Wall Street analysts were largely bullish on Goldman Sachs after the bank’s earnings topped their expectations as stronger investment banking revenue overshadowed struggles in trading that have plagued the whole industry, as well as concerns about the firm’s involvement in the 1MDB scandal.

The shares surged 8 percent to their highs of the day as analysts sent their bullish notes to clients.

Here’s what they are saying:

(Note: FICC refers to fixed income, currencies and commodities trading.)

“Results reflected capital markets revenue that outperformed peers YOY (down 1% vs. down 7% ), helped by stronger than expected advisory (up 56% YoY). … That’s important because it shows that the franchise remains intact despite the overhang from 1MDB (that’s a question that we’ve been getting). … Also, I&L performed better than expected (up 2% QoQ); equity I&L was about $350mil. more than expected; while some may want to exclude this as onetime, this is conceptually offset with an increase in litigation to $516 mil., or up $380mil. QoQ (likely due to 1MDB but GS did not say). … Moreover, cost control was decent. … The full year comp ratio was 34% down nearly 200bp YOY. … The main area of weakness in the quarter was FICC, down 18% YOY (about in line with peer); looking ahead, the rebound in energy prices might help future results, in our view …”

“Clean FICC client execution revenues were down -18% YoY (-35% QoQ) to $822mn with GS indicating YoY significantly lower net revenues in credit products and lower net revenues in interest rate products. … Net revenues in commodities, currencies and mortgages were essentially unchanged. … We remain OW as we believe GS is ticking all the right boxes on revenue growth initiatives, delivering positive operating leverage — leading to attractive capital returns and TBVPS growth. … We also believe other important drivers for the stock are: i.) volatility pickup which we have seen in 2018, ii.) a turnaround of commodities business which performed better in H1 and iii.) ongoing best-in-class cost management.”

“We get that people continue to think about how GS’s mix will evolve over time and might question the
sustainability of M&A and equity I&L at these levels, we’d also expect FICC, DCM & ECM to improve and the stock is trading only at ~90% of book value … and returns are good so our gut is the 1MDB situation is like the real hold up for people right now. … Overall, results were good given the tough backdrop and we’ll look to get an update on the strategic priorities and 1MDB on the call to see if that can ease investor concerns.”

“Few tidbits: 1) Overall trading was better than expected, with equities +18% y/y better than peers, and FICC down 18% generally inline, 2) investment banking came in better, with M&A up 56% y/y, though GS noted that the firm’s investment banking backlog decreased q/q, 3) GS guided to a 2019 tax rate of 22-23% excluding discrete items, which is in-line with our estimates. … Implications — Good quarter though we think bar was low, expect stock to outperform.”

“Notably the legal provision (likely related to 1MDB) of $0.5 bn was in line with our estimate. … ICS revenues were quite weak (47c headwind), partially offset by better than expected IBD revenue (29c tailwind). … FICC revenues were $0.82 billion, down 18% Y/Y and well below our $1.06 billion estimate, although closer to reported trends at peers. … Equities revenues were $1.6 billion, up 17% Y/Y and in line with our estimate… IBD revenues of $2.04 bn were above our $1.89 billion estimate, driven by M&A. The banking backlog is lower Q/Q.”

“Relative to consensus, GS’s 4Q18 EPS beat was driven by a lower than expected tax rate, higher than anticipated advisory fees and I&L revenues ($1.3bn in gains from public equities), and controlled costs more than offsetting weaker than anticipated trading results (FICC and equities). Increased disclosure around net interest income, its loan loss provision, and I&L (plus a slide deck) was welcomed.”

This is a developing story. Check back for updates.

Originally published at CNBC

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