Goldman's profit tops estimates as market turbulence powers record equities revenue

Reuters

2 days ago

July 16 (Reuters) - Goldman Sachs' (GS.N), opens new tab second-quarter profit exceeded Wall Street expectations, as turbulent markets lifted revenue from its equities division to a record and a pickup in dealmaking boosted investment banking.
The results capture a growing trend of market turmoil boosting trading desks across Wall Street as investors rebalance their portfolios to manage tariff-related risks.
Goldman's equities revenue rose 36% to $4.3 billion, higher than the $3.6 billion analysts were expecting, according to estimates compiled by LSEG.
Fixed income, currencies and commodities business hauled in $3.47 billion, 9% higher than a year ago. Financing revenue in both equities and FICC hit a record.
While shifting tariff risks kept some companies on the sidelines, pent-up demand for dealmaking triggered a flurry of acquisitions.
Still, the return of trade policy uncertainty in recent weeks has revived concerns about how long the momentum would last.
"The economy and markets are generally responding positively to the evolving policy environment. But as developments rarely unfold in a straight line, we remain very focused on risk management," Goldman CEO David Solomon said in a statement.
Goldman's investment banking fees stood at $2.19 billion, rising 26% from a year ago. Analysts were expecting a nearly 10% jump.
"The well-above consensus rise in investment banking was (a surprise), with a lot of analysts snookered into thinking that macro uncertainty would hold back this line item more than it did," said Stephen Biggar, director of financial services research at Argus Research.
Advisory fees were significantly higher due to strength in the Americas and Europe, the Middle East and Africa, the bank said.
Revenue from debt underwriting fell slightly, while equities underwriting was unchanged.
Overall profit rose 22% to $3.7 billion, or $10.91 per share, for the three months ended June 30,exceeding estimate of $9.53.
Goldman's rivals JPMorgan Chase (JPM.N), opens new tab and Citigroup (C.N), opens new tab too had reported strong trading gains on Tuesday.
Revenue from Goldman's asset and wealth management arm, which caters to institutions and high net-worth individuals, dipped 3% to $3.78 billion due to weakness in equity and debt investments.
The business is important for Goldman as it can offer steadier revenue than trading and investment banking.
The bank set aside $384 million as provisions for credit losses, compared with $282 million last year, mainly related to its credit card portfolio.
Headcount fell to 45,900, 2% lower than the first quarter. The bank had planned to trim its staffing by 3% to 5% in an annual performance review process.
Shares rose 0.9% before the market open. They have climbed 23% this year, making them the fifth best performer in the S&P 500 financial index (.SPSY), opens new tab.
The stock boost has partly been driven by shareholder confidence in recent weeks after the bank cleared the Federal Reserve's annual stress test, paving the way for it to increase its dividend, opens new tab by $1 a share from the third quarter.