(Bloomberg) — Goldman Sachs Group Inc.’s traders countered the industry’s dealmaking slump with revenue gains that raced past analysts’ estimates.
The trading operation posted a 32% surge in second-quarter revenue that included another banner period for fixed income, which jumped 55%, the New York-based firm said Monday in a statement.
The gains helped ward off the steep slowdown in investment banking as the volatility that spurred gains for its trading group weighed on the capital-markets and asset-management businesses.
Goldman was the last of the six biggest US banks to post results, with investors scouring the reports for clues on the health of the economy. Company executives last week said the US is well-positioned to withstand fallout from surging inflation, even if rising interest rates push the economy into a recession in coming quarters. Bank bosses warned that a potent mix of hurdles are still a threat, including inflation and the impact of Russia’s invasion of Ukraine.
Goldman shares have dropped about 23% this year, pushing its price-to-book value below 1 — an unwelcome development that tracks how investors value the firm’s net assets. The stock climbed 2.7% to $301.94 at 7:30 a.m. in early New York trading.
Investment-banking revenue fell 41%, reflecting a sharp drop in underwriting, a decline that had been well-telegraphed as clients steered clear of capital markets. Analysts were expecting it to fall 46%.
One factor has been the implosion of the SPAC market as Goldman and other banks fled what had been a red-hot market for the blank-check vehicles they helped create. Goldman even pulled out of working with most SPACs it took public, spooked by new liability guidelines.
Asset-Management Drop
The firm’s asset-management business, which includes the alternatives-investing platform, turned in revenue of $1.08 billion, a 79% drop. The unit tends to post volatile results because its own balance-sheet investments drive performance. The bank has signaled its intent to turbocharge fundraising to get to a place where fees from managing outside capital outweigh investments.
The unit is facing a probe by the Securities and Exchange Commission focusing on the mutual-funds business in its asset-management arm. The inquiry is focused on whether some investments are in breach of metrics promised in marketing materials regarding environmental, social and governance criteria.
The consumer and wealth business posted revenue of $2.18 billion, a 25% increase from a year earlier.
At its debut investor day in 2020, Goldman said its consumer business would break even by this year. It has pushed out that target and budgeted losses exceeding $1.2 billion this year, according to people with knowledge of the matter. The addition of new business lines, pandemic effects and the need to set aside more reserves in line with new accounting rules have contributed to that miss.
Other key results:
- Net income dropped 47% to $2.93 billion, or $7.81 a share.
- Companywide revenue of $11.9 billion compared with an average estimate of $10.7 billion.
- Equity-trading rose 11% to $2.86 billion.
- Debt-underwriting revenue fell 52% to $457 million while the firm pulled in $131 million from equity underwriting, a tumble of 89%.
©2022 Bloomberg L.P.
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