Before the bell Tuesday, Goldman Sachs is set to report 4Q22 earnings with a conference call scheduled for 9:30 a.m. ET. and the investment banking giant is expecting to see mixed results.
The investment banking icon is expected to report EPS and revenue of $5.77 and $10.9 bln, respectively.
The investment banking space’s earnings perception remains as cold as a corpse in a meat locker, with earnings from JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup all showing a decline. GS shares have been strong recently, but with the release of these initial banking reports, it's clear that the investment banking business may be in for another tough quarter. Expectations are low for GS's investment banking business, as last quarter investment banking revenue fell by 57%, and equity underwriting fees dove by 79%.
But don't count Goldman out just yet. The company's trading unit should have held up pretty well in Q4, especially in the FICC segment, which benefits from the rising interest rate environment. In Q3, FICC net revenue surged by 41% yr/yr, helping to offset a 14% decline in equities net revenue.
Goldman has announced a reorganization of its business structures, which will be effect from this earnings report. The purpose of this reorganization is to advance GS's strategy to become a more well-rounded financial institution that relies less on its boom-or-bust investment banking and trading businesses.
It’s important to also mention as Bloomberg reported in mid-December, the company could eliminate up to 4,000 jobs. It's a brutal world out there, and Goldman Sachs is staying alive in the frozen tundra of the investment banking space.
Efforts to diversify its revenue have centered on its recently launched consumer banking business called Marcus. In Q3, consumer banking revenue surged by 95% to $744 mln, helping to fuel an 18% revenue increase in the Consumer & Wealth Management segment. Higher credit card balances and higher deposit spreads as a result of rising interest rates bolstered the growth.
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