The Goldman Sachs Group Inc (GS) Q3 2024 Earnings Call Highlights: Strong Revenue Growth and ...
Net Revenues: $12.7 billion, up 7% year-over-year.
Earnings Per Share (EPS): $8.40, up 54% year-over-year.
Return on Equity (ROE): 10.4%.
Return on Tangible Equity (RoTE): 11.1%.
Global Banking & Markets Revenues: $8.6 billion.
Advisory Revenues: $875 million.
Equity Underwriting Revenues: $385 million, up 25% year-over-year.
Debt Underwriting Revenues: $605 million, up 46% year-over-year.
FICC Net Revenues: $3 billion.
Equities Net Revenues: $3.5 billion, up 18% year-over-year.
Asset & Wealth Management Revenues: $3.8 billion, up 16% year-over-year.
Assets Under Supervision: $3.1 trillion.
Net Interest Income: $2.6 billion.
Provision for Credit Losses: $397 million.
Total Operating Expenses: $8.3 billion.
Common Equity Tier 1 Ratio: 14.6%.
Capital Returned to Shareholders: $2 billion.
Release Date: October 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
The Goldman Sachs Group Inc (NYSE:GS) reported net revenues of $12.7 billion for the third quarter, up 7% year-over-year.
Earnings per share increased by 54% year-over-year to $8.40.
Assets under supervision reached a record $3.1 trillion, marking the 27th consecutive quarter of long-term net inflows.
The company achieved record financing revenues in FICC and strong performance in equities, demonstrating robust client engagement.
The Asset & Wealth Management segment saw revenues rise by 16% year-over-year, with management and other fees reaching a new record.
Negative Points
The narrowing of the consumer footprint reduced the company's ROE by 80 basis points.
Equity underwriting revenues, while improved, are still below longer-term averages.
The company continues to face regulatory uncertainties, particularly concerning Basel III revisions.
The consumer business remains a drag on overall performance, with ongoing operating losses expected until the transition of the GM card platform is completed.
The investment banking segment, despite improvements, is still operating below 10-year averages in M&A and equity volumes.
Q & A Highlights
Q: The trading business has been performing well, but how does the regulatory perception of trading impact your operations? A: David Solomon, Chairman and CEO, explained that while regulatory environments change, Goldman Sachs adapts effectively. The firm has invested in its markets business, which includes fixed income and equities, to make it more durable. The focus on financing has added stability, and the business is positioned to grow with global market cap expansion.
Q: How do you view the competitive threat from non-bank trading venues in fixed income markets? A: David Solomon noted that while there is competition, Goldman Sachs offers integrated services across all client needs, which is crucial for maintaining client relationships. The firm has a strong equity business despite competition and digitization, and it remains a leading liquidity provider and financier.
Q: What are the key steps for Goldman Sachs to achieve a 15% ROE? A: David Solomon highlighted the need for continued execution in Global Banking and Markets, improvement in Asset & Wealth Management margins and returns, and narrowing the consumer footprint. These steps, along with potential tailwinds in investment banking, are expected to drive mid-teens returns.
Q: How is Goldman Sachs addressing the competitive landscape in trading, and are you seeing increased competition? A: David Solomon stated that while market shares fluctuate, Goldman Sachs maintains a leading position. The firm focuses on top clients and benefits from a strong M&A environment. The competitive landscape is always evolving, but Goldman Sachs is well-positioned with deep client relationships.
Q: Can you discuss the strategy for expanding loan offerings in Asset & Wealth Management and its impact on RWA? A: Dennis Coleman, CFO, explained that the strategy involves shifting from high-density historical principal investments to lower-density lending, which is more capital efficient. This shift supports the holistic coverage of clients and improves capital efficiency.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.