Goldman Sachs reports record revenue amid booming investment banking

Goldman Sachs on Wednesday surpassed analysts ’expectations of first-quarter net profit and record earnings on strong performance from equity traders and investment banks.

The bank earned earnings per share of $ 18.60, crushing the estimate of $ 10.22 from analysts surveyed by Refinitiv and representing a growth of 498% over the same period a year ago. Revenue of $ 17.7 billion easily exceeded expectations of $ 12.6 billion and accounted for 102% growth over the first quarter of 2020.

Here are the numbers:

Earnings: $ 18.60 per share, compared to $ 10.22 per share expected by analysts surveyed by Refinitiv.
Income: $ 17.7 billion, up from the expected $ 12.6 billion.
Commercial income: Fixed income: $ 3.898 billion, Equity: $ 3.688 billion
Investment banking: $ 3,777 million

Shares of the New York-based bank rose 1.5% after launch, which showed Goldman’s first-quarter revenue more than doubled year-over-year.

“We have been working closely with our clients in preparation for a world beyond the pandemic and a more stable economic environment,” CEO David Solomon said in the earnings statement. “Our businesses continue to be very well positioned to help our clients reposition themselves for recovery, and that strength is reflected in the record revenue and earnings achieved this quarter.”

Goldman’s expectations were high, as the economic recovery and first-quarter record issuance of blank check companies known as SPACs were expected to raise investment banking revenues. Earlier Wednesday, JPMorgan Chase posted solid business results during the first quarter and a $ 5 billion tailwind in releasing funds it had set aside for loan losses that did not materialize.

At Goldman, the flood of SPAC helped drive net investment income to a record $ 3.777 billion for the quarter, including record equity underwriting. The number of major income from investment banking exceeded the estimate of $ 2.9 billion and represents an increase of 73% over the same period last year.

Asset management generated record quarterly net income of $ 4.6 billion, reflecting record net income from equity investments.

In their global markets unit, traders generated 47% of revenue from a year earlier to $ 7.58 billion. That amount was split between $ 3.99 billion in fixed-income transactions and $ 3.688 billion in equity, which reflected year-over-year growth of 31% and 68%, respectively. The bank said the strong growth in fixed-income trading was due in part to “significantly higher” net sales of mortgages and interest rate products.

Of the six largest banks in the United States, Goldman derives most of its revenue from Wall Street activities, including banking and investment. In recent years, this has been detrimental to the company, as retail banking driven by cheap consumer deposits has boosted industry records.

This dynamic was reversed during the coronavirus pandemic, when companies with large consumer operations had to set aside tens of billions of dollars for early loan losses, prompting banks such as Wells Fargo to register their first quarterly loss since the financial crisis.

Goldman shares have risen 24% this year, roughly coinciding with the gain of the KBW Bank index.

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