Goldman Sachs’ profits rose 28 per cent in the first quarter, as a strong performance at its hallmark trading business helped the Wall Street bank easily surpass analysts’ estimates.
The bank said net income for the first three months of the year was $4.1bn, up from $3.2bn a year earlier and almost $1bn ahead of analysts’ forecasts compiled by Bloomberg.
The figures were “a near-perfect print”, Oppenheimer analyst Chris Kotowski wrote in a note to clients. Goldman’s stock closed up almost 3 per cent on Monday.
The performance will help draw a line under a challenging 12 months for Goldman in which its results were hit by losses tied to its pullback from consumer lending.
Chief executive David Solomon, who last year faced criticism for his management of the bank, said the first-quarter results were aided by the decision to “play to our core strengths”.
After initially spending heavily to expand Goldman’s consumer business, Solomon has refocused Goldman’s strategy on investment banking and trading businesses and prioritised asset and wealth management to generate more stable revenues.
“It was a very, very strong quarter,” said Christian Bolu, banking analyst at Autonomous Research. “It’s increasingly looking like they have been justified in their move to just focus on what they’re good at.”
The brightest spot was a blowout performance from trading.
Analysts had expected revenues in Goldman’s equity and fixed-income trading businesses to fall in the first quarter without tailwinds from recent triggers of market volatility such as Russia’s full-scale invasion of Ukraine and central banks lifting interest rates.
Instead, both businesses reported 10 per cent increases in revenues compared with a year earlier, benefiting from trading in mortgages, currencies and credit in the quarter. These were bigger gains than at rival banks JPMorgan Chase and Citigroup, which reported results last week.
Investment banking, meanwhile, had its best quarter in two years, with revenues of $2.1bn. This was up 32 per cent from a year earlier, although still well below the peak achieved during the pandemic-era boom in dealmaking.
Strong public market debuts from companies such as social media platform Reddit and artificial intelligence infrastructure group Astera Labs have also raised hopes for a revival in initial public offerings after two years of subdued activity.
“Where we stand today it’s clear that we’re in the early stages of reopening of the capital markets,” Solomon said.
The market for mergers and acquisitions has finally started to pick up after a slowdown that has proved far more enduring than many on Wall Street anticipated.
The number of takeovers worth at least $10bn more than doubled in the first three months of 2024, a rise in volume that will boost fees for investment banking advice and debt underwriting.
Goldman’s asset and wealth management division reported revenue of $3.8bn, up 18 per cent from a year earlier.
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Solomon said Goldman remained “constructive on the health of the US economy” but that persistent inflation, weakness in the commercial real estate market and escalating geopolitical tensions “could slow growth”.
“While the environment is constructive and markets expect a soft landing,” Solomon said, “the trajectory is still uncertain”.