Revenue at Goldman Sachs rose in the second quarter as a strong performance in its asset management unit made up for a slowdown in the trading bonanza that boosted the Wall Street bank’s earnings in the early months of the Covid-19 pandemic.
Goldman’s total revenues were $15.4bn, up 16 per cent from a year ago and ahead of analysts’ forecasts of $12.4bn, according to consensus data compiled by Bloomberg.
Earnings per share were $15.02, up from $0.53 in the same quarter last year, when Goldman set aside $1.59bn of provisions for potential loan losses stemming from the coronavirus crisis. Analysts had forecast earnings of $10.14 per share for this quarter.
Helping to drive the earnings success was Goldman’s asset management business, which houses its fund for private equity investments. The division reported revenues of $5.1bn, up 144 per cent from a year ago and well ahead of forecasts for $2.8bn. The bank said it generated record quarterly net revenues from its private equity investments.
Fees earned in investment banking rose, thanks to a surge in merger and acquisition activity. Revenues in its investment banking unit were $3.6bn, up 36 per cent year on year and ahead of analysts’ estimates of $3.1bn.
However, revenue at Goldman’s markets business fell 32 per cent year on year to $4.9bn in the second quarter as the vaccines rollout boosted investor confidence and tamed market volatility. Analysts had forecast revenues of $5bn.
Markets revenues soared earlier in the pandemic as investors repositioned their portfolios to keep pace with the price swings caused by uncertainty around the virus’s economic impact and stimulus from the US Federal Reserve.
This was a windfall for Goldman, which handles transactions for clients trading equities, fixed income, currencies and commodities.
Goldman chief executive David Solomon struck a cautious note on the bank’s outlook on Tuesday, saying: “While the economic recovery is under way, our clients and communities still face challenges in overcoming the pandemic.”
Eighteen months ago Goldman outlined plans at its first investor day to focus on consumer and transaction banking so that it became less dependent on its trading and investment banking.
Revenue in the consumer and wealth management unit, which includes its online bank Marcus and its Apple credit card, was up 28 per cent at $1.7bn, in line with analysts’ forecasts. The division reported earnings of $363m, up 41 per cent.
Annualised return on equity for the quarter was 23.7 per cent, ahead of the 14 per cent medium-term target Goldman laid out in 2020.
The bank said it had approved a 60 per cent increase in its quarterly dividend to $2 per common share, starting from the third quarter. It also repurchased $1bn worth of stock in the second quarter.
“The only ‘disappointment’ in the quarter was that there was only $1bn of share repurchases versus our $3.2bn estimate,” Oppenheimer analysts wrote in a note.
Shares in the bank were up about 0.2 per cent in pre-market trading.