Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Goldman Sachs profit soars on global deals frenzy, trading boom

Stock MarketsApr 14, 2021 15:50
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A view of the Goldman Sachs stall on the floor of the New York Stock Exchange

By Anirban Sen, Matt Scuffham and Noor Zainab Hussain

(Reuters) -Goldman Sachs Group Inc surged past Wall Street expectations for first-quarter profit on Wednesday, as the U.S. investment banking giant capitalized on record levels of global dealmaking and a coronavirus-driven boom in equity trading.

An unprecedented boom in private firms merging with listed shell companies to go public helped Goldman earn handsome fees from such deals, resulting in a 73% jump in revenue from investment banking to $3.77 billion.

Revenue from equities trading jumped 68% to $3.69 billion as heightened trading by ordinary investors fed stock market volatility.

"Overall, it's quite stunning," said Oppenheimer analyst Chris Kotowski.

Total revenue more than doubled to $17.7 billion in the quarter, while financial advisory revenue came in at $1.1 billion.

The investment bank also comfortably held on to its top ranking on the league tables for worldwide M&A advisory. The league tables by Refinitiv rank financial services firms on the amount of M&A fees they generate.

As global investment banking fees hit an all-time record of $39.4 billion in the March quarter, according to Refinitiv data, some analysts turned skeptical about how long the bumper capital markets environment will last.

"Questions about the sustainability of revenues remains an open question despite strong results this quarter," said KBW's Brian Kleinhanzl.

Goldman's trading performance was equally impressive. Revenue from the segment jumped 47% to its highest since 2010 and was in line with the broader gains for trading desks across Wall Street.

Goldman said debt underwriting was helped by strong leveraged finance and asset-backed activity, while equity underwriting was boosted by a red-hot IPO market.

Earlier in the day, JPMorgan Chase & Co (NYSE:JPM) said its quarterly earnings jumped almost 400%, as the largest U.S. bank released more than $5 billion in reserves and was aided by a big jump in investment banking and trading.

BLOWOUT QUARTER

Goldman's profit also benefited from favorable comparisons to last year when it set aside more funds to cover potential corporate loan losses due to the pandemic and marked down the value of some assets.

Unlike rivals such as JPMorgan and Bank of America (NYSE:BAC), Goldman has a relatively smaller consumer business, which has limited its exposure to loan defaults and allowed it to focus on its core strength in investment banking and trading.

Even so, the bank has stuck with its plan to expand its consumer loans and credit card businesses.

Consumer banking revenue rose 32% in the quarter. The business is tiny compared to other large revenue generators at the firm, with consumer and wealth management representing just 10% of the total in the first quarter.

Meanwhile, Goldman's asset management arm received a huge boost from investments in private equities and gains from public equity investments.

Net earnings applicable to common shareholders rose to $6.7 billion in the quarter ended March 31. Earnings per share rose to $18.60 from $3.11 a year earlier.

Analysts on average had expected a profit of $10.22 per share, according to Refinitiv estimates.

Goldman shares were up 1.6% in premarket trading. The bank's most comparable peer Morgan Stanley (NYSE:MS) will round off the earnings season for big banks on Friday.

Goldman Sachs profit soars on global deals frenzy, trading boom
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email