Goldman Sachs (GS.N) reported a notable first-quarter profit that surpassed Wall Street expectations, fueled by a recovery in its core areas of underwriting, deals, and bond trading.
The investment banking giant saw its earnings per share rise to $11.58, marking the highest level since late 2021, significantly ahead of the expected $8.56. This boost led to a 3% increase in its stock value on Monday.
The bank’s first-quarter profit soared by 28% to $4.13 billion, reflecting a robust recovery in investment banking, particularly after a two-year slowdown.
This performance contrasts with its rival, Morgan Stanley, which saw nearly a 7% decrease in its stock this year. In comparison, Goldman’s shares have climbed over 4%.
CEO David Solomon highlighted the early signs of capital market revitalization, noting a rising risk appetite for initial public offerings and robust debt underwriting activities.
“We continue to be constructive on the health of the U.S. economy,” Solomon expressed during an investor call.
Analysts have responded positively, with Chris Kotowski from Oppenheimer describing the earnings as a “near-perfect print,” citing better-than-expected performance across most profit drivers.
Stephen Biggar of Argus Research pointed out the potential relief for Solomon from recent setbacks in consumer banking, which led to significant financial losses and senior management changes.
Goldman’s leadership in advising on major deals was evident in its involvement in significant transactions like Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources.
Solomon also anticipates an increase in deal activity, driven by pressure from private equity firms. “The LP community is putting a lot of pressure on the financial sponsor community to return more capital,” he noted.
Amid these developments, Goldman Sachs is also advising clients on emerging technologies, particularly artificial intelligence, which has seen increased investor interest spurred by innovations like OpenAI’s ChatGPT.
Solomon emphasized the demand for AI-related infrastructure, noting that a thoughtful approach to technology and risk management is crucial.
The bank’s revenue streams showed healthy growth, with investment banking fees up 32% to $2.08 billion, and trading revenues from fixed income, currencies, and commodities increasing by 10% to $4.32 billion. Equities revenue also saw a 10% rise to $3.31 billion.
The asset and wealth management division achieved record management fees of $2.45 billion, with total assets under supervision rising to a record $2.85 trillion. In restructuring efforts, the Platform Solutions unit, part of Goldman’s consumer operations, reported a 24% revenue increase.
Despite challenges, including a proposal by Institutional Shareholder Services to split Solomon’s roles as chairman and CEO due to previous missteps, the company continues to streamline its consumer business, aiming for profitability by 2025.
David Wagner of Aptus Capital Advisors noted, “We are witnessing tangible strides by the company as it continues to transition away from the consumer banking segment allowing it to focus on the traditional side of the business.”
This quarter’s results may represent just the beginning of a clearer trajectory for Goldman Sachs as it refocuses on its core strengths.