Goldman Sachs Earnings Still Bedeviled by Fixed Income Declines

Goldman Sachs Group Inc. (NYSE: GS) reported third-quarter 2018 results before markets opened Tuesday morning. The investment bank posted diluted earnings per share (EPS) of $6.28 on net revenue of $8.65 billion. In the same period a year ago, the bank reported EPS of $5.02 on revenue of $8.33 billion. Third-quarter results also compare to the consensus estimates for $5.38 in EPS on revenue of $8.38 billion.

Book value per common share has increased by 9% for the year to date to $197.33 and annualized return on equity was 13.7%, the highest nine-month level in nine years. Net income rose by 19% from $2.13 billion in the same period last year to $2.52 billion.

Revenues were higher in two of the bank’s business lines. Fixed income revenues fell 10% due to significantly lower net revenues in interest rate products and lower net revenues in credit products and mortgages, partially offset by higher net revenues in commodities and currencies.

The firm’s effective tax rate dipped from 19.4% in the first half of the year to 19.0% in the first nine months of 2018. The bank’s provision for taxes fell 35% year over year in the quarter from $848 million to $554 million.

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Goldman’s newly minted CEO David M. Solomon said:

We delivered solid results in the third quarter driven by contributions from across our diversified client franchise. Year-to-date earnings per share is the highest in our history and year-to-date return on equity is the highest in nine years, notwithstanding our continued investment in growth opportunities. We remain well positioned to continue delivering for our clients and shareholders

The bank did not offer guidance in its press release, but the consensus estimates call for fourth-quarter EPS of $6.40 on revenues of $8.62 billion. The EPS estimate for the 2018 fiscal year is $24.69 on revenues of $36.4 billion.

Shares traded up about 1.4% in the premarket Tuesday to $218.24, after closing on Monday at $215.22. The current 52-week trading range is $210.95 to $275.31. The consensus 12-month price target was $275.78 before results were announced this morning.

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