Goldman Sachs reports record gains amid expanding banking investment

Goldman Sachs on Wednesday blew analysts’ expectations of record net first-quarter earnings and earnings based on the strong performance of the company’s stock traders and investment bankers.

The bank recorded earnings per share of $ 18.60, crushing the estimate of $ 10.22 of analysts surveyed by Refinitiv and representing a 498% increase over the same period a year ago. $ 17.7 billion in revenue easily exceeded $ 12.6 billion in expectations.

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, compared to $ 12.6 billion expected.
Trading income: Fixed income: $ 3.89 billion, equity: $ 3.69 billion
Investment bank: $ 3.77 billion

Shares of the New York bank rose 1.5 percent after launch, showing that Goldman’s first-quarter revenue doubled from year to year.

“We have worked hard with our clients to prepare for a world beyond the pandemic and a more stable economic environment,” said CEO David Solomon in the revenue statement. “Our business remains very well positioned to help our customers reposition themselves for recovery, and this strength is reflected in record revenue and earnings this quarter.”

Expectations were high for Goldman, as the economic recovery and record issuance in the first quarter of unknown check companies, known as SPAC, should have raised bank investment income. Earlier on Wednesday, JPMorgan Chase posted solid trading results for the first quarter and a tailwind of $ 5.2 billion from the release of funds it set aside for loan losses that did not materialize.

At Goldman, the flood of SPACs helped consolidate net banking income to a record $ 3.77 billion for the quarter, including record equity. The main number of bank income from investments exceeded the estimate of 2.9 billion dollars and represents an increase of 73% compared to the same period last year.

Financial consulting revenue totaled $ 1.12 billion.

“The increase in net subscription revenues was due to significantly higher net revenues from both equity subscriptions, driven primarily by strong initial public offering activity,” the bank said in a statement. “The increase in net financial consulting revenues reflected a significant increase in mergers and acquisitions completed.”

Asset management generated quarterly net income of $ 4.61 billion, reflecting record net income from equity investments.

In its Global Markets unit, traders saw a 47% increase in revenue from a year earlier to $ 7.58 billion. This amount was divided between $ 3.89 billion in fixed income trading and $ 3.69 billion in shares, which reflected an increase from 31% to 68% 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.

Of the six largest US banks, Goldman derives most of its revenue from Wall Street operations, including banking and investment. In recent years, this has been to the detriment of the company, as retail banking powered by cheap consumer deposits has driven the industry’s record profits.

This dynamic was reversed during the coronavirus pandemic, when companies with significant consumer operations had to allocate tens of billions of dollars for anticipated loan losses, causing banks such as Wells Fargo to record their first quarterly loss since the financial crisis.

Goldman shares have risen 24% this year, roughly equivalent to the earnings of the KBW Bank index.

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