=Goldman Sachs (GS) reported earnings on Wed 16 Jan 2019 (b/o)

Goldman Sachs beats by $1.26, beats on revs; RoE 12.1%; Increases reservse for litigation expenses

• Reports Q4 (Dec) earnings of $6.04 per share, $1.26 better than the S&P Capital IQ Consensus of $4.78; revenues fell 0.5% year/year to $8.08 bln vs the $7.48 bln S&P Capital IQ Consensus.
• Return on average common shareholders' equity (ROE) was 13.3% for 2018 and annualized ROE was 12.1% for the fourth quarter of 2018. Return on average tangible common shareholders' equity (ROTE) was 14.1% for 2018 and annualized ROTE was 12.8% for the fourth quarter of 2018.
• Net revenues in Investment Banking were $2.04 billion for the fourth quarter of 2018, 5% lower than the fourth quarter of 2017 and 3% higher than the third quarter of 2018.
• Net revenues in Institutional Client Services were $2.43 billion for the fourth quarter of 2018, 2% higher than the fourth quarter of 2017 and 22% lower than the third quarter of 2018.
  • Net revenues in FICC Client Execution were $822 million, 18% lower than the fourth quarter of 2017, reflecting significantly lower net revenues in credit products and lower net revenues in interest rate products. Net revenues in commodities, currencies and mortgages were essentially unchanged. During the quarter, FICC Client Execution operated in an environment characterized by challenging market conditions, including wider credit spreads, compared with the third quarter of 2018.
  • Net revenues in Equities were $1.60 billion, 17% higher than the fourth quarter of 2017, primarily due to significantly higher net revenues in equities client execution compared with a challenging prior year period. This increase reflected significantly higher net revenues in cash products, while net revenues in derivatives were essentially unchanged.
• Operating expenses were $5.15 billion for the fourth quarter of 2018, 9% higher than the fourth quarter of 2017 and 8% lower than the third quarter of 2018. The increase in operating expenses compared with the fourth quarter of 2017 primarily reflected significantly higher net provisions for litigation and regulatory proceedings.
  • Net provisions for litigation and regulatory proceedings for the fourth quarter of 2018 were $516 million compared with $9 million for the fourth quarter of 2017.