Goldman Sachs glitters as it beats analyst expectations

Hayley Kirton
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Goldman Sachs building in London
Revenues and profits for the bank have increased in the third quarter (Source: Getty)

Goldman Sachs shares have risen in pre-market open trading, after its latest quarterly earnings left analyst expectations in the dust.

The figures

The US banking giant reported net earnings of $2.1bn (£1.7bn) for its third quarter of 2016, an increase of 47 per cent based on $1.4bn the year before and an increase of 15 per cent on the previous quarter's $1.8bn.

The lender also reported earnings per share of $4.88, up from $2.90 the year before and beating analyst expectations, according to figures from Yahoo Finance, of $3.79.

Meanwhile, Goldman Sachs announced net revenue of $8.2bn, up 19 per cent on last year's $6.9bn and, again, outpacing analyst predictions of $7.4bn.

However, the bank's operating expenses have inched up to $5.3bn, an increase of 10 per cent compared with $4.8bn the third quarter of 2015. The bulk of the increase was from compensation and benefits, which grew by 36 per cent compared with the year before, despite headcount decreasing by five per cent.

Shares are up 1.7 per cent at $171.89 in pre-market open trading.

Why it's important

Not only have rock bottom interest rates and increasing red tape squeezed bank's profits, political instability caused by a combination of the Brexit vote and the upcoming US presidential election have put many clients off making big decisions. That's bad news for the likes of Goldman, which also reported today its revenues in investment banking had remained largely unchanged year-on-year and had fallen quarter-on-quarter.

However, so far, the US lenders have fared better than expected. Analysts were already predicting top and bottom line earnings would tick up at Goldman anyway, so the bank beating out expectations is an incredibly positive sign.

What Goldman Sachs said

"We saw solid performance across the franchise that helped counter typical seasonal weakness," said Lloyd Blankfein, chairman and chief executive of Goldman Sachs. "We continue to manage our balance sheet conservatively and are benefiting from the breadth of our offerings to clients."

In short

That's five lenders in a row with stronger-than-expected results, proving US banking might be in better health than many had thought.

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