Goldman Sachs profit tops estimates on robust debt underwriting, fixed-income trading
Adds CEO quote in paragraph 3,4, analyst quote in 6, CFO quotes in paragraph 22, updates stock price
By Saeed Azhar and Niket Nishant
NEW YORK, July 15 (Reuters) -Goldman Sachs' GS.N profit more than doubled in the second quarter and beat analysts' estimates on strong debt underwriting and fixed-income trading, but slipped from a bumper first quarter when earnings were the highest since 2021.
The resilience of the U.S. economy has given corporate executives the confidence to pursue acquisitions, debt sales and stock offerings.
"We remain very well-positioned to benefit from a continued resurgence in activity," said Goldman CEO David Solomon, who began a conference call with analysts by condemning the assassination attempt on former U.S. President Donald Trump.
While activity in capital markets and mergers is improving, it remains below historical averages, Solomon said.
Shares climbed as much as 2.3% to a record high, before paring gains to rise 0.3% in late morning trading.
The modest rise is partly because the bank's investment banking gains fell short of those at peers including JPMorgan Chase JPM.N and Citigroup C.N, said Stephen Biggar, an analyst at Argus Research.
Earnings rose to $3.04 billion, or $8.62 per share, for the three months ended June 30, about 3% higher than analysts' average expectation of $8.34 per share, according to LSEG.
Goldman is poised for higher earnings from investment banking fees given the significant increase in its backlog, Kenneth Leon, research director at CFRA Research and who has a buy rating on the stock, said in a note.
The results exceeded estimates bynarrower margins than in the prior two quarters, when Goldman reportedprofit that was35% and 56% higher than estimates.
Goldman's investment banking fees rose 21% to $1.73 billion in the quarter. Fees earned from advising on mergers and acquisitions (M&A) jumped 7%, while debt and stock underwriting climbed 39% and 25%, respectively.
On Friday, JPMorgan reported a 46% jump in investment banking revenue, whichjumped 60% at Citigroup.
REFOCUS ON WALL ST
Goldman's profit in the second quarter last year was also hit by writedowns related to GreenSky, afintech business that Goldman has since sold.
After its foray into consumer banking flopped, Goldman has refocused on its traditional mainstays - investment banking and trading. This year marks the 25-year anniversary of Goldman's initial public offering, the same year Solomon joined the firm.
Investors have supported Goldman's attempt to refocus on its Wall Street operations, pushing the Wall Street titan's stock up 24.4% so far this year. That compareswith 11.6% at rival Morgan Stanley MS.N and 20.5% at JPMorgan.
Goldman's revenue from fixed income, currency and commodities (FICC) trading rose 17%, boosted by FICC financing, or making loans to private equity investors and other large market participants.
FICC financing revenue climbed 37% to $850 million, just a shade below the record $852 million in the first quarter, driven by mortgages and structured lending.
Goldman has significantly increased short-term loans to private funds as part of a push since 2021.
Equities trading revenue increased 7% including financing activities. The asset and wealth management unit, which manages money on behalf of wealthy and institutional clients, reported revenue in the second quarter rose 27%.
The bank oversees $2.93 trillion of assets. In May, it signed a deal to manage the $43.4 billion pension fund portfolio of parcel delivery giant UPS UPS.N.
Platform solutions, the unit that houses some of Goldman's consumer operations, reported 2% higher revenue.
The bank's provisions for credit losses were $282 million for the second quarter, compared with $615 million a year earlier.
Goldman's Chief Financial Officer Denis Coleman told analysts the bank plans to "moderate" its stock buybacks. The bank bought back $3.5 billion worth of own stock in the second quarter.
The bank is also in talks with regulators about its recent results in a Federal Reserve's annual health check, Solomon said.
A bank's performance in the so-called "stress test" dictates the size of its stress capital buffer, an extra cushion of capital the Fed requires banks to hold to weather a hypothetical economic downturn. Goldman had one of the biggest increases in stress capital buffers at 94 basis points.
"The year-over-year increase in our stress capital buffer does not seem to reflect the strategic evolution of our business and the continuous progress we've made to reduce our stress loss intensity," Solomon said.
CREDIT CARDS
Goldman Sachs took a $58 million charge on the General Motors GM.N credit card business in the second quarter as it prepares to exit the partnership. Goldman had decided to sell the GM card loan portfolio last year.
GM is in talks to replace Goldman with Barclays BARC.L, a source familiar with the matter told Reuters in April.
A similar partnership with tech giant Apple AAPL.O is facing an uncertain future.
Credit cards were an important facet of Goldman's consumer strategy, but it decided to retreat from retail banking after suffering biglosses.
In its annual stress test, the Federal Reserve indicated credit cards could be a headache for banks. The potential losses on Goldman's credit card loans were among the worst under the central bank's hypothetical scenario.
Still, Goldman raised its quarterly dividend to $3 per share from $2.75 previously.
Reporting by Niket Nishant in Bengaluru and Saeed Azhar in New York, Editing by Lananh Nguyen, Sriraj Kalluvila and Deepa Babington
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.
