Goldman Sachs smashes profit expectations as global M&A and SPAC boom pushes fees higher
Goldman Sachs today blew past Wall Street expectations for first-quarter profit, as the investment bank behemoth capitalised on record levels of global dealmaking activity.
Net profit jumped to $6.7bn in the quarter to 31 March from $1.12bn in the same period a year ago.
An unprecedented boom in private firms merging with listed shell companies to go public, known as SPACs, has helped the Wall Street banking titan earn handsome fees, resulting in a 73 per cent jump in revenue from investment banking to $3.77bn, while its global markets unit’s performance was up 47 per cent on the year.
Total revenue surged 102 per cent to $17.7bn in the quarter.
Revenue from equities trading jumped 68 per cent to $3.69bn as heightened trading by ordinary investors fed stock market volatility.
“Overall, it’s quite stunning,” said Oppenheimer analyst Chris Kotowski.
The bank also benefited from favourable comparisons to last year when it set aside more funds to cover potential corporate loan losses due to the coronavirus pandemic and took markdowns to some assets.
Earnings per share rose to $18.60 from $3.11 a year earlier. Analysts on average had expected a profit of $10.22 per share, according to the IBES estimate from Refinitiv.
In March, Goldman had said its losses from a fire sale of stocks triggered by a meltdown of New York investment fund Archegos were immaterial.
Danni Hewson, financial analyst at AJ Bell said of the US banking results today, which also included Goldman rival JP Morgan:
“JP Morgan Chase and Wells Fargo both beat analysts’ expectations but it was Goldman Sachs that really grabbed investors’ attention. Net earnings for the first three months of 2021 were up a staggering 464 percent on last year and revenues also obliterated the numbers pencilled in.
“But the boss urged caution, highlighting concerns about new variants of Covid and their potential impact on economic recovery.