Goldman Sachs Q3 Earning Preview: After JPMorgan's Beat, Can GS Surprise Even Further?

Goldman Sachs (GS) is set to release its Q3 earnings, with several key factors expected to shape its results:

1. Market-Making Revenues: Client activity remained steady in Q3 due to the potential soft landing of the U.S. economy, cooling inflation, and easing monetary policies. Volatility in equity markets and other asset classes like commodities and bonds also played a role. However, GS anticipates a 10% drop in trading revenues due to challenging conditions, particularly in fixed-income markets. Market-making revenues are projected to reach $4.97 billion, a slight improvement from the prior year.

2. Investment Banking (IB) Fees: The global M&A landscape saw a rebound in Q3, with increased deal value and volume, supported by solid financial performance and a favorable economic outlook. The IPO market also showed cautious optimism amid market volatility and geopolitical risks. GS’ strong position in M&As and equity offerings is expected to boost its IB revenues, estimated at $1.65 billion, a 6.1% increase year-over-year.

3. Net Interest Income (NII): Despite a Federal Reserve rate cut of 50 basis points in September, higher rates and an inverted yield curve might have impacted GS' NII growth. Still, loan demand, particularly in the commercial sector, was modest, contributing to a projected 17.8% rise in NII revenues to $1.82 billion.

4. Expenses: Increased investments in technology, market expansion, and transaction-based costs due to higher client activity are expected to drive up overall expenses for the quarter.

Goldman Sachs is positioned to deliver mixed results, with growth in key areas like IB fees and NII, but potential challenges in trading revenues and rising expenses.