Goldman Sachs Group Inc

Goldman Sachs Group Inc (NYSE: GS) is an investment banking entity that renders a diverse range of financial services to financial institutions, government, and individuals.

The Company will pay a second quarterly dividend of 45 US cents per share on 29 June 2021, while the ex-dividend date was 28 May 2021.

On 13 July 2021, the Company expects to release Q2 FY21 results.

Investment Highlights – Goldman Sachs Group Inc – Watch at USD 361.50

• Europe’s largest wine exporter had filed a report with FCA accusing the Company with regards to currency trading.
• The net expenses before taxes had shown a quarter-on-quarter rise from USD 23.4 million as of 31 December 2020 to USD 24.7 million as of 31 March 2021.
• On the leverage front, the debt-to-equity ratio of 8.55x remained significantly ahead of the industry median of 0.55x during Q1 FY21, indicating that GS had a large amount of debt piled up on the balance sheet.
• The Company’s shares became ex-dividend on 28 May 2021.
• From a technical standpoint, 20-days simple moving average (USD 375.00) seems unfavourable and resist the upside potential in the stock price.

Key Risks

• The volatility in the financial markets can negatively impact the solvency, capital, and liquidity position of the Company.
• There are also certain risks and uncertainties associated with administrative complexity, increased competitive pressure, complying with changing regulations, external threat to security systems, among others.

Financial Highlights (for three months ended 31 March 2021, as of 03 May 2021)

 (Source: Company result)

• The Company made new investment commitments of USD 188.3 million during Q1 FY21.
• The total investments at fair value and commitments stood at USD 3.43 billion as of 31 March 2021.
• 63% of the total amount of debt outstanding was unsecured debt and 37% in secured debt. Moreover, the Company had a debt of approximately USD 1.61 billion as of 31 March 2021.

Share Price Chart

(Analysis done by Kalkine Group) 

Valuation Methodology: Price/Book Approach (Illustrative)

Conclusion

The operating environment had seen gradual improvements over the quarter boosted by increased optimism of rapid economic recovery and continued fiscal supports from the Central Banks. Moreover, the investment banking activities got benefitted from high levels of underwriting volumes and mergers & acquisitions volumes. However, the slow economic recovery may result in a decline in asset prices, reduction of M&A activity levels and lower underwriting volumes. The stock made a 52-week low and high of USD 185.52 and USD 393.26, respectively.

Based on the economic uncertainty, overstretched valuations and various points mentioned above, we have given a "Watch" stance on Goldman Sachs Group Inc at the closing market price of USD 361.50 (as of 17 June 2021), while we will update when we analyse more corporate announcements from the Company.

Bank of Nova Scotia

Bank of Nova Scotia (NYSE: BNS) is an international bank that provides financial services in North America, Latin America, and Central America.

Investment Highlights – Bank of Nova Scotia – Watch at USD 65.42

• The gross impaired loans had reduced to CAD 5.11 billion as of 30 April 2021, while it was CAD 5.28 billion at the end of the prior quarter (Q1 FY21).
• The Bank’s Tier 1 and Total capital ratios remained unchanged during Q2 FY21 when compared with Q1 FY21.
• The stock is trading very close to the 52-weeks high of USD 68.02, which would make it difficult for the stock to show further upside movement.
• From a technical standpoint, 20-day SMA (USD 66.65) is not supporting the upside potential in the stock price.

Key Risks

• The dampened investor sentiment amid market volatility can reduce investors’ appetite for the asset classes.
• The risk related to unfavourable interest rate movements, borrower’s quality, adverse market conditions, and regulatory developments.
• The ongoing uncertainties arising from the Covid-19 pandemic and widen macro-economic factors could impact the M&A activity, investment rates, quality of new investments, earnings growth and exit plans.

Q2 FY21 Financial Highlights (for three months ended 30 April 2021, as of 01 June 2021)

• On an adjusted basis, the net income grew from CAD 1.371 million during Q2 FY20 to CAD 2.475 million during Q2 FY21.
• The diluted earnings per share grew by around 88% to CAD 1.88 per share during Q2 FY21.
• The Bank reported a Common Equity Tier 1 capital ratio of 12.3% during Q2 FY21.
• The International Banking had produced earnings of CAD 429 million during Q2 FY21.

Share Price Chart

 (Analysis done by Kalkine Group)

Conclusion

The Company had delivered strong results for Q2 FY21, illustrating the strength of the diversified business model and the solid economic recovery across the core markets. Moreover, BNS had shown a significant rise in the net earnings during Q2 FY21 boosted by the substantial reduction in the provision for credit losses. The Company expects overseas loan growth to improve during H2 FY21, with 10% expansion "very likely" in 12 to 18 months. The stock made a 52-week low and high of USD 39.57 and USD 68.02, respectively.

Based on the overstretched price point and the various factors discussed above, we have given a "Watch" stance on Bank of Nova Scotia at the closing market price of USD 65.42 (as of 17 June 2021), while we will suggest reinvesting when we identify further growth catalysts.

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.