Three months ago, Goldman reported what we described as a “mehh” set of results for Q1.
Basically, the bank cleared a low bar, as David Solomon embarked on what he’s called “an evolutionary path” that hopefully won’t lead to a dead end.
Fast forward to Q2 and the bottom line beat looks some semblance of impressive. EPS was $5.81 versus consensus of $4.93. Net revenue was $9.46 billion, down 2% YoY.
As far as trading goes, FICC was $1.47 billion, which represents a 13% YoY drop. That doesn’t sound great, and neither does the rationale. Goldman cites “significantly lower net revenues in interest rate products” (that’s in an environment of higher volatility) as well as weakness in currencies and lower net revenues in credit products. That was at least partly mitigated by higher net revenues in commodities and mortgages (with the latter likely helped by the turbulent rates landscape).
On the bright side, equities sales and trading revenue beat, coming in at $2.01 billion. That’s up 6.3% YoY and well ahead of the $1.79 billion the street was looking for. Goldman cites “an environment generally characterized by improved client activity compared with the first quarter of 2019”, which may help them stand apart from peers – at least on this front.
So far, Goldman is the only bank to post a YoY increase in equities trading.
Overall, trading revenue was $3.48 billion, down 2.5% YoY.
Investing and Lending was strong, with revenue of $2.53 billion for the quarter. That’s up 16% YoY and 38% sequentially. The breakdown there shows equities revenues rising 20% to $1.54 billion (on “significantly higher net gains from investments in public equities”) and debt/loans revenues rising 10% YoY on higher NII. It was the best quarter in eight years for the segment.
IB revenue of $1.86 billion fell nearly 9%, missing estimates by a hair.
Equity underwriting revenues were flat YoY, which means you can blame weakness in debt markets for the 12% drop in underwriting revenue (to $1.09 billion). Goldman cites “lower net revenues from investment-grade and leveraged finance activity”. Debt underwriting revenues plunged 20% from Q2 2018.
Goldman reminds you that they are #1 in worldwide announced and completed M&A YTD and #1 in worldwide equity and equity-related offerings and common stock offerings, too.
Solomon delivered a wholly meaningless assessment:
We’re encouraged by the results for the first half of the year as we continue to invest in new businesses and growth to serve a broader array of clients. Given the strength of our client franchise, we are well positioned to benefit from a growing global economy. And, our financial strength positions us to return capital to shareholders, including a significant increase in our quarterly dividend in the third quarter.
The shares were higher on the results which, again, look solid enough.