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Profits at Goldman Sachs rose more than a fifth in the second quarter, as a surprise rally in investment banking added to a record period for the US bank’s equity traders.
The Wall Street group comfortably beat estimates with net income of $3.7bn for the three months to the end of June, up from $3bn a year ago.
Equities traders put in a record performance for the second quarter in a row, generating $4.3bn in revenues.
The business was aided by big market moves following Donald Trump’s “liberation day” tariff announcements in April and the subsequent uncertainty about US trade policy.
The bank also reported higher than expected revenues from fixed income trading and investment banking.
The fixed income unit narrowly surpassed estimates with $3.5bn, but the $2.2bn in investment banking fees the mergers and acquisitions giant reported was about $400mn better than analysts had forecast, and represented an improvement of more than a quarter on last year’s figure.
The revival in investment banking after a two-year downturn in the business echoed Goldman’s rivals, JPMorgan Chase and Citigroup, which reported earnings a day earlier.
At JPMorgan, investment banking fees were up 7 per cent to $2.5bn and they rose 13 per cent to $1.1bn at Citi.
Banks had hoped a deregulatory agenda under Donald Trump would facilitate more dealmaking, but the market tumult from the White House’s trade policy initially made it harder to consummate mergers and new stock market listings.
Bankers say they are now seeing momentum building in dealmaking.
They have been telling investors for more than a year that pipelines of new transactions were building and that corporate leaders and money managers just needed greater certainty to move ahead with deals.
“At this time, the economy and markets are generally responding positively to the evolving policy environment,” Goldman chief executive David Solomon said.
Wall Street executives need the momentum to prove less fleeting than other recent recoveries — in recent years bank leaders have talked about “green shoots”, “early innings” and “animal spirits” being unleashed for investment banking before economic and political uncertainty intervened.
Even with the uptick in investment banking fees, they are still contributing meaningfully less in earnings than banks’s trading divisions, which for more than two years have been responsible for the lion’s share of big US banks’ Wall Street revenues.
