Investment banking gains help Goldman Sachs top expectations

Goldman Sachs on Wednesday reported second-quarter earnings of $3.72 billion, or $10.91 per share, exceeding expectations by a wide margin.

Analysts had been forecasting second-quarter earnings-per-share of $9.63, according to S&P Capital IQ. The better-than-expected performance was driven by heady increases in investment banking and equities revenues, which spiked 26% and 36%, respectively, from the same period in 2024.

The performance of the wealth and asset management unit, the $1.78 trillion-asset bank’s other major line of business, was muted, with revenue declining 3% from the quarter that ended on June 30, 2024.

Firm-wide revenue totaled $14.6 billion, up 15% from a year earlier. Solid financial results pushed compensation costs higher. The company reported quarterly operating expenses of $9.2 billion, up 8% annually.

“Our strong results for the quarter reflected healthy client activity levels across our businesses, our differentiated franchise positions and the talent and commitment of our people,” Goldman Chairman and CEO David Solomon said in a press release. “Given the strategic decisions and investments we’ve made, we continue to believe that the firm is well positioned to perform for our shareholders.”

Goldman reported investment banking fee income of $2.2 billion for the quarter ending June 30, up from $1.7 billion a year ago and $1.9 billion for the quarter ending March 31. Advisory fees showed big gains, while debt-underwriting revenue fell slightly year over year.

Goldman also appeared to benefit from a turbulent global economy. Equities revenue of $4.3 billion was up significantly from a year earlier and represented a record for the 156-year-old company. It also beat the first-quarter total by 3%.

Goldman President and Chief Operating Officer John Waldron had telegraphed the investment banking business’ strong performance in comments at the Bernstein Strategic Decisions Conference on May 29. He said Goldman’s pipeline was “very strong,” adding that markets were demonstrating “a bias for action and activity.”

Revenue from the bank’s asset and wealth management unit totaled $3.78 billion for the three months ending June 30, as an increase in management and other fees was overshadowed by declines in equity and debt investments.

Despite the unit’s revenue decline, total assets under supervision reached $3.29 trillion on June 30, up 12% from a year earlier.

Goldman’s loan portfolio totaled $217 billion on June 30, up 18% from a year earlier. The bank reported second-quarter chargeoffs of $290 million, down from the $376 million it reported for the three months ending March 31. Solomon said the company’s risk-management posture would remain vigilant.

“At this time, the economy and markets are generally responding positively to the evolving policy environment, but as developments rarely unfold in a straight line, we remain very focused on risk management,” Solomon said in the press release.

Goldman was a beneficiary of the Federal Reserve’s decision to reduce big banks’ regulatory capital buffers earlier this month. The company reported a cut in its stress capital buffer of nearly 3 percentage points to 3.4%.

The new stress-buffer capital schemes take effect Oct. 1. Goldman finished the second quarter with a common equity tier 1 capital ratio of 14.5%.