Goldman Sachs beats expectations as investment bank shows signs of recovery

A nascent recovery in investment banking helped Goldman Sachs outperform expectations, with quarterly profit rising 28 per cent to $4.1bn in the first quarter of the year.

Goldman reported revenue of $14.2bn in the first quarter, up 16 per cent on last year and comfortably ahead of analyst expectations. The bank noted this reflected higher revenue across “all segments”.

The results showed signs of a recovery in investment banking, with revenues in the division up 32 per cent compared to last year, thanks to a few more IPOs and takeovers.

Goldman traditionally makes most of its money from investment banking, which means it has struggled over the past two years as higher interest rates and geopolitical uncertainty have sent M&A volumes tumbling.

Data from Bain showed the value of M&A globally dropped 36 per cent last year to a decade low. In response to falling, Goldman cut its headcount by seven per cent over the course of 2023.

Revenue also increased in both equity and fixed-income trading, surprising analysts who had expected revenue to fall.

“Our first quarter results reflect the strength of our world-class and interconnected franchises and the earnings power of Goldman Sachs. We continue to execute on our strategy, focusing on our core strengths to serve our clients and deliver for our shareholders,” chief executive David Solomon said.

In its asset and wealth management arm, which Solomon has tried to develop in order to diversify the bank’s sources of income, revenue jumped 18 per cent.

The bank set aside $318m for credit losses in the first quarter compared to a net release of $171m in the first quarter of last year.

“Provisions for the first quarter of 2024 reflected net provisions related to both the credit card portfolio (driven by net charge-offs) and wholesale loans (driven by impairments),” Goldman said.