Goldman Sachs sees its profits surge as deals on Wall Street revive
A REVIVAL in deal-making has driven an unexpected leap in profits at Goldman Sachs.
The Wall Street bank enjoyed its best first-quarter earnings since 2021 after an uptick in advising on deals and a strong performance from its traders.
Profits rose by 31pc on the same period last year to $5.2bn (£4.2bn), leading to its best earnings per share since the third quarter of 2021.
Revenues rose 16pc to $14.2bn, with investment banking fees jumping by almost a third to $2bn.
David Solomon, the chief executive, said focusing on the bank’s “core strengths” had delivered the turnaround. The 62-year old was previously criticised for his foray into consumer lending, which included the launch of Marcus in the UK and the takeover of Greensky, a lender for home DIY improvements.
The bet failed to deliver the big windfall Mr Solomon had promised, prompting him to refocus on Goldman’s core business of trading markets and offering advice to boardrooms on takeovers.
He said: “This performance was aided by the swift actions we took last year to narrow our strategic focus and play to our core strengths.”
Recent big deals that Goldman advised on include the $60bn takeover by Exxonmobil of Pioneer Natural Resources and the $13bn takeover of WWE wrestling owner Endeavor by Silver Lake. The stock market debut of Reddit in the first quarter also helped.
In the UK, Goldman worked on defending Direct Line from an approach by Belgian insurer Ageas.
DS Smith is also taking advice from Goldman on a bid battle between suitors International Paper and Mondi.
Mr Solomon said the deep freeze that hit financial markets in 2023 was starting to thaw.
He said: “We’re in the early stages of a reopening of capital markets.”
An even bigger boost could arrive if private equity firms start to offload a backlog of companies that need to be sold, he added.
Private equity firms, known as “financial sponsors” by the banks, have largely sat on the sidelines during the mergers and acquisitions revival and have refused to sell off portfolio firms.
Mr Solomon said more companies were chatting to Goldman about trying to sell businesses because of “pressure” from their investors.
He said: “Sponsors make money, both themselves and for their investors, by buying things and selling things and the level of activity has been incredibly muted.
“The pace is going to pick up in the coming quarters,” he added. “The activity and interaction and engagement is higher in this first quarter than it was throughout 2023.”