How the COVID-19 Economic Trauma Hit Goldman Sachs Earnings

Goldman Sachs Group Inc. (NYSE: GS | GS Price Prediction) reported first-quarter 2020 results before markets opened Wednesday. The investment bank reported diluted quarterly earnings per share (EPS) of $3.11 on net revenue of $8.74 billion. In the same period a year ago, the bank reported EPS of $5.71 on revenue of $8.81 billion. First-quarter results also compare to the consensus estimates for EPS of $3.35 on revenue of $7.92 billion.

First-quarter revenues were up 7% year over year, but diluted EPS were down 46%. Operating expenses rose 10% year over year in the quarter to $6.46 billion, which the bank attributed to significantly higher expenses related to brokerage, clearing, exchange and distribution fees, higher net provisions for litigation and regulatory proceedings, and higher expenses related to consolidated investments

Book value per common share rose by 9% to $228.21, and the annualized return on equity for the quarter came in at 5.7%. Net income fell by 49% to $2.18 billion.

Investment banking revenues rose 6% compared with the first quarter of last year. Fixed income revenues rose 33% year over year to $2.97 billion. Trading revenue was up 22% in the quarter to $2.19 billion. Asset management revenues came in with a loss of $96 million, down from $1.79 billion a year ago. The loss was attributed to an $868 million in net losses in lending and debt investments as credit spreads widened and the COVID-19 outbreak has led to global economic uncertainty.

CEO David M. Solomon commented:

Our quarterly profitability was inevitably affected by the economic dislocation. As public policy measures to stem the pandemic take root, I am firmly convinced that our firm will emerge well-positioned to help our clients and communities recover.

[nativounit]

The bank offered no guidance in its press release, but the consensus estimates call for second-quarter EPS of $2.70 on revenues of $7.83 billion. The EPS estimate for the 2020 fiscal year is $14.10 on revenues of $32.41 billion.

Shares traded down about 1.5% Wednesday morning to $175.61. The 52-week range is $130.85 to $250.46. The consensus 12-month price target was $209.29 before results were announced.

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