Goldman Sachs considers windfall as earnings crush expectations



July 13 (Reuters) – Executives at Goldman Sachs Group Inc (GS.N) said a record backlog of transactions will help generate profits for the rest of the year after the bank smashes second quarter estimates .

Deals worth $ 1.5 trillion were announced in the three months to June 30 despite a slowdown in blank check company activity, more than any second quarter on record and up 13 % from record first quarter of the year, according to data from Refinitiv.

Goldman CEO David Solomon expects the deal’s windfall to continue as business leaders seek to reposition their businesses for the post-pandemic world, he told analysts during a conference call.

“Strategic discussions with our corporate clients remain high, reflecting the high confidence of CEOs and the prospect of continued economic recovery,” he said. “We see a very broad commitment throughout our franchise.”

A warning has been issued about the potential impact of President Joe Biden’s executive order signed last Friday, urging agencies to crack down on anti-competitive practices – a move that could make deals more difficult.

“This is something that we will have to watch very, very closely,” Solomon said, adding that he expected “a lot of discussion” about whether the big tech companies will be allowed to merge.

Goldman’s investment banking income rose 36% to $ 3.61 billion in the last quarter.

The bank comfortably held onto its top spot in global M&A advisory rankings, according to Refinitiv. The league tables rank financial services companies based on the amount of merger and acquisition costs they generate.

Total net sales jumped 16% to $ 15.39 billion, while diluted earnings per common share of $ 15.02 beats estimates by $ 10.24, according to Refinitiv’s IBES estimate.

Trade, however, has been a sour point, as the bank made difficult comparisons to a year ago when the COVID-19 pandemic first hit, sending markets into a frenzy.

The global markets activity, which houses the trading activity, recorded a 32% drop in turnover.

Net income from rates, commodities and currencies (FICC) trading fell 45%. Net income from equity trading fell 12%.

JPMorgan Chase & Co (JPM.N), America’s largest bank, also suffered from a well-reported slowdown from record business results last year. Read more

Goldman is among the best performing banking stocks, up 42% since the start of the year. The bank has benefited from this year’s stock market boom, but analysts are wondering if it will continue to cash in when markets return to normal.

Bank executives say changes to the business, including serving a wider range of corporate clients, have led to market share gains that Goldman can maintain even when conditions get tougher.

“We gained 160 basis points of market share in the first quarter, which allows us to take a greater share of whatever the broader commercial market offers us,” Solomon said.

The bank reiterated its confidence in meeting the targets set on its very first Investor Day last year, including generating $ 1.3 billion in expense savings.

Revenues from its consumer banking operations, a target for Solomon as it seeks to diversify the business, increased 41% in the quarter, reflecting higher deposit and credit card balances.

Reporting by Noor Zainab Hussain in Bengaluru and Matt Scuffham in New York; Editing by Sriraj Kalluvila and Nick Zieminski

Our Standards: Thomson Reuters Trust Principles.



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