Goldman Sachs shares fall after earnings miss the Street

Goldman Sachs shares fell after posting third-quarter profit below Wall Street expectations.

The bank posted profit of $1.88 billion, or $4.79 a share, below the $4.81 expected by analysts, according to Refinitiv. Revenue came in at $8.32 billion, slightly above the $8.31 billion expected.

The shares declined by 0.9% in early trading.

Chief Executive Officer David Solomon has been at the helm of Goldman Sachs for a full year, but it’s clear that the bank is still a work in progress.

“Our results through the third quarter reflect the underlying strength of our global client franchise and its ability to produce solid results in the context of a mixed operating environment,” Solomon said in the earnings release. “We continue to execute on our strategic priorities, including investing in important growth opportunities in our existing and new businesses.”

Among its four main businesses, it was the bank’s investing and lending division that missed analysts’ expectations by the largest degree, despite those figures coming down in recent weeks. The division produced $1.68 billion in revenue, below the $1.74 billion estimate. 

Meanwhile, trading revenue modestly exceeded expectations: Equities trading desks produced $1.88 billion, exceeding the $1.79 billion estimate of analysts surveyed by FactSet. Bond trading generated $1.41 billion in revenue, above the $1.36 billion estimate. 

Investment banking produced $1.69 billion in revenue, just under the $1.72 billion estimate. Investment management matched the $1.67 billion estimate. 

One of Solomon’s key initiatives since taking over in October 2018 – an internal review of the bank’s operations – has sparked departures among several longtime Goldman partners, including trading head Marty Chavez and chief information officer Elisha Wiesel.

The review, meant to boost shareholder returns at the New York-based bank, has also taken longer than initially promised, sowing impatience among investors eager for a resurgence at Goldman. The 150-year-old investment bank is plowing money into new ventures including retail banking and corporate cash management to diversify away from its traditional strengths in Wall Street trading, which has been mired in the industry’s multi-year slowdown.

Another area that investors will scrutinize is the bank’s holdings in WeWork and other stakes that lost value in the third quarter. The bank could post a $264 million writedown on its holdings in WeWork, Morgan Stanley analyst Betsy Graseck said in a research note.

While the bank’s investing and lending division, where private equity stakes and public holdings are reported, has helped it beat analysts’ profit estimates in previous quarters, investors may complain that it’s a source of earnings volatility in declining markets.

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