Oddly enough, Goldman didn’t capitalize on the beginnings of an IB renaissance in Q2. Or at least not to the extent some might’ve expected.
The firm said Monday that advisory fees were $688 million during the quarter, nearly $100 million short of consensus and just 7% higher YoY. That felt disappointing.
Thankfully, debt underwriting and ECM revenue jumped 39% and 25% YoY, respectively, preventing a wide IB miss.
Overall IB revenue of $1.733 billion rose more than 20% from the same period a year ago, but fell short of the $1.82 billion the Street expected.
The bank said its backlog “increased significantly” in recent months, but shareholders will be forgiven for any skepticism they might harbor. Goldman shouldn’t be missing in advisory at a time when dealmaking’s turning a corner. That’s a bad look, and it could cast further doubt on David Solomon’s managerial capacity.
Goldman’s trying to recapture the proverbial magic after Solomon’s ill-fated foray into consumer banking. It looked, last quarter, like the turnaround effort was paying off. Between them, IB and Markets (Goldman’s bread and butter) had their best quarter in years during Q1.
The IB miss for Q2 suggests the jury’s still out. Goldman needs to shine in dealmaking. It’s not that IB was “bad” in Q2, it’s just that when you’re Goldman, you’re operating on a Ricky Bobby motto: “If you’re not first, you’re last.”
On the bright side, trading was decent. FICC revenue of $3.18 billion for Q2 was up 17% YoY and counted as a small beat. Equities revenue of $3.17 billion likewise topped consensus, rising 7% from the same period a year ago.
The loss in Platform Solutions — which houses some of the remnants from Solomon’s big, bad idea — was $147 million, narrower than expected.
As the figure shows, the red ink’s drying up amid higher revenue but… well, that division’s never going to be a point of pride for the firm, let’s put it that way.
Overall, profit more than doubled YoY, but that’s not apples-to-apples. This time last year, Goldman was writing down bad property deals and fumbling for the exit door out of Solomon’s consumer nightmare. Firmwide revenue of $12.73 billion was a modest beat for Q2.
Solomon on Monday said he was “pleased” with the results, which he described as “solid.” To be as blunt as absolutely possible: “Solid” wouldn’t be good enough for any other Goldman employee, so why’s it good enough for Solomon?
