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Goldman Sachs Earnings: Here's How to Read Them

In terms of Goldman's core business, investment banking fees are expected to rise significantly in the fourth quarter, while fixed income sales & trading revenue may underwhelm for the second consecutive quarter.

KBW analyst Fred Cannon expects Goldman to earn $1.72 billion in investment banking revenue, up 47% quarter-over-quarter and up 22% year-over-year on particularly strong equity underwriting and M&A advisory performance.

Total trading revenue, however, could fall 10% quarter-over-quarter to $2.87 billion, even after interest rate volatility and losses in correlated assets like currencies hurt the firm's third quarter results. Equity trading could prove strong while fixed income, currency & commodity trading could disappoint.

Credit Suisse recently lowered its estimate of FICC sales & trading revenue to $1.7 billion and forecasts 0-2% revenue growth in the unit through 2016. "[We] believe the favorable conditions that have characterized the last few years (higher prices, easy monetary policy, robust fund flows) could slow down and be exacerbated by regulations (e.g. derivatives reform)," the analysts said.

Bottom Line: Goldman Sachs may post a big earnings beat in the fourth quarter that could still disappoint investors.

Goldman's Operating Performance Raises Question Marks

-- Written by Antoine Gara in New York

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