Wall Street investment bank Goldman Sachs (NYSE:GS) on Thursday is likely to report that its third-quarter profits fell along with its revenue amid an industrywide falloff in the bond business.
Analysts polled by Thomson Reuters expect Goldman’s overall third-quarter revenue to slide 12 percent to $7.40 billion, compared to $8.4 billion in the comparable period a year ago, leading to a consensus estimate of $2.43 in earnings per share. Goldman earned $2.85 a share in 2012’s third quarter.
That estimate declined sharply over the past few months, from about $2.80 a share to its current level.
“July and August were very slow months as investors sat on the sidelines waiting for more clarity on Fed tapering, Syria and the emerging-market slowdown, and we believe the weakness extended into September,” Richard Staite, an analyst at Atlantic Equities LLP, wrote in a note, referring to uncertainty about when the Federal Reserve would slow its $85 billion-a-month bond-buying program. “In contrast, September 2012 was very active in rates and foreign exchange due to improvements in the Eurozone.”
Earlier, Citigroup Inc. (NYSE:C) analysts trimmed their EPS estimate for Goldman to $2.34 from $2.90 based on fixed-income concerns and uncertainty regarding monetary policy.
Reflecting the quarter’s solid stock market performance, Goldman’s Equity Capital Market investment banking fees are expected to log 30 percent growth, according to Citi research.
Goldman, long known for paying its bankers well, is expected to have spent 43 percent of its revenue on compensation in the third quarter, unchanged from a year ago.
Goldman’s investment and lending business is expected to be a bright spot at about $1.36 billion, Citi said.
“Goldman's Investing and Lending division is the most profitable division in the company with an average net profit margin of around 50 percent, while Institutional Client Services recorded a net profit margin of 28 percent in the second quarter of 2013,” said Sheetal Kothari, a business financial services research analyst at Frost & Sullivan.
Goldman Sachs is trading at around $156.97 a share. So far this year, the stock has gained 23.0 percent.