Goldman Sachs reaps rewards from dealmaking rebound as profit doubles
Profit more than doubled at Goldman Sachs in the second quarter as the investment banking behemoth capitalised on the long awaited recovery in dealmaking.
In three months to June, profit at Goldman Sachs hit $3bn, up from $1.2bn last year. The bank’s revenue rose 17 per cent in the same period to hit $12.7bn with contributions coming across multiple business lines.
The largest contribution came from investment banking, where revenue rose 21 per cent on the back of a recovery in leveraged finance and a rebound in initial public offerings (IPOs). The bank also noted that its fees backlog “increased significantly compared with the end of the first quarter of 2024”.
Of all the major US banks, Goldman Sachs is the most heavily dependent on investment banking revenue and so was hit extremely hard by the dealmaking downturn seen over the past few years.
Last year it slipped to its worst annual performance in four years, with profit falling by nearly a quarter on the year before. However, as confidence grows that the economy is approaching a soft landing and with interest rate cuts on the horizon, Wall Street banks are hoping to cash in on a more active M&A market and IPO pipeline.
Other major US banks have already reported a substantial increase in revenue from the traditionally volatile sector. JP Morgan reported that revenue from investment banking rose by half compared to last year while Citi notched a 60 per cent increase.
But Goldman also reported a 27 per cent increase in revenue from asset and wealth management, with much of the improvement down to gains in equity investments. The bank has been trying to build out its wealth management business to help diversify its sources of revenue.
Goldman also set aside much less for bad loans, with provision for credit losses falling to $282m in the second quarter, down from $615m last year. What provisions there were came mainly from the credit card portfolio.
“We are pleased with our solid second quarter results and our overall performance in the first half of the year, reflecting strong year-on-year growth in both Global Banking & Markets and Asset & Wealth Management,” David Solomon, chair and chief executive of Goldman Sachs said.