Goldman Sachs announces a significant profit rise in Q1 2024, driven by strong performance in investment banking and dealmaking. The firm’s strategic focus on core strengths and renewed corporate confidence in capital markets contributed to its financial success amidst a cautiously managed economic environment.
Goldman Sachs reported a 28% increase in profit for the first quarter, driven by a resurgence in its investment banking activities including underwriting and dealmaking. The firm announced on Monday that its profit climbed to $4.13 billion, or $11.58 per share, up from $3.23 billion, or $8.79 per share, during the same period last year.
CEO David Solomon highlighted the company’s strategic focus, stating, “We continue to execute on our strategy, focusing on our core strengths to serve our clients and deliver for our shareholders.”
The positive trend was echoed by other major banks, with executives at JPMorgan Chase and Citigroup also noting improved dealmaking conditions when they reported their earnings last Friday, which exceeded market expectations.
Goldman‘s shares saw a pre-market rise of 3.4% and have increased by about 1% this year, contrasting with a nearly 8% decline for competitor Morgan Stanley.
As a top advisor on mergers and acquisitions, Goldman played a significant role in major transactions last year, such as Exxon Mobil‘s $60 billion acquisition of Pioneer Natural Resources.
The economic environment has been cautiously managed by the Federal Reserve towards a “soft landing,” marked by interest rate hikes aimed at controlling inflation without triggering a severe downturn. This has renewed corporate confidence, leading to a revival in equity and bond underwriting, and an uptick in mergers and acquisitions, with global M&A volume rising 30% to approximately $755.1 billion.
Goldman’s investment banking fees surged 32% to $2.08 billion, thanks to higher fees from underwriting and advisory services. The firm also saw a 10% increase in revenue from trading in fixed income, currencies, and commodities (FICC) to $4.32 billion, and equities revenue rose by the same percentage to $3.31 billion.
The asset and wealth management division of Goldman reported record quarterly management fees of $2.45 billion, with assets under supervision reaching a new high of $2.85 trillion, including $1.5 trillion in wealth client assets. Following a 2022 reorganization, the firm merged its asset management and wealth management divisions.
The platform solutions unit, which includes some of Goldman’s consumer operations, reported a 24% revenue increase. However, the bank is scaling back its consumer banking operations, which have incurred significant losses, including substantial writedowns on the home improvement lender GreenSky, which Goldman acquired and sold two years later.
Amid criticism of his retail strategy, CEO Solomon has faced calls from the top proxy adviser Institutional Shareholder Services (ISS) for shareholders to vote for splitting his dual role as chairman and CEO. ISS referenced “missteps and steep losses” under his leadership.
Goldman has also ended its co-branded credit card agreements with General Motors, and its similar partnership with Apple is currently under scrutiny.
The bank’s provisions for credit losses have significantly increased to $318 million from a net benefit of $171 million the previous year, primarily due to its credit card and wholesale loan portfolio. Goldman’s workforce stood at 44,400 at the end of March, marking a 2% decrease from the fourth quarter following extensive layoffs in 2023, including a significant round in January which was the largest since the 2008 financial crisis.
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