Goldman Sachs doubles profit as trading beats expectations amid dealmaking recovery
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The news: Goldman Sachs second quarter earnings more than doubled compared to a year ago, rising to USD3 billion ($4.49 billion) and beating market expectations, thanks to a recovery in dealmaking and strong performance in bond and equities trading.
The numbers: Overall Q2 profit surged 150% compared to last year, when the bank was scaling back its consumer lending operations. Revenues climbed 17% to USD12.7 billion, beating market forecasts. Investment banking revenues rose 21% to USD1.7 billion, though this was less than the 50% increase reported by JPMorgan Chase a day earlier. Fixed income trading revenues grew 17% to USD3.2 billion, while equities trading was up 7% to USD3.2 billion, both exceeding forecasts.
Goldman’s asset and wealth management division, central to CEO David Solomon's strategy to reduce risk and its reliance on volatile sectors, saw a 27% revenue increase to USD3.9 billion. The division, led by Marc Nachmann, achieved a pre-tax profit margin of 23%.
The context: The result was better than the USD2.8 billion quarterly profit expected by analysts. Second quarter earnings, however, slipped from a bumper Q1 when earnings were the highest since 2021.
Goldman is focusing on expanding its investment banking and money-management operations after stepping back from consumer banking. Fixed-income and stock-trading revenues were among the highest ever, but investment-banking revenue fell short of estimates.
Still, the Wall Street giant remains #1 in M&A league tables and advised on ExxonMobil’s USD60 billion mammoth acquisition of Pioneer Natural Resources during the quarter, one of the largest deals of the period.
What did they say: “From what we’re seeing, se are in the early innings of a capital markets and M&A recovery,” Solomon told analysts in a call. “Our Investment Banking backlog is up significantly this quarter. And while certain transaction volumes are still well below their 10-year average, we remain very well positioned to benefit from a continued resurgence activity.”
The sources: Financial Times, S&P Capital IQ, Bloomberg
