Goldman Sachs, the storied Wall Street investment bank, nearly doubled stock-trading revenue in the three months through Mach as the rising risk of a trade war from President Trump’s protectionist policies rocked global markets.
The New York-based firm’s equities business swelled 92 percent to $1.06 billion, while bond trading added 23 percent to $2.07 billion. The revenue at each business was the highest in three years, said Chief Financial Officer Marty Chavez, and together, they drove 38 percent growth in institutional client services, the bank’s largest division.
Firmwide, profit of $6.95 a share compared with the $5.58 average estimate of analysts surveyed by FactSet. Net income climbed 27 percent to $2.74 billion, while revenue surged 25 percent to $10 billion.
Like Wall Street rivals from JPMorgan Chase to Bank of America, Goldman benefited from higher volatility as capital markets reacted to the possibility of accelerating interest-rate hikes, tighter regulation of technology firms and a trade dispute between the U.S. and China, the planet’s two biggest economies.
“At the most macro level, the environment is still positive for banks,” said Kenneth Leon, an analyst at CFRA Research who predicted before the earnings reports that the largest firms would benefit from both higher interest rates and higher volatility due to geopolitical issues.
Goldman’s effective tax rate dropped to 17.2 in the first quarter from 62 percent for all of last year, a period when it spiked because of the GOP-led tax overhaul’s one-time charge on assets held overseas. The tax bill, which cut the top corporate rate to 21 percent from 35 percent, was hailed by businesses in the U.S., which responded with a mix of pay raises, one-time bonuses for employees and investment plans.
“A positive outlook on global growth translate into improved corporate and investors confidence and, in turn, to solid activity across the firm,” Chavez said.
Stock markets, in fact, soared to record highs in January, before faltering amid bellicose statements on trade from both Beijing and Washington, along with the departure of top economic adviser Gary Cohn, a former Goldman Sachs executive, from the Trump administration.
The blue-chip Dow Jones Industrial Average, which reached an all-time high of 26,616 in late January, has since given up 8.5 percent of its value as Trump followed up on stiff metals duties with tariffs on some $50 billion of China’s imports, then threatened levies on $100 billion more when Beijing retaliated.
While Goldman clients have voiced “concerns about tariffs and trade wars,” activity and dialogue with bankers has been strong, Chavez said. “It’s impossible to predict what drivers will be in the future, but we keep the focus on what we can do here, which is to position ourselves to support the clients in whatever they’re going to do.”
Goldman fell 0.4 percent to $256.90 in New York trading early Tuesday. The shares previously climbed 1.2 percent this year, outperforming the broader S&P 500, which fell slightly.
