The third-quarter earnings season for U.S. banks is in full swing, and all eyes are on Goldman Sachs Group, Inc. (GS) as it prepares to report its financial results on Tuesday before the opening bell. Following strong performances from JP Morgan & Co. (JPM) and Wells Fargo & Co. (WFC), investors are eager to see if Goldman Sachs can maintain its winning streak.
Both JP Morgan and Wells Fargo exceeded analyst expectations in the third quarter, demonstrating the resilience of the banking sector. JP Morgan’s revenue surged by 6% year-over-year to $43.3 billion, driven by a 31% increase in investment banking fees. Wells Fargo also impressed, reporting stronger-than-expected earnings per share of $1.42, beating the consensus estimate of $1.28. These positive results have fueled optimism about the broader financial sector.
However, the banking industry faces a unique backdrop. The Federal Reserve’s decision to cut interest rates by 50 basis points in September and the possibility of further reductions in the near future have sparked debate about the impact on large-cap banks. Morgan Stanley economists anticipate an additional 150 basis points of rate reductions by mid-2025, arguing that these cuts could benefit large-cap banks sensitive to liabilities.
Goldman Sachs, being one of the largest banks, also has significant revenue exposure to capital markets. This exposure could lead to fee income growth in a lower-rate environment. Despite the potential challenges, analysts remain optimistic about Goldman Sachs’s upcoming earnings report. According to estimates from Benzinga Pro, the Street expects the company to report quarterly earnings of $7.03 per share and revenue of $11.868 billion on Tuesday. Goldman Sachs has a proven track record of exceeding analyst expectations, having beaten on both the top and bottom lines in each of its last four quarterly reports.
As of Monday, Goldman Sachs shares were up 1.09% at $521.95. Investors will be watching closely to see if the company can continue its strong performance in the face of changing interest rates and macroeconomic uncertainty. Tuesday’s earnings report will provide valuable insights into the health of the investment banking industry and the outlook for Goldman Sachs in the coming months.
