Goldman’s profit tumbled 46%, but bank posts strongest bond-trading results in 5 years




By Hugh Son


KEY POINTS


  • Goldman Sachs on Wednesday said first quarter profit dropped 46% as the coronavirus pandemic wiped out results in its asset management division. 

  • The bank said it earned $1.21 billion in the quarter, or $3.11 a share, missing the $3.35 estimate of analysts surveyed by Refinitiv.

  • While results were dragged down by losses in debt and equity holdings housed in the asset management business, the firm’s trading division exceeded expectations, helping companywide revenue of $8.74 billion top the $7.92 billion estimate. 

  • Goldman shares slipped 3.3% in premarket trading. 


Goldman Sachs on Wednesday said first quarter profit dropped 46% as the coronavirus pandemic wiped out results in its asset management division. 

The bank said it earned $1.21 billion in the quarter, or $3.11 a share, missing the $3.35 estimate of analysts surveyed by Refinitiv. While results were dragged down by losses in debt and equity holdings housed in the asset management business, the firm’s trading division exceeded expectations, helping companywide revenue of $8.74 billion top the $7.92 billion estimate. 


Goldman shares slipped 3.3% in premarket trading. 

“While Goldman Sachs’ profits were cut in half, most of its lines of business actually did quite well,” said Octavio Marenzi, CEO of capital markets consultancy Opimas. “Revenues increased in investment banking, global markets and consumer and wealth management. However, the bank took a bath in asset management.”

CEO David Solomon said the firm was “inevitably affected by the economic dislocation” tied to the pandemic and that “as public policy measures to stem the pandemic take root, I am firmly convinced that our firm will emerge well-positioned to help our clients and communities recover.”

Trading results increased because of the market volatility. Fixed income operations posted  net revenues of $2.97 billion, the division’s best results in five years. Equities revenues came in at $2.19 billion, the second best quarter in five years.

Now, in the first quarter where the industry’s results have been impacted by the coronavirus pandemic, Goldman Sachs is showing it may be slightly more insulated from the turmoil facing its bigger peers. Goldman has been the only bank to exceed analysts’ expectations for revenue so far. Among the six biggest U.S. banks, Goldman derives the biggest share of its revenue from Wall Street activities including trading and mergers advice.


Goldman set aside $937 million for loan losses in the quarter, reflecting its smaller book of loans versus its peers, and the company cited higher provisions for corporate loans in the flailing energy sector.  

On Tuesday, JPMorgan Chase and Wells Fargo both posted sharp drops in first-quarter profit as the banks set aside a combined $10 billion for a coming deluge of loan defaults. A lone bright spot for the banks has been surging trading and bond issuance operations, driven in part by the historic jump in market volatility last month

Here’s what Wall Street expected: Earnings: $3.35 a share, 41% lower from a year earlier, according to Refinitiv.

Revenue: $7.92 billion, a 10% decrease from a year earlier.

Trading Revenue: Fixed Income $1.99 billion, equities $1.92 billion.

Investment Banking Revenue: $1.87 billion.


CNBC

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