Goldman Sachs Group, Inc. (NYSE:GS) finished 2012 with a broad based beat on higher debt and equity underwriting and financial advisory revenues also climbed. A similar trend is also visible in the results of JPMorgan Chase & Co. (NYSE:JPM) which reported higher than expected performance for the fourth quarter on higher revenues from debt and equities underwriting revenues. JPM’s revenues from equity and debt underwriting experienced a sequential surge of 13% and 23%, respectively.
Goldman Sachs reported earnings per shares of $5.6, beating estimates of $3.78 per share, on revenues of $9.24 billion. Revenues surpassed the consensus mean estimate by 17%. The remainder of the article aims to unearth the reasons for such an outperformance during the fourth quarter of 2012.
| Goldman Sachs 4Q12 Earnings Surprise | ||
| Revenues ($ Bn) | Earnings Per Share ($) | |
| Reported | 9.24 | 5.6 |
| Estimated | 7.91 | 3.78 |
| % Surprise | 16.81% | 48.15% |
The total net revenue for the fourth quarter was 9.2 billion, up 11% sequentially and 53% above the revenues of the same quarter of the previous year. Much of this improvement in the top line was a result of improvement in investment banking revenues. Basic earnings per share increased two-fold from the linked quarter. A closer look at the bank’s sub-functions reveals a broad based improvement in results.
Revenues of $1.4 billion accruing from were 21% above the results of the linked quarter. Revenues from equity underwriting increased 61% as more constructive equity markets enabled some digestion of backlogs to finish the year. Debt underwriting increased 27% from already healthy levels during the third quarter, while M&A fees were stable and finished the year on a relatively weaker note.
Equities & FICC within the ended the year on a solid note. Revenues of $4.3 billion accruing from Institutional Client Services were 4% up from the linked quarter and 42% from a year. FICC revenues for the fourth quarter of 2012 were $2.1 billion, up 55% year over year, however 14% below the third quarter levels. Similarly, equities revenue of $1.9 billion was up 9% from a year ago but down 12% from the third quarter levels.
The revenue of $2 billion was positively impacted by tighter credit spreads and an increase in equity prices in Asia and Europe. The results from this segment also included a gain of $334 million from the firm’s investment in the share of ICBC.
Revenue of $1.52 billion from was 26% higher than the third quarter of 2012 and 20% above the levels of the fourth quarter of 2011. Assets under supervision during the fourth quarter increased $14 billion to $956 billion, while assets under management decreased $2 billion to $854 billion, partially offset by net market appreciation.
