Goldman Sachs posted a 28% jump in quarterly profit, beating Wall Street expectations thanks to surprisingly strong performance in the bank’s trading and investment banking business.
The Wall Street giant announced Monday that first-quarter profit jumped to $4.13 billion. Revenue for the three months ended March 31 rose 16% to $14.21 billion, more than $1 billion more than analysts expected.
Goldman’s return on equity, a closely watched indicator of profitability for Wall Street banks, rose to 14.8%, nearly double the modest 7.5% return it posted in 2023, according to Bloomberg. .
The company attributed the unexpected surge to a back-to-basics approach to trading by Goldman and its traders. bloomberg.
“Our first quarter results reflect the strength of our world-class interconnect franchise and the profitability of Goldman Sachs,” Solomon said. “We continue to execute on our strategy and focus on our core strengths of serving our customers and serving our shareholders.”
Goldman managed to avoid the downturn experienced by rival JPMorgan Chase & Co., but CEO Jamie Dimon blamed the “volatile” global situation.
Sources close to the bank told the Post that Mr. Solomon announced Monday morning that “Receive an overwhelming number of text messages Our CEO and customers congratulated us on our strong quarterly results. ”
“His response was humble, simply replying, ‘One quarter at a time,'” the source said.
Goldman’s stock trading revenue of $3.31 billion exceeded expectations, but the bank also incurred a $78 million charge for a special assessment from the Federal Deposit Insurance Corp. following the failure of a regional bank last year.
Bond traders raked in $4.32 billion in revenue, beating forecasts for a decline, led by mortgages and structured loans.
Goldman is working to win back investors with a more predictable approach to its money management division, Bloomberg reports.
The strategy comes after a series of missteps in recent years, including the bank’s ill-fated foray into consumer lending and a failed credit card partnership with Apple, led to scrutiny of the leadership of the bank’s chief executive, David Solomon. It was launched in response to what was said.
Despite the pitfalls, Solomon has touted his staying power at the bank, and after the 62-year-old financier was heavily criticized by insiders and the bank’s board of directors, who couldn’t believe Solomon’s word, he became a hobbyist DJ. I even stopped. -Sol” – Goldman’s business allows him to step away from investment banking and trading during the day and spin discs at parties at night.
Since hanging up his headphones last year, Goldman has experienced what Solomon calls the “year of execution” in 2023. At that time, the bank carried out one of the largest layoffs in its history.
After laying off 3,200 employees last January during what was internally dubbed “David’s breakup day,” Goldman cut another 250 employees by May.
But capital market activity is now picking up again, and analysts expect Goldman to be well positioned to benefit from a recovery, although a full recovery is not guaranteed, according to Bloomberg. .
The timing of the Fed’s interest rate decisions remains the biggest threat to capital market activity.
Following the Labor Department’s latest announcement of a 3.5% inflation rate, the consensus among traders is that the Fed will hold off on lowering interest rates from their current 23-year high until September. The bank also expects two 25-basis point rate cuts this year, rather than the three expected.
Meanwhile, Goldman Sachs economists are more optimistic, predicting the Fed will cut interest rates in July from the current 23-year high of 5.25% to 5.5% and again in November, according to Bloomberg. are doing.
The Fed “needs to ensure that the three rounds of strong inflation developments from January to March are balanced out by a prolonged series of soft developments in subsequent months,” the bank, led by Jan Hadzius, said in a statement. a team of leading economists wrote in a memo.
Inflation, fueled in part by pandemic-era stimulus and other government spending, has persisted even as stocks have added $12 trillion in value since last October.
