Goldman Sachs Group Inc reported a higher-than-expected quarterly profit on Tuesday as the Wall Street investment bank benefited from higher equities trading revenues.
The bank said equities trading revenue increased by 6 percent from a year ago to $2 billion, the second highest in four years. Goldman said clients were more active than the same period a year ago.
According to the investment bank, it benefited from higher revenues in equities client execution, including an improved performance in cash products and derivatives. The bank said clients were more active than in the prior quarter.
However, Goldman’s fixed income business suffered another disappointing quarter with net revenue falling by 13 percent. The bank said that reflected significantly lower net revenue from interest rate products and currencies.
Goldman is shifting the focus of its business model away from trading to a more stable, consumer-oriented revenue stream. Despite the better-than-expected performance, revenue still fell at three of its four major businesses, with the biggest declines in trading and investment management.
Like its rivals, the bank faces a challenge to increase revenue in the face of rising geopolitical uncertainties and concerns about the impact of future interest rate cuts by the U.S. Federal Reserve.
Institutional client revenue, which includes trading, slipped 3 percent, while investment banking revenue was down 9 percent. However, revenue from the bank’s investing and lending business rose 16 percent, its highest quarterly performance in eight years.
Evercore ISI analyst Glenn Schorr said Goldman had delivered a “pretty good quarter” with most business lines performing “a little better than expected.”
“Looking ahead, we expect management to continue to invest in new initiatives and businesses and return plenty of capital,” Schorr said.
Chief Executive David Solomon, who was promoted to the role in October last year, is undertaking a strategic review of the business and plans to announce the results early next year.
The bank has already made moves to further develop its consumer division, by expanding online bank Marcus and launching a credit card with Apple Inc. It also announced plans in May to acquire United Capital, a boutique wealth management firm.
It is aiming to generate $5 billion in new revenue by 2020.
While overall revenue slipped in the quarter, lower compensation expenses provided some relief. Total operating expenses were nearly flat at $6.12 billion.
The bank’s net earnings applicable to common shareholders in the second quarter fell 6 percent to $2.20 billion. Earnings per share fell to $5.81 from $5.98 a year earlier.
Total net revenue fell 2 percent to $9.46 billion.
Frontpage September 25, 2019