(Adds details from earnings report, analyst comment)
By Olivia Oran and Sruthi Shankar
April 18 Goldman Sachs Group Inc reported
earnings that missed Wall Street expectations on Tuesday as weak
trading revenue outweighed gains in other areas, sending its
shares down nearly 3 percent in premarket trading.
The fifth-largest U.S. bank by assets generated its lowest
trading revenue in five quarters even as Wall Street rivals
reported gains. It blamed weakness in commodities, currencies,
and credit revenue, as well as lower commissions and fees from
Overall, Goldman's trading revenue, its biggest contributer
to total revenue, dropped 2 percent to $3.36 billion. Equities
trading revenue fell 6 percent while fixed income trading was
essentially flat, though analysts were more disappointed in that
business relative to their expectations.
Goldman's profit rose from a difficult year-ago quarter,
with earnings per share of $5.15 versus $2.68 in the first
quarter of 2016. But the results were well short of analyst
forecasts of $5.31 per share, on average, according to Thomson
Goldman shares were down 2.8 percent at $219.95 in premarket
"It sounds like they had a tough time navigating ... in 1Q,"
said Evercore ISI analyst Glenn Schorr. "Isn't good and it
happens every once in a while for Goldman, but definitely not
Goldman's results stood in sharp contrast to other big U.S.
banks that have reported earnings so far. Bank of America Corp
beat expectations on Tuesday due to surge in trading
revenue, similar to results from JPMorgan Chase & Co and
Citigroup Inc last week. Goldman's chief rival Morgan
Stanley will report on Wednesday.
Goldman has historically relied more on trading than other
big banks, but has been trying to shift to more stable
businesses like investment management and lending.
In a statement, Goldman Chief Executive Lloyd Blankfein
described the business environment as "mixed" with client
Revenue from investment banking, investment management and
investing and lending all rose in the first quarter, but not
enough to offset the sharp decline in trading.
Overall, Goldman's profit rose 80 percent to $2.2 billion
from $1.2 billion in the first quarter of 2016, when sliding
commodity prices, worries about the Chinese economy and
uncertainty about U.S. interest rates led to weak results across
Wall Street. Its revenue rose 27 percent to $8 billion from $6.3
The bank's expenses rose just 15 percent and it paid out a
smaller share of its revenue to employees. Its closely watched
compensation-to-revenue ratio was 41 percent in the first
quarter, down from 42 percent a year earlier, but higher than
the 38 percent ratio it reported for all of 2016.
(Reporting by Sruthi Shankar in Bengaluru and Olivia Oran in
New York; Writing by Lauren Tara LaCapra; Editing by Sriraj
Kalluvila and Meredith Mazzilli)