October 18, 2016 / 7:26 PM / in a year

Fitch: Strong 3Q16 Earnings for Goldman Sachs

(The following statement was released by the rating agency) CHICAGO, October 18 (Fitch) Goldman Sachs Group Inc.'s (GS) third quarter 2016 (3Q16) earnings were strong driven in large part by solid results in its markets businesses, according to Fitch Ratings. GS's overall annualized return on average equity in 3Q16 was a good 11.2%, and for the first nine months of the year was 8.7%, which includes the comparatively challenging first quarter of the year. This quarter's sequential results, particularly in the markets businesses, are generally in line with peer banks that have reported thus far. Most have benefited from improving trading activity in the credit and mortgage areas of their Fixed Income, Currency, and Commodities (FICC) businesses as well as improved debt underwriting net revenue due to higher investment grade issuance levels across the industry. For GS, net revenue in its FICC businesses were $1.96 billion, 2% higher than the sequential quarter and 34% higher than the year-ago quarter. If the debt valuation adjustment (DVA) of $147 million in the year-ago quarter had been included in other comprehensive income as it is this quarter, the year-over-year increase would have been a still strong 49%. The higher net revenues in FICC on a year-over-year basis were driven by improved results in rates, credit products, and mortgages partially offset by weaker results in currencies and commodities. Net revenue in Equities was $1.78 billion in 3Q16, 2% higher than the sequential quarter and 2% higher than the year-ago quarter. This was driven by higher net revenues in derivatives partially offset by significantly lower net revenues in cash equities. GS's overall investment banking net revenue was down 14% from the sequential quarter and essentially flat from the year-ago quarter. Advisory net revenue, which has been a bright spot for several years, was down 17% relative to the linked quarter and 19% relative to the year-ago quarter as mergers & acquisition (M&A) activity declined industry-wide. This is not overly surprising given that Fitch believes the industry is in the later innings of an M&A cycle. Net underwriting revenue was down 11% from the sequential quarter but up 18% from the year-ago quarter. The sequential comparisons in debt underwriting were down in part due to unfavorable comparisons to a strong sequential quarter. Relative to the year-ago comparisons, this was due to the growth in industry volumes. Equity issuance remains slightly more challenging amid low industry initial public offering (IPO) activity levels across the industry. GS's Investing and Lending (I&L) segment as well as its Investment Management (IM) segment both had net revenue improvements during the quarter. I&L benefited from higher net revenues from investments in equities amid higher global equity prices, as well as continued growth in net interest income. IM benefited from improved performance fees amid stronger markets during the quarter. GS recently launched its consumer lending platform, Marcus by Goldman Sachs as noted in Fitch's comment dated Oct. 16, 2016, 'Fitch: Goldman's Online Lender Seeks to Link Fintech and Banking.' As noted, Fitch expects that initially it will be a more nascent part of GS's overall suite of businesses. Overall expenses were down 3% from the sequential quarter but up 10% from the year-ago quarter, both reflecting positive operating leverage for the company. The ratio of compensation and benefits to net revenues, inclusive of net interest income, was 39.2% in 3Q16, and 41% for the first nine months of the year. Fitch notes that the relative stability of this ratio does indicate some scalability in GS's business model as the compensation ratio has remained stable while net revenue has been more variable. In Fitch's view, GS's capital ratios and liquidity metrics remain consistent with the rating category (Viability Rating of 'a') given the agency's assessment of the inherent variability of many of GS's businesses. The company's transitionally phased-in Basel III Common Equity Tier 1 ratio under the advanced approach was 12.4%, and under the standardized approach was 14.0% at 3Q16. GS's fully phased-in enhanced supplementary leverage ratio (SLR) was up to 6.3% at the end of 3Q16 compared to 6.1% at 2Q16. Additionally, GS's Global Core Liquid Assets were $214 billion at the end of 3Q16, or 24.6% of total assets, relative to $211 billion at the end of 2Q16, or 23.5% of total assets and, $196 billion at 1Q16, or 22.3% of total assets. Contact: Justin Fuller, CFA Senior Director +1-312-368-2057 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Nathan Flanders Managing Director +1-212-908-0872 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below