Goldman Counters Trading Lull With Dealmaking, Investment Gains

Trading revenue at Goldman trailed estimates in the second quarter, the bank said Tuesday.

FICC revenue of $2.32 billion was down 45% YoY and came in well below the $2.49 billion the market expected. I’d reiterate that the comp with 2020’s second quarter is largely meaningless. Earlier, JPMorgan posted FICC results that were similarly underwhelming.

Equities revenue at Goldman was down 12% YoY to $2.58 billion. That was slightly better than expected. All in all, trading revenue of $4.9 billion (figure below) was a miss. The market wanted $5 billion or better.

Goldman attributed the FICC disappointment to… well, to everything, really. Revenues were “significantly lower” in interest rate products, credit products and commodities, as well as in mortgages and currencies. Revenues were also lower in FICC financing.

Like JPMorgan, IB was strong at Goldman. Net revenue of $3.61 billion was up 36% YoY and was the second-highest on record, behind only Q1. Advisory revenues jumped 83% (13% sequentially) thanks to completed M&A. Equity underwriting was robust on strong IPO activity, even as secondaries declined “significantly.” Backlogs were up sharply from year-end and hit a record at the end of June, the bank said. In debt underwriting, Goldman noted a decrease in high-grade issuance.

In asset management (which used to be Investment Management before Goldman revamped how it breaks down results by division), revenues more than doubled.

Goldman’s equity investments produced record revenues of $3.72 billion (figure above). That was mostly attributable to gains in private equities, where “company-specific events, including capital raises and sales” were a boon.

Panning out, net revenue firmwide was $15.39 billion, up 16% YoY and far better than even the highest estimate. The range for Q2 was $10.97 billion to $13.54 billion. EPS was $15.02. Net earnings were $5.49 billion. All of those figures were the second-highest on record.

Goldman proudly noted that the bank is “#1 in worldwide announced and completed M&A, worldwide equity and equity-related offerings, common stock offerings and IPOs” YTD. They’re still making inroads in consumer too, by the way. Revenues hit a record in Consumer & Wealth Management at $1.75 billion. They also increased the dividend.

In the usual perfunctory assessment, David Solomon said he’s “proud” of the bank’s “people.” Just another quarter spent doing “God’s work.”