Goldman Sachs is trading 1.7% lower in pre-market trading as investors digest a mixed set of results.
EPS -24% to $4.69 vs $5.20 exp.
Revenue +23% to $9.96 billion vs $8.601 billion
Investment banking revenue dropped 6% to $2.06 billion
Fixed income trading jumped 63% to $1.77 billion.
Equity trading climbed 12% to $1.71 billion.
Goldman Sachs beat expectations on revenue, but quarterly profits were stung by a $1.1 billion litigation charge. This is the second straight quarter in which Goldman Sachs missed expectations. The bank has not said what the legal provisions related to but are most likely related to the final negotiations over 1MDB money laundering and bribery scandal.
Goldman Sachs results are in stark contrast to peer JP Morgan chase which posted record profits not only for the quarter but also for the year 2019.
Whilst the fixed income revenue at GS was a standout performer, investment banking was the worst performing division, dropping 6% year on year compared to a 6% increase at JP Morgan Chase.
Goldman’s is trying to diversify by launching a credit card, building a retail brokerage and commercial banking arm. As is common with new initiatives it is losing money so far. $1.3 billion has been invested into its consumer efforts, which are right now nothing more than a drag on profit. Going forwards the plan is Goldman Sachs will be more diversified and better able to weather tough conditions.
The results will pile pressure on David Solomon ahead of Goldman Sachs first ever investors day, due to be held in 2 weeks. Here David Solomon will need to convince investors that he and his team have found a way to improve returns at Goldman Sachs.
Goldman Sachs rallied 37% across the previous year, reaching an all time high $248.49 in the previous session. Whist the share price has dropped away from the high, trading 1% lower, it remains firmly above its 50, 100 and 200 sma. It has now fallen out of over bought territory on the RSI.
Immediate resistance can be seen at 248.49 high previous session. Meanwhile a break below $232 could open the door to further losses.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.