Goldman Sachs (NYSE:GS) has beaten analyst estimates reporting Q2 2022 earnings per share of $7.73. At the same time, Goldman raised its dividend to $2.50 a share, a whopping 25% increase over previous amount. The price of Goldman shares increased in pre-market trading.
David Solomon, Chairman and CEO of Goldman, said:
“We delivered solid results in the second quarter as clients turned to us for our expertise and execution in these challenging markets. Despite increased volatility and uncertainty, I remain confident in our ability to navigate the environment, dynamically manage our resources and drive long-term, accretive returns for shareholders.”
While Goldman topped analyst expectations, the results are far lower than year prior.
In 2021, Q2 EPS arrived at $15.02 for the second quarter of 2021 and $10.76 for the first quarter of 2022.
Top line revenue for Q2 2022 was reported at $11.86 billion versus $15.4 billion in 2021 and for the first 6 months of 2022 $24.8 billion versus $33. 1 billion in 2021.
Net revenues were $11.86 billion for the second quarter of 2022, 23% lower than a strong second quarter of 2021 and 8% lower than the first quarter of 2022.
Goldman’s firmwide assets under supervision increased by $101 billion during the quarter, including inflows of $305 billion from the acquisition of NN Investment Partners (NNIP), to a record $2.50 trillion. Firmwide Management and other fees were a record $2.23 billion for the second quarter of 2022, 22% higher than the second quarter of 2021.
Goldman’s Investment Banking division generated quarterly net revenues of $2.14 billion, including solid net revenues in Financial advisory.
Goldman’s Fintech ventures, Consumer & Wealth Management generated record quarterly net revenues of $2.18 billion, 25% higher than the second quarter of 2021.
Specifically, net revenues in Wealth Management were $1.57 billion, 13% higher than Q2 of 2021. Goldman said this was due to higher management and other fees, reflecting higher placement fees and the impact of higher average assets under supervision, and higher net revenues in Private banking and lending, reflecting higher loan and deposit balances. Net revenues in Consumer banking were $608 million, 67% higher than the second quarter of 2021, primarily reflecting significantly higher credit card balances and higher deposit balances. Consumer banking is a key area of development for Goldman as it combines its deep knowledge of financial markets and its tendency to cater to higher net worth individuals with technology where Goldman may now service the mass affluent reaping the benefits of scale. Goldman operates one of the few federally chartered digital banks in the US under the Marcus brand.
During Q2, Goldman returned $1.22 billion of capital to shareholders, including $500 million of share repurchases and $719 million of common stock dividends.
Goldman will hold its earnings call at 930AM ET today where additional information should be shared.
A Dynamic and Challenging Environment
During the call, the tone was guardedly optimistic for the coming year. Solomon said “this is an uncertain environment and we will be cautious,” adding they will be nimble with their allocation of resources. Goldman stated that they are slowing the hiring velocity due to the choppy economy.
Regarding the consumer side of the business, Solomon said they have been building a business from scratch here and they have been pretty clear they have a long-term strategy to build a consumer digital banking platform. He explained that a lot of the build cost is “in the ground.”
“We expect this business to build accretive returns over time.”
He added that they do not see a significant deterioration in consumer credit.
He was asked specifically about growth opportunities in the Fintech sector, specifically organically or other (IE acquisitions). Solomon did not directly answer the question but he said there are a “lot of partnership opportunities and lots of people coming to us.” He stated that their attention for the moment is the couple of big businesses that are “in the ground (think Apple). Their attention is to “execute at a high level” and, perhaps in 2023 and 2024 pursue new partnerships. Solomon mentioned that checking is on track for later this year.
Goldman has been doggedly, yet methodically, building out its Fintech platform. While it may never match its investment banking and trading services retail offerings have the potential to scale and drive significant margin opportunities over time. This potential has yet to be reflected in Goldman’s share price which currently trades at an earnings multiple of just 6 (TTM).