Goldman Sachs profits smash analyst expectations thanks to first-quarter volatility

 
Jasper Jolly
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Goldman chief executive Lloyd Blankfein greeted "strong returns" (Source: Getty)

Goldman Sachs today reported profits far above analyst expectations as revenues came in more than $1bn higher than predicted on the back of equity market volatility.

The figures

The investment bank reported net revenues of $10.04bn (£7bn) and net earnings of $2.83bn for the first quarter ended 31 March.

Earnings per common share were $6.95, a big jump from the $5.15 reported in the first quarter of 2017, and far beyond the $5.54 consensus.

The bank's annualised return on equity, a measure of profitability for shareholders, rose to 15.4 per cent, up from only 10.71 per cent in the previous quarter.

Why it's interesting

Goldman basked in volatility on equity and bond markets during the first quarter, with revenues from client execution in fixed income, currency and commodities reaching $2bn, 23 per cent higher than the first quarter of 2017. The improvement in the bond trading arm came in spite of rivals – such as Bank of America – struggling.

The "improved market-making conditions" cited in the update came as the firms scrambled to adjust their positions as equity markets in particular swooned; equity revenues jumped by 38 per cent at the firm, with the derivatives and cash products highlighted as particular strengths.

Like other US banks Goldman also felt the warm glow from higher interest rates, reporting "significantly higher" net interest income of more than $550m.

Also notable was a 34 per cent rise in equity securities revenues, attributed by the bank to gains in private equity investment for "company-specific reasons".

What Goldman said

Lloyd Blankfein, Goldman's chairman and chief executive, said: “Solid performance across our businesses produced strong returns in the first quarter. We are well positioned to serve our clients as the global economy continues to show strength and central banks unwind certain aspects of policy stimulus.

"We are also broadening our client base and further diversifying our businesses to drive more revenue and earnings growth for the firm.”

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