this morning.