Goldman Sachs (GS –Free Goldman Sachs Stock Report), a global leader in investment banking, securities, and investment management, saw solid year-over-year gains in both earnings and revenues in the third quarter of 2016. While share net of $4.88 was slightly below our estimate of $5.00, it marked a substantial improvement over the $2.90 earned in the third quarter of last year. It was also a significant sequential improvement over the $3.72 figure put up during the June period. Meanwhile, revenues of $9.943 billion were up strongly from the $8.138 billion figure in the September 2015.
The improvement came despite continuing challenges caused by widespread global economic uncertainty. The effect of the United Kingdom's decision to leave the European Union has caused jitters about how the disentanglement will affect London's financial sector, and the British pound has declined rapidly against the U.S. dollar in recent months. However, solid performance across many of the company's business segments helped counter global challenges as well as typical seasonal weakness.
The Institutional Client Services division saw a 17% increase in revenues, as fixed income, currency, and commodities client execution activity was 34% higher than in the third quarter of 2015. This was driven by higher revenues in interest rate products as well as mortgages.
Meanwhile, revenues in the Investing & Lending segment more than doubled on a year-over-year basis. The increase was primarily due to improved results in equities, as global equity prices increased during the quarter compared with a significant decrease in the previous-year period. On the other hand, the Investment Banking segment was basically flat on a year-over-year basis, owing in part to a decrease in completed mergers and acquisitions.
While we have kept our share-net estimate for full-year 2016 steady at $16.50, we have reduced our revenue estimate from $39 billion, to $38 billion. The effect of a strong dollar relative to other major world currencies has created headwinds for the investment banking industry throughout the year, leading us to reduce our full-year revenue estimate for Goldman several times. Those headwinds have diminished since the beginning of the year, and thus revenue growth is likely to continue into the fourth quarter and next year. Indeed, while the company's full-year 2016 performance is likely to fall short of its 2015 tallies, we expect to see solid revenue and earnings growth in 2017.
About The Company: The Goldman Sachs Group is a global investment banking and securities firm. It operates in four business segments: Investment Banking (21% of 2015 revenues); Institutional Client Services (45%); Investing & Lending (16%); and Investment Management (18%). In 2015, 44% of the company’s revenues came from outside of the Americas.