By
Bhushan Akolkar
April 12th, 2024
Goldman Sachs is considering merging both the investment banking divisions as well as the trading unit together to form just three major units moving forward.
American multinational investment banking giant Goldman Sachs Group Inc (NYSE: GS) has released its third quarter (Q3) earnings today as global deal-making has slowed. The banking behemoth has had it rough this year with some of its core units underperforming, but nonetheless, the firm topped analysts’ expectations.
Ahead of the release of the official result, Wall Street has expressed pessimism and gave a lower projection on its core banking units. Per the results released, Goldman Sachs posted $8.25 as its Earnings Per Share for the quarter against the $7.69 per share projected by analysts by Refinitiv.
The company also did better than expected in its overall revenue for the quarter which came in at $11.98 billion as against the $11.41 billion that analysts projected. According to Wall Street expectations, trading revenue including Fixed Income and Equities were supposed to come in at $3 billion and $2.59 billion respectively while the projections for the investing Banking unit were $1.84 billion.
According to the exact results released, the combined trading revenue came in at $6.20 billion, showing how much resilience the firm has amid a global slowdown in banking activities. The investment banking unit, though showcasing a relatively poor performance, still stood out amongst its major competitors.
According to the earnings report, Goldman Sachs ranked as the number 1 firm worldwide as it concerns announced and completed mergers and acquisitions and in worldwide equity and equity-related offerings for the year-to-date. Per the performance report, the company said its Book value per common share increased by 2.1% during the quarter and 8.4% during the first nine months of 2022 to $308.22
Goldman Sachs’s performance has shown a similar trend amongst all major banks that have published their earnings reports thus far. While investment banking recorded slow growth, the upshoot in other units complemented the performance to shoot the overall outlook up.
Goldman Sachs to Merge Some of Its Business Units
One major trajectory that Goldman Sachs may confirm as widely speculated by Wall Street is in the merger of some of its key business units. As reported by Reuters, the firm is looking at merging both the investment banking divisions as well as the trading unit together to form just three major units moving forward.
While the rationale for wanting to merge these units remains unknown, the future of the loss-making Marcus business is also a major contention among observers.
“They’ve definitely innovated with Marcus… But the reality is, what’s the cost of money that they’re bringing in?” said Chris Marinac, Director of Research at Janney Montgomery Scott.
With the whole uncertainty around some of its businesses, Marinac believes Goldman Sachs is best positioned with impressive growth milestones in the long term considering its antecedents.
“They’re excellent at trading, excellent (at) investment banking,” said Marinac. “And even though those businesses may not be necessarily the best this quarter, they’re still good business. Long term, this is a winning company, so you can’t knock them at all.”
Ahead of the company’s Conference Call, its shares are up 2.93% in the pre-market to $315.70.