Goldman Sachs Profit Jumps 27% in First Quarter -- Update
April 17 2018 - 8:31AM
Dow Jones News
By Liz Hoffman
Goldman Sachs Group Inc. reported higher profit and revenue from
a year ago, catching the wave of lower taxes and newly active
markets that boosted other big banks' quarterly earnings.
Revenue at the Wall Street firm rose to $10.04 billion from
$8.03 billion a year ago. Goldman's profit was $2.83 billion, or
$6.95 a share, up 27% from the year-ago first quarter when the
bank's traders made bad bets on the dollar and interest rates.
Analysts, on average, were expecting earnings of $2.21 billion,
or $5.58 a share, on revenue of $8.74 billion, according to Thomson
Reuters.
Each of Goldman's four business lines reported higher revenues
from a year ago. The firm's return on equity, a measure of
profitability, stood at 15.4% for the quarter, Goldman's highest in
six years. That comes even as the firm is pouring money into a
three-year growth plan.
Shares, which were up 1.2% in 2018 through Monday, rose 0.9% to
$260.12 in premarket trading.
For all of Goldman's changes in recent years -- launching a
consumer bank and embracing steadier businesses like asset
management and corporate lending -- it still relies heavily on its
traders, who make money buying and selling everything from stocks
to interest-rate swaps.
Their recent troubles have spurred criticism that Chief
Executive Lloyd Blankfein, who once ran Goldman's trading arm,
didn't act quickly enough to reposition the firm for the postcrisis
world. Calm markets and the popularity of passive investing have
sapped demand for the sophisticated and expensive products Goldman
was known for, while new regulations closed its once-profitable
proprietary trading desks.
But the business roared back to life in the first quarter as
volatility returned to the markets. The dollar fell, and interest
rates rose. Stocks swung around amid fears of a trade war and as
the tumult at Facebook Inc. weighed on shares of technology
companies.
Goldman reported a 38% increase in stock-trading revenues and a
23% increase in fixed-income trading, which includes bonds,
currencies and interest-rate products.
In fixed-income, its headline increase was bigger than rivals,
but Goldman faced a lower bar after trailing its peers in the first
quarter of last year.
Investment-banking, the business of arranging mergers and
helping companies raise money, reported a 5% increase in revenue
from a year ago, with a rise in underwriting compensating for a
decline in merger fees.
The surprise factor in Goldman's earnings is often its opaque
investing-and-lending segment, which comprises everything from
simple mortgages to illiquid investments in private startups.
Revenue in that division rose 43% to $2 billion.
During the quarter, Goldman sold its last shares of credit
bureau TransUnion, sealing in a roughly $3.3 billion profit on the
six-year-old deal. Kensho Technologies Inc., an
artificial-intelligence firm that Goldman was an early investor in,
was sold to S&P Global.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
April 17, 2018 08:16 ET (12:16 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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