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Goldman Sachs tops analyst estimates as trading desks crush expectations amid surging volatility
David M. Solomon, Chairman and CEO of Goldman Sachs, speaks during the Milken Institute’s 22nd annual Global Conference in Beverly Hills, April 29, 2019
Mike Blake | Reuters
Goldman Sachs posted first-quarter results that blew past expectations as its traders navigated a surge in market volatility sparked by the war in Ukraine.
Here’s are the numbers:
- Earnings: $10.76 per share, vs. $8.89 estimate, according to Refinitiv
- Revenue: $12.93 billion, vs. $11.83 billion estimate.
The bank said Thursday that profit fell 42% to $3.94 billion, or $10.76 per share, from a year earlier on lower investment banking fees. While revenue sagged 27% to $12.93 billion, that was a full $1 billion more than analysts had expected for the quarter.
Goldman shares climbed almost 3% in premarket trading.
“It was a turbulent quarter dominated by the devastating invasion of Ukraine,” CEO David Solomon said in the release. “The rapidly evolving market environment had a significant effect on client activity as risk intermediation came to the fore and equity issuance came to a near standstill. Despite the environment, our results in the quarter show we continued to effectively support our clients.”
Goldman Sachs, a top global investment bank, seems to have exceeded other Wall Street firms in benefiting from the sudden market upheaval caused by the Ukraine conflict. JPMorgan Chase, Morgan Stanley and Citigroup all posted results that topped expectations thanks to better-than-expected trading, but the magnitude of Goldman’s beat was larger than some of the rivals.
Goldman’s fixed income desk produced $4.72 billion in first-quarter revenue, nearly $1.7 billion more than analysts surveyed by StreetAccount expected, thanks to strong activity in currencies and commodities, the bank said. Equities desks produced $3.15 billion in revenue, about $570 million more than expected.
Goldman Sachs has been one of the big beneficiaries of a torrid two years of Wall Street deals activity, putting up record revenue figures and blowing past performance targets.
The results showed the bank’s trading side stepped in to make up for a slowdown in mergers, IPOs and debt issuance slowed in the first quarter.
Goldman Sachs is the world’s biggest mergers advisor by revenue and is the most Wall Street-dependent firm among the six biggest U.S. banks. One of Solomon’s biggest priorities has been to diversify the firm’s revenue streams, boosting consumer banking, wealth and asset management operations.
Analysts will be keen to ask Solomon how the deals pipeline looks for the remainder of 2022, and if mergers and IPOs are being killed, or merely pushed back into future quarters.
Another area of concern for the bank is trading, where spikes in volatility and market dislocations caused by the Ukraine war may have benefited some traders, while leaving others holding losses. It remains to be seen whether the quarter’s tumult led to the type of volatility that encouraged clients to trade, or it left them on the sidelines.
In February, Solomon increased the bank’s guidance for returns and targets in wealth and asset management divisions after handily exceeding goals set in early 2020.
Goldman shares have fallen 15.8% this year through Thursday, compared with the 10.5% decline of the KBW Bank Index.
On Wednesday, JPMorgan said first-quarter profit slumped 42% as it posted losses tied to Russia sanctions and set aside money for future loan losses.
This story is developing. Please check back for updates.