Picture: REUTERS/DAVID GRAY
Picture: REUTERS/DAVID GRAY

New York — Goldman Sachs Group made the most of a historic market rebound in the second quarter as the US Federal Reserve’s stimulus efforts handed a bonanza to Wall Street trading desks. Revenue from trading stocks and bonds surged 93%, surpassing what analysts had expected by about $2.5bn and mirroring similar gains by JPMorgan Chase and Citigroup.

The bank also raked in record fees from helping companies raise cash needed to weather the coronavirus pandemic.

“The turbulence we have seen in recent months only reinforces our commitment to the strategy we outlined earlier this year to investors,” CEO David Solomon said in a statement. The full force of the US Fed helped rescue markets reeling from the outbreak and government stay-at-home orders, which had ground economies to a halt around the world.

Policymakers’ emergency measures sent companies racing to tap funding sources, and the biggest quarterly stock gains in more than two decades fueled demand for trading services.

The firm’s fixed-income trading revenue more than doubled to $4.24bn, the highest in nine years, while the equity unit had its best showing in 11 years. The gains propelled revenue to the second-highest mark ever and net income to a slight surprise increase from a year earlier. Profit was $2.42bn, or $6.26 a share, compared with analysts’ estimates for $3.95 per share.

Shares of Goldman Sachs, down 3.5% in 2020 so far, advanced 3.3% to $221.04 at 9.48am in New York.

Goldman Sachs’s large investment portfolio also rode the rebound after taking a huge markdown in the first three months of the year.

Equity and debt holdings swung to a $1.38bn gain after producing a hit of almost $900m in the first quarter. Goldman has said it’s moving away from taking stakes with its own money, and is trying to raise more client funds. The strategy could help limit exaggerated moves that add volatility to the firm’s quarterly results.

The firm’s commodities business is on a hot streak after years of scrutiny, generating more than $1bn in revenue throughout May, people familiar with the matter said in June. Goldman Sachs didn’t provide an update on Wednesday.

The company’s oil traders pounced on unprecedented moves in that market, which saw the price of a barrel of oil dropping below zero in April.

Revenue from underwriting stocks and bonds more than doubled to $2.05bn, well beyond analysts’ average estimate of $1.3bn. Fees from advising on deals for companies fell 11% to $686m.

Goldman Sachs posted a big jump in money set aside for litigation and regulatory proceedings, adding almost $1bn to that pile. Most notably, the bank has yet to resolve charges related to the 1MDB corruption scandal, two years after the department of justice implicated three of its bankers in a scheme to loot billions from the Malaysian investment fund.

The Wall Street firm is also facing pressure in the wake of the US Fed’s annual stress tests, in which regulators assigned it a higher “stress capital buffer” to determine how much capital the company needs to meet safety requirements.

Goldman Sachs almost reached the capital level needed by the end of September 2019, finishing the second quarter just shy of the 13.7% capital-ratio requirement. The firm would need to exceed that mark to keep paying its current dividend, and has previously said it’s confident it can do so.

Bloomberg

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.