Amidst robust debt underwriting and fixed-income trading, Goldman Sachs' profit more than doubled in the second quarter and above analysts' projections. However, the company's first-quarter earnings, which were at their highest since 2021, declined.
Corporate leaders now feel more confident to explore stock offers, debt sales, and acquisitions because to the durability of the US economy.
Goldman CEO David Solomon opened a conference call with analysts by denouncing the attempt on the life of former US President Donald Trump. "We remain very well-positioned to benefit from a continued resurgence in activity," Solomon stated.
Even if merger and capital market activity is increasing, Solomon noted that it is still below historical levels.
Before cutting gains to advance 0.3% in the late morning trading, shares increased by \s much as 2.3% to a record high.
According to Stephen Biggar, an analyst at Argus Research, the low increase is mostly due to the bank's investment banking gains not meeting those of rivals like JPMorgan Chase, and Citigroup.
For the three months ending June 30, earnings increased to $3.04 billion, or $8.62 per share, according to LSEG. This was around 3% more than analysts' average prediction of $8.34 per share.
Kenneth Leon, research director at CFRA Research, who rates the company as buy and believes that Goldman is primed for stronger profitability from investment banking fees, wrote in a note.
Compared to the previous two quarters, when Goldman reported profit that was 35% and 56% greater than projections, the results beat expectations by smaller margins.
During the quarter, Goldman's investment banking fees increased by 21% to $1.73 billion. Fees for M&A advisory services increased by 7%, while fees for debt and stock underwriting increased by 39% and 25%, respectively.
JPMorgan revealed on Friday a 46% increase in investment banking income, while Citigroup saw a 60% increase.
Writedowns connected to GreenSky, a fintech company that Goldman has since sold, also negatively impacted the company's second-quarter earnings last year.
Goldman has returned its attention to its core competencies, trading and investment banking, following the failure of its consumer banking venture.
This year commemorates the 25th anniversary of Goldman Sachs' first public offering, which happened the year Solomon started working for the company.
Goldman's decision to refocus on its Wall Street activities has been well received by investors, as seen by the Wall Street titan's shares rising 24.4% so far this year. This contrasts with 20.5% at JPMorgan and 11.6% at competitor Morgan Stanley (MS.N), opens new tab.
Goldman's profits from trading fixed income, currencies, and commodities (FICC) increased by 17% as a result of FICC financing, or lending money to major market players and private equity investors.
Driven by mortgages and structured loans, FICC finance income increased 37% to $850 million, barely shy of the record $852 million in the first quarter.
Since 2021, Goldman has made a major drive to boost short-term loans to private funds.
Revenue from equity trading rose 7% when financing operations were taken into account. The segment responsible for managing the assets and wealth of affluent and institutional customers saw a 27% increase in revenue during the second quarter.
The bank is in charge of assets worth $2.93 trillion. The package delivery company UPS signed a contract in May to administer the $43.4 billion pension fund portfolio.
The division that houses a portion of Goldman's consumer business, platform solutions, reported a 2% increase in sales.
In the second quarter, the bank's provisions for credit losses were $282 million, down from $615 million in the same period last year.
Denis Coleman, the chief financial officer of Goldman Sachs, informed analysts that the bank intends to "moderate" its buyback of stock. In the second quarter, the bank repurchased $3.5 billion worth of its own shares.
According to Solomon, the bank is also in discussions with authorities on its recent performance in the Federal Reserve's annual health check.
The amount of a bank's stress capital buffer, an additional capital cushion the Fed mandates banks maintain to withstand a fictitious economic downturn, is determined by how well the bank does in the so-called "stress test". At 94 basis points, Goldman had one of the largest increases in stress capital buffers.
"The year-over-year increase in our stress capital buffer does not seem to reflect the strategic evolution of our business and the continuous progress we've made to reduce our stress loss intensity," Solomon said.
As it is ready to leave the partnership, Goldman Sachs took a $58 million charge on General Motors credit card business in the second quarter. Last year, Goldman made the decision to liquidate the portfolio of GM card loans.
According to a person familiar with the situation who spoke to Reuters in April, GM is in discussions to replace Goldman with Barclays.
The future of a such collaboration with IT behemoth Apple is unclear.
A key component of Goldman's consumer strategy was credit cards, but the company withdrew from retail banking after incurring significant losses.
The Federal Reserve said that credit cards can cause banks trouble in its yearly stress test.
According to the central bank's theoretical scenario, Goldman's credit card loans had among of the worst possible prospective losses.
Nevertheless, Goldman increased its quarterly dividend from $2.75 to $3 per share.
(Source:www.bloomberg.com)
Corporate leaders now feel more confident to explore stock offers, debt sales, and acquisitions because to the durability of the US economy.
Goldman CEO David Solomon opened a conference call with analysts by denouncing the attempt on the life of former US President Donald Trump. "We remain very well-positioned to benefit from a continued resurgence in activity," Solomon stated.
Even if merger and capital market activity is increasing, Solomon noted that it is still below historical levels.
Before cutting gains to advance 0.3% in the late morning trading, shares increased by \s much as 2.3% to a record high.
According to Stephen Biggar, an analyst at Argus Research, the low increase is mostly due to the bank's investment banking gains not meeting those of rivals like JPMorgan Chase, and Citigroup.
For the three months ending June 30, earnings increased to $3.04 billion, or $8.62 per share, according to LSEG. This was around 3% more than analysts' average prediction of $8.34 per share.
Kenneth Leon, research director at CFRA Research, who rates the company as buy and believes that Goldman is primed for stronger profitability from investment banking fees, wrote in a note.
Compared to the previous two quarters, when Goldman reported profit that was 35% and 56% greater than projections, the results beat expectations by smaller margins.
During the quarter, Goldman's investment banking fees increased by 21% to $1.73 billion. Fees for M&A advisory services increased by 7%, while fees for debt and stock underwriting increased by 39% and 25%, respectively.
JPMorgan revealed on Friday a 46% increase in investment banking income, while Citigroup saw a 60% increase.
Writedowns connected to GreenSky, a fintech company that Goldman has since sold, also negatively impacted the company's second-quarter earnings last year.
Goldman has returned its attention to its core competencies, trading and investment banking, following the failure of its consumer banking venture.
This year commemorates the 25th anniversary of Goldman Sachs' first public offering, which happened the year Solomon started working for the company.
Goldman's decision to refocus on its Wall Street activities has been well received by investors, as seen by the Wall Street titan's shares rising 24.4% so far this year. This contrasts with 20.5% at JPMorgan and 11.6% at competitor Morgan Stanley (MS.N), opens new tab.
Goldman's profits from trading fixed income, currencies, and commodities (FICC) increased by 17% as a result of FICC financing, or lending money to major market players and private equity investors.
Driven by mortgages and structured loans, FICC finance income increased 37% to $850 million, barely shy of the record $852 million in the first quarter.
Since 2021, Goldman has made a major drive to boost short-term loans to private funds.
Revenue from equity trading rose 7% when financing operations were taken into account. The segment responsible for managing the assets and wealth of affluent and institutional customers saw a 27% increase in revenue during the second quarter.
The bank is in charge of assets worth $2.93 trillion. The package delivery company UPS signed a contract in May to administer the $43.4 billion pension fund portfolio.
The division that houses a portion of Goldman's consumer business, platform solutions, reported a 2% increase in sales.
In the second quarter, the bank's provisions for credit losses were $282 million, down from $615 million in the same period last year.
Denis Coleman, the chief financial officer of Goldman Sachs, informed analysts that the bank intends to "moderate" its buyback of stock. In the second quarter, the bank repurchased $3.5 billion worth of its own shares.
According to Solomon, the bank is also in discussions with authorities on its recent performance in the Federal Reserve's annual health check.
The amount of a bank's stress capital buffer, an additional capital cushion the Fed mandates banks maintain to withstand a fictitious economic downturn, is determined by how well the bank does in the so-called "stress test". At 94 basis points, Goldman had one of the largest increases in stress capital buffers.
"The year-over-year increase in our stress capital buffer does not seem to reflect the strategic evolution of our business and the continuous progress we've made to reduce our stress loss intensity," Solomon said.
As it is ready to leave the partnership, Goldman Sachs took a $58 million charge on General Motors credit card business in the second quarter. Last year, Goldman made the decision to liquidate the portfolio of GM card loans.
According to a person familiar with the situation who spoke to Reuters in April, GM is in discussions to replace Goldman with Barclays.
The future of a such collaboration with IT behemoth Apple is unclear.
A key component of Goldman's consumer strategy was credit cards, but the company withdrew from retail banking after incurring significant losses.
The Federal Reserve said that credit cards can cause banks trouble in its yearly stress test.
According to the central bank's theoretical scenario, Goldman's credit card loans had among of the worst possible prospective losses.
Nevertheless, Goldman increased its quarterly dividend from $2.75 to $3 per share.
(Source:www.bloomberg.com)