McCreath: 40% of S&P earnings per share growth due to U.S. banks
Goldman Sachs Group Inc. cashed in on another roaring period for its traders and investment bankers, with revenue and earnings rising to a record.
Trading revenue surged 47 per cent to US$7.58 billion, fueled by equities. Goldman’s dealmakers also contributed to the positive quarter, with investment-banking fees surging 73 per cent. Revenue from equity underwriting quadrupled to US$1.57 billion as the red-hot market for special purpose acquisition companies and technology-company initial public offerings gave bankers a bonanza in the first three months of the year.
Investors will look for signs of how long IPOs and trading will keep the machine roaring at the investment bank, which has had an extraordinary run through the COVID-19 crisis. In the year since the deadly pandemic first disrupted the global economy, Goldman Sachs has benefited from the resulting surge in market volatility and companies tapping wide-open capital markets.
Goldman’s stock has climbed 24 per cent this year through Tuesday, reaching an all-time high of US$348.81 last month. The shares rose 1 per cent to US$331.01 at 7:30 a.m. in early New York trading. Revenue came in at US$17.7 billion for the quarter, and earnings rose to US$6.84 billion.
Fees from helping put together deals for companies rose 43 per cent to US$1.12 billion. That, along with equity underwriting, helped propel total investment-banking revenue to US$3.77 billion, setting a quarterly record.
But that performance came at the expense of bankers getting overworked. Making the rounds on social media last month was a stinging deck put together by a group of junior Goldman Sachs bankers highlighting the 100-hour weeks they were putting in to lock in big profits for the firm. The presentation attracted the attention of peers across the industry, financial meme accounts and even the archbishop of Canterbury, who weighed in on the matter.
The SPAC boom is also facing pressure from another prominent entity, as the Securities and Exchange Commission is cracking down on how accounting rules apply to a key element of blank-check companies. That could gum up the process for new deals hitting the market and slow down the torrid pace of SPAC deals.
Goldman’s trading group clocked its best performance since 2010 with net revenue of US$7.58 billion, led by the equities division. The day-trading Reddit crowd helped turn the first quarter of 2021 into one of the wildest periods of stock-market mania in modern history.
Goldman had managed to avoid the debris from the collapse of Bill Hwang’s Archegos Capital Management, even as rival Credit Suisse Group AG has said it expects almost US$5 billion in losses from its exposure to the family office. Goldman was one of the banks able to offload its Archegos holdings relatively quickly, allowing it to emerge unscathed from the debacle.
Even in a period of big gains, Goldman has been buffeted by continued attrition in its senior ranks. The departures have been most noticeable in its nascent consumer-banking division, Marcus, which has lost its chief as well as other senior leaders. Goldman did crack US$100 billion in consumer deposits, even as the pace of growth has slowed down after getting a lift from the industry’s deposit windfall last year.
Asset-management revenue surged to a record US$4.61 billion, backed by a surge in equity investments.