Goldman Sachs back on track

Shares in investment bank Goldman Sachs bounced on Monday after a rebound in global mergers and acquisitions helped its firstquarter profits exceed expectations, says Charles Gorrivan in The Times. Investment banking revenue jumped by 32% to $2.1bn thanks to higher fees for underwriting debt or stock offerings and advising on deals. Goldman Sachs’s investment bank recorded its best quarter in two years. Revenue from trading in fixed income, currencies and commodities climbed by 10% to $4.3bn amid record financing revenue in mortgages and structured lending.

Only a year ago Goldman Sachs was struggling “after attempting to build a Main Street franchise”, says Rob Copeland in The New York Times. Now large profits in its trading and corporate advisory franchises seem to be underlining “the benefits of sticking to what it knows best”. Indeed, the fact that Goldman Sachs only has a “relatively tiny” consumer business now means that it “may weather the uncertainty better than lenders with broader exposure to the economy”. Certainly, its rivals, including JPMorgan Chase and Wells Fargo, have recently “reported weaknesses” in some parts of their businesses in the first quarter, with JPMorgan’s CEO Jamie Dimon warning of an “unsettling” global backdrop.

Critics may still feel that Goldman Sachs “is delivering more of the wrong thing”, especially since the market values income from investment banking less generously than money from interest and wealth management, says John Foley on Breakingviews. Trading is also deemed “a balance-sheet-heavy business”. Still, many of the consumer activities that Goldman Sachs “temporarily pursued and then discarded” have “lost some allure”, especially since lower interest rates will cut net interest income. At the very least, the timing will be “convenient” for CEO and chair David Solomon. Investors are soon due to decide whether they want to split his roles as CEO and chairman.