Goldman Sachs: Lot of Headwinds but Generally Impressive Quarterly Results

Goldman Sachs (GS) reported an overall impressive Q1 2022 earnings report in a very difficult environment. The bank trades at a significant discount on a P/E and P/B basis with its peers.

The bank's Q1 earnings generally topped Wall Street expectations, however its revenues tangibly declined. Having said that, a surge in its Global Markets business helped make up for lower underwriting revenue caused by a volatile market as other divisions including IB, somewhat disappointed. Among other segments, the Consumer & Wealth Management businesses also improved, while Asset Management revenue declined QoQ.

In terms of earnings, Q1 GAAP EPS came in at $10.76 vs. the consensus estimate of $8.98 falling from $10.81 in Q4 2021 and $18.60 in Q1 2021. Total net revenue of $12.9 billion vs. $12.6 billion in the previous quarter and $17.7 billion in the year-ago quarter. Total operating expenses of $7.72 billion rose from $7.27B in the previous quarter and fell from $9.44 billion in the year-ago quarter.

Goldman Sachs' (GS) Investment Banking revenue of $2.41 billion, down 36% from both Q4 and Q1 2021 on significantly lower revenue from underwriting.

Global Markets net revenue of $7.87 billion rose 98% Q/Q and 4% YoY, with FICC revenue of $4.72 billion rising 21% YoY and Equities revenue of $3.15 billion falling 15% YoY.

The Global Markets Division posted net revenue of $7.87 billion for the quarter, reflecting strong performance in equities, fixed income, FX and commodities, including record net earnings in this segment. Wealth Management generated a record quarterly net revenue of $2.10 billion, reflecting the company's growth in both asset management and customer banking.

The enterprise value of the entire company amounted to $2.39 trillion, while the book value of GS’s common share increased by 3.1% during the quarter to $293.31.

Bottom line: it was a worrisome quarter in geopolitical terms. The rapidly changing market environment has had a significant impact on client activity as deep risk management has come to the fore and listings of new companies have virtually ceased. Despite all the drawbacks, the results of the financial group for the quarter showed all strategic goals were met. Record revenues by most departments – as well as record net profits for some of them – served as a confirmation of these statements.