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Goldman Sachs (NYSE: GS) earnings came in today (Thursday) at $4.60 per share, beating consensus estimates of $4.21. Revenue for the investment bank was nearly $8.8 billion – well above analysts' projections of $7.7 billion.
Don't be fooled by the estimate-beating numbers.
Today's report suggests that Goldman Sachs rebounded from its abysmal third quarter, but GS's earnings beat is mostly an indication of how modest analysts' projections were.
Goldman's net income of $2.3 billion was less than the $2.89 billion reported in the same quarter last year. Likewise, $8.8 billion in revenue was 5% lower than 2012's Q4 – even if it did beat expectations.
The biggest takeaway from today's earning's report was Goldman's fixed-income, currencies, and commodities (FICC) trading business. GS's FICC trading revenue was just $8.7 billion for all of 2013. That represented a 13% drop from 2012.
That was also Goldman Sachs' worst FICC revenue since the financial crisis.
Goldman officials are quick to point out that Q4 FICC trading revenue of $1.7 billion was a 38% gain from Q3. That, however, points more to the terrible Q3 Goldman had.
Yes, Goldman's FICC rebounded in Q4, but that $1.7 billion revenue was still a 15% drop from the previous year.
Equities revenue at Goldman Sachs was also reported near $1.7 billion for Q4. That's a 4.1% increase from Q3 – but a 27% drop from 2012's Q4.
One of the only numbers to help offset Goldman's losses: Investment banking revenue rose 22% from last year, at over $1.7 billion.
Standard Life Investments' Euan Sanderson wrote the results were "respectable but unspectacular." According to Sanderson (published in Barron's):
"Full year Return on Equity was 11% which represents a fairly solid showing in a somewhat challenging environment but also serves as a reminder that the glory days of posting 20%+ ROE is a distant memory as higher capital levels and regulatory constraints make it more challenging for 'Goldman to be Goldman'!"
Earnings Impact on Goldman Sachs (NYSE: GS) Stock
Goldman's FICC trading revenue is especially concerning when compared to that of its competitors.