Business World

Monday 26 June 2017

Goldman Sachs profits almost double

Christine Harper

Goldman Sachs has reported first-quarter earnings that surpassed analysts’ estimates on record fixed-income trading revenue.

Net income almost doubled to $3.46bn from $1.81bn a year earlier, the New York-based bank said today in a statement.

The results showed Goldman Sachs maintained its dominance in fixed-income trading, the biggest source of Wall Street’s revenue.

Chief Executive Officer Lloyd Blankfein is trying to preserve the bank’s place as the most profitable investment bank in Wall Street history while defending it against regulators’ claims that the company misled investors in 2007.

“Goldman is continuing to take market share, and I think that’s the key move for them coming out of the financial crisis,” Jason Tyler, senior vice president at Ariel Investment LLC, which manages $5bn, said in a Bloomberg Television interview.

“Goldman is a clear winner as people are trying to figure out who they are going to do business with.”

Shareholders said concern about potential fallout from the accusations would supersede news about earnings.

The stock, which fell 13pc after the SEC filed its case on April 16, climbed 1.6pc yesterday on news that the SEC was split over whether to file the suit.

The shares rose to $163.45 at 7:48am from $163.32 at the close on the New York Stock Exchange yesterday.

Goldman Sachs said revenue from fixed-income, currencies and commodities trading, which contributed more than half of revenue last year, rose 13pc in the first quarter to an all-time high of $7.39bn from $6.56bn.

That beat estimates for $5.95bn from Howard Chen at Credit Suisse Group AG and $6.09bn from Roger Freeman at Barclays Capital.

Bank of America

Bank of America and JPMorgan, the two biggest US banks by assets, both reported record fixed-income revenue last week of $5.52bn and $5.46bn respectively.

“We’re looking at a great year for capital markets firms,” Thomas Brown, CEO of Second Curve Capital LLC and founder of bankstocks.com, said yesterday.

Equities-trading revenue rose 18pc to $2.35bn from $2bn a year earlier, Goldman Sachs said.

Gains from principal investments, which includes the company’s stakes in Industrial & Commercial Bank of China Ltd as well as property and other companies, were $510m compared with a net loss of $1.41bn in the first quarter of 2009.

Investment-banking revenue climbed 44pc to $1.18bn from $823m last year.

Within that, fees from financial advice fell 12pc to $464m from $527m and equity-underwriting revenue surged to $371m from $48m.

Debt underwriting generated $349m compared with $248m a year earlier.

Compensation and benefits, the firm’s biggest expense, increased 17pc to $5.49bn in the quarter, or 43pc of the firm’s overall revenue.

The cost compared with $4.71bn in the first quarter of 2009, when the firm set aside 50pc of revenue.

The bank said the percentage of quarterly revenue put aside for compensation expense was the lowest for any first quarter.

Bloomberg

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