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Profits at Goldman Sachs more than doubled in the second quarter to $3bn as the Wall Street bank reaped the benefits from an accelerating recovery in dealmaking, and its bond and equities traders performed better than expected.
Net income for the quarter exceeded the $2.8bn analysts were expecting and was up from $1.2bn a year earlier, when Goldman’s ill-fated push into retail banking hurt earnings and left chief executive David Solomon under fire.
A recovery in investment banking and trading, the historic drivers of Goldman’s profits, have helped the bank draw a line under a bruising 12 months.
A rebound in mergers and acquisitions and debt deals have driven Goldman’s shares up by roughly a quarter this year to a record, outperforming the 13 per cent rise in the KBW Bank index and the 18 per cent advance in the S&P 500 over the same period.
Goldman shares were broadly flat in pre-market trading on Monday.
Solomon said on Monday that he was “pleased with our solid second-quarter results and our overall performance in the first half of the year”.
Investment banking revenues rose 21 per cent to $1.7bn in the quarter, just short of forecasts and lagging behind the 50 per cent increase that rival JPMorgan Chase reported last week.
ExxonMobil’s $60bn acquisition of Pioneer Natural Resources was among the transactions Goldman advised on in the second quarter, one of the largest since a two-year drought in dealmaking ended.
“On balance we think that the results show an ongoing rebound in capital markets activity,” noted Chris Kotowski, an analyst at Oppenheimer.
Revenues from fixed income trading were up 17 per cent at $3.2bn while Goldman made $3.2bn in equities trading, up 7 per cent from a year earlier. The performance of both businesses was better than analysts had forecast.
Overall revenues climbed 17 per cent to $12.7bn in the quarter, surpassing the $12.4bn analysts had expected.
Goldman’s asset and wealth management division reported a 27 per cent increase in revenues to $3.9bn in the quarter. Solomon has put the business at the heart of his attempt to make the bank’s earnings less reliant on volatile investment banking and trading.
The business, run by Marc Nachmann, delivered a pre-tax profit margin of 23 per cent, just shy of the division’s target for somewhere in the mid-twenties.
Longtime Goldman rival Morgan Stanley reports results on Tuesday.
