Did Goldman just rediscover the magic?
Wall Street’s most “revered” firm turned in a set of results on Monday morning in the US which looked more like “old” Goldman than David Solomon’s new Goldman. It’s fair to suggest shareholders vastly prefer old Goldman. New Goldman went over about like New Coke.
Note the scare quotes I used around the word “revered.” I can’t use that word (or any synonym) to describe Goldman unless I include an asterisk. Some readers demand I acknowledge the ostensible veracity of derisive accounts which insist the firm’s better conceptualized as a nefarious cephalopod which consumes the blood of the world for subsistence. That characterization was popularized 15 years ago by forever-teenager Matt Taibbi. Matt’s not going to grow up. The rest of us can, though.
For Q1, Goldman beat on every line that counts, and handily on some of them. FICC revenue was $4.32 billion, easily ahead of the $3.64 billion consensus and up 10% YoY.
Equities revenue of $3.31 billion likewise rose 10% and came in comfortably ahead of expectations.
The IB breakdown showed more than a billion in advisory revenue. Consensus was $874 million. Debt and equity underwriting were both beats at $699 million and $370 million, respectively, against consensus of $611 million and $331 million. Total IB fees of $2.08 billion were 32% higher versus Q1 of 2023. Goldman’s backlog shrank sequentially, though.
Simply put: This was the best quarter for Goldman’s Markets and IB segment (i.e., the segment that matters) since the onset of Fed hikes in March of 2022. Total revenue there was $9.73 billion, or ~68% of total revenue which, at $14.213 billion, was more than a billion ahead of consensus. EPS of $11.58 beat by nearly $3.
Notably, the bank’s loss in Platform Solutions (the beleaguered home to some of Solomon’s consumer dreams before they turned into nightmares) was much smaller than expected.
The unit lost just $117 million pretax in Q1, by far the narrowest yet. Revenue hit a record near $700 million.
It’s hard to say whether Goldman’s Q1 results simply reflect more favorable market conditions or if Solomon’s “year of execution” (as he dubbed 2023) is paying off. Shareholders will take it either way I imagine.
On Monday, Solomon emphasized that the bank’s continuing to focus on its “core strengths” which, again, is good news for shareholders. Because Goldman’s “core strength” is minting money in IB and Markets. The rest is just a distraction. Solomon appears to understand that now.
