Goldman Sachs traders helped the Wall Street bank overcome a slump in dealmaking and report better than expected profits in the second quarter.
In second-quarter earnings on Monday, Goldman reported net income fell 47 per cent to $2.9 billion (€2.85bn) or $7.73 per share, from $5.5 billion or $15.02 per share in the same period last year. This was in advance of analysts’ estimates for $2.6 billion or $6.65 per share, according to consensus data compiled by Bloomberg.
Net revenues for the first quarter totalled $11.9 billion, down from $15.4 billion a year earlier, but beating analysts’ forecast for $10.7 billion.
Revenue from investment banking was down 41 per cent at $2.1 billion, in line with analysts’ estimates. Rivals JPMorgan Chase and Morgan Stanley last week reported falls of 61 per cent and 55 per cent respectively in investment banking revenue.
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In investment banking, Goldman said its overall deal backlog shrunk during the quarter, reflecting “a significant decrease” in debt underwriting and in equity underwriting, partially offset by an increase in advisory activity.
Revenues in Goldman’s trading division, which has benefited from heavy trading during the recent market volatility, were up 32 per cent at $6.5 billion, remaining above pre-pandemic levels and in advance of analysts’ forecast for $5.8 billion. Revenues from trading at JPMorgan were up 15 per cent and up 21 per cent at Morgan Stanley.
With the results coming against a backdrop of recession worries, Goldman chief executive David Solomon said in a statement that he remained “confident in our ability to navigate the environment, dynamically manage our resources and drive long-term, accretive returns for shareholders”.
Goldman said its board of directors had approved a 25 per cent increase in its quarterly dividend to $2.50 per share. In the quarter, Goldman also provisioned $667 million for credit losses amid rising concerns that a potential US recession will impact credit quality.
The bank’s asset management division reported revenues of $1.1 billion, down 79 per cent from the same period last year, when Goldman benefited from significant gains on its equity investments. Analysts had forecast revenues of $685 million.
Revenue in the consumer and wealth management unit, which includes its online bank Marcus and its Apple credit card, were up 25 per cent at $2.2 billion, just in advance of analysts’ forecasts for $2.1 billion.
Goldman’s stock was trading up about 5.5 per cent in New York. - Copyright The Financial Times Limited 2022
