Goldman Sachs' Revenue Disappointment: $470M Hit on Marcus Loans Sends Shockwaves! 😮

 KEY POINTS

• Here’s what the company reported: Earnings of $8.79 a share vs. $8.10 estimate
• Revenue of $12.22 billion vs. $12.79 billion
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Summarized ARTICLE:

Goldman Sachs reported lower-than-expected first-quarter revenue due to a $470 million loss associated with the sale of consumer loans. The bank's earnings per share of $8.79 beat estimates, but companywide revenue fell 5% to $12.22 billion, missing expectations. The decline in revenue was attributed to weaker-than-expected bond trading and asset and wealth management results, as well as the consumer loan hit. Goldman's reliance on Wall Street activities for revenue, such as trading and investment banking, was highlighted as a potential risk during a turbulent quarter in which some of its rivals outperformed. Analysts are also closely monitoring Goldman's consumer banking for potential further unwinding or strategic alternatives.

full article 

• Goldman Sachs reported first-quarter results on Tuesday that fell short of analysts' expectations for revenue, largely due to a $470 million loss tied to the sale of consumer loans. The bank's earnings per share came in at $8.79, beating the estimate of $8.10 from Refinitiv, but its revenue of $12.22 billion fell short of the expected $12.79 billion.

  Goldman's earnings were down 18% to $3.23 billion, or $8.79 per share, but this beat was partially driven by the sale of loans, which allowed the bank to release $440 million in reserves for loan losses, adding approximately $1.20 per share to earnings, according to Wells Fargo analyst Mike Mayo.

  Companywide revenue declined by 5% to $12.22 billion, below estimates, due to the impact of the consumer loan loss and weaker-than-expected results in bond trading and asset and wealth management.

  Goldman Sachs, unlike its more diversified competitors, relies heavily on Wall Street activities such as trading and investment banking for its revenue. However, its traders did not perform as well in the first quarter compared to other banks like JPMorgan Chase and Citigroup, which beat estimates partly due to better-than-expected fixed income trading.

  Goldman's fixed income trading revenue fell 17% to $3.93 billion, below StreetAccount estimate, due to lower activity in currencies and commodities. Equities trading revenue slipped 7% to $3.02 billion, slightly exceeding the estimated $2.9 billion.

  Although investment banking revenue remained weak, declining 26% from the previous year to $1.58 billion, it was better than the estimated $1.44 billion.

  Goldman's results highlight its dependence on the performance of Wall Street, with both trading and investment banking showing declines compared to the previous year, leaving few options for revenue growth. The bank's combined trading and advisory revenue decline was noted as a "worst in class" drop of 16% by analyst Mike Mayo.

  Another closely watched metric, the bank's return on tangible equity, was 12.6% in the first quarter on an annualized basis, below its longer-term target of 15% to 17% returns.

  Goldman's other units had mixed results, with its asset and wealth management division posting a 24% increase in revenue from the previous year to $3.22 billion, falling short of the estimated $3.7 billion. However, its platform solutions business generated $564 million in revenue, a 110% increase from the previous year, surpassing the estimated $535.1 million.

  Analysts are expected to inquire about Goldman's consumer banking strategy, which has faced losses and management turnover, and the potential unwinding of its consumer platforms business, including the recent acquisition of GreenSky or credit card partnerships with companies like Apple. Additionally, details about Goldman's involvement in helping Apple offer new savings accounts with higher interest rates compared to its own Marcus product may also be sought after.

  Goldman Sachs shares have declined 1.1% year-to-date before the earnings report, which is a better performance compared to the nearly 17% decline of the KBW Bank Index. Other major banks such as Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo have reported better-than-expected profits amid rising interest rates, with Morgan Stanley scheduled to release its results on Wednesday. The story is still developing, and updates may be expected.