What a difference a year makes at Goldman Sachs.
The revered Wall Street investment bank, which was in trouble a year ago after trying to establish a franchise on Main Street, showed Monday the benefits of sticking to what it knows best. better. It earned nearly $4 billion in the first quarter, about $1 billion more than analysts expected, after reaping big profits in its trading and business advisory franchises.
The results were all the more comforting for Goldman because they came just days after rival JPMorgan Chase suffered its worst stock market drop in nearly four years, revealing that it expected a tougher year than foreseen.
Here’s how Goldman did it – and what it means for other lenders.
Where did Goldman make money?
Goldman has enjoyed a bumper period at its core investment bank, which makes money arranging financing for companies seeking to borrow or offer shares to the public, as well as advising on mergers . Its investment banking fees topped $2 billion in the first quarter, nearly a third more than the same period a year earlier.
Dealmaking typically ebbs and flows, and it has been mutating for over a year. If he returns, Goldman will be one of the big banks likely to benefit.
Goldman’s stock price rose more than 5 percent in early trading Monday.
Doesn’t a bank like Goldman always make a lot of money?
Um, no, not always.
How are other banks doing?
Late last week, some of Goldman’s competitors, including JPMorgan Chase and Wells Fargo, reported weaknesses in parts of their businesses in the first quarter. Jamie Dimon, managing director of JPMorgan, warned of a “troubling” global landscape, highlighting a cascade of pressures including war, rising geopolitical tensions and inflation. He called financial markets “too happy.”
Because Goldman has a relatively small consumer business — think bank branches — it could weather uncertainty better than lenders with more economic exposure. It might even work well; Goldman said Monday that it actually made more money from its credit card arm, which runs cards for stores like Apple, in part because customers had higher balances.
Morgan Stanley, another bank with a similar profile to Goldman, will release its results on Tuesday.
What have bank executives said about the economy?
Bank results are closely followed because they often contain clues about the economy as a whole, but this year’s collection has so far painted a fuzzy picture. Although Mr. Dimon was relatively pessimistic, Citi said its outlook for countries like Europe had improved recently.
“Overall, when we look at the global economy, its strength appears resilient. We expect growth to slow through 2024, but when you look at labor markets and consumer strength, it appears to be holding up,” said Mark Mason, Citi’s chief financial officer.
Citi and Goldman continue to shut down their teams. Goldman said its workforce declined 2% last quarter.
