Goldman Sachs’ profits more than doubled during the second quarter, as it reaped benefits from a faster recovery in dealmaking and its bond and equity traders performed better than anticipated.
After a slow two-year period in which central banks raised interest rates to fight inflation, dealmaking is now picking up.
Goldman Sachs’ profits grew by 150 percent in the second quarter, to $3bn. This was more than the $2.8bn analysts had expected and $1.2bn from a year ago. Goldman Sachs’ bond and equity traders also performed better than expected, which helped to boost the results.
David Solomon, Goldman’s chief executive officer, told analysts that the bank had a “significantly higher” backlog of deal activity.
Solomon stated that “from what we can see, we are still in the early stages of a recovery on capital markets and M&A”.
He predicted that private equity deals would continue to grow, despite the fact that activity levels are still “well below average” for the past 10 years.
Goldman shares have risen by a quarter to a new record this year, beating the KBW Bank Index’s 13 percent rise and the S&P 500’s 18 percent gain over the same time period.
Early Monday morning, the shares of Goldman were modestly up.
Goldman’s revenues from investment banking rose by 21 percent to $1.7 billion in the third quarter. This was behind the 50% increase reported by JPMorgan Chase last week, and fell short of analyst expectations.
In a client note, KBW analysts stated that they believe the advisory revenues may be related to a time issue arising from the absence of closings during the third quarter. The investment banking backlog had increased by a significant amount.
Goldman Sachs advised on the $60bn ExxonMobil acquisition of Pioneer Natural Resources in the second quarter.
Goldman’s revenue from trading fixed-income securities was up by 17 percent at $3.2 billion, while Goldman’s equities revenues were up 7 percent from the previous year. Both businesses performed better than expected.
The overall revenue increased by 17 percent to $12.7 billion in the third quarter, exceeding the $12.4 billion analysts expected.
Goldman’s Asset and Wealth Management division reported an increase of 27 per cent in revenue to $3.9bn during the third quarter. Solomon’s goal is to reduce the bank’s reliance on volatile, capital-intensive trading and investment banking.
Marc Nachmann’s business achieved a profit margin before tax of 23%, which was just a little bit below the target of somewhere around the mid-20s.
Morgan Stanley, a long-time Goldman competitor, reports its results on Tuesday.
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