Fixed income trading and underwriting revenues at Goldman Sachs surged in the second quarter, in contrast to its equity operations
Lloyd Blankfein, chairman and chief executive of Goldman Sachs, said in a statement alongside the bank’s results on July 19: “Despite the uncertainty created by Brexit, we achieved solid results by continuing to serve our clients across our diversified franchise and by managing our business efficiently.”
Debt underwriting and fixed income, currencies and commodities trading were the only divisions across Goldman Sachs’s investment banking, trading, investing and lending, and investment management businesses to post year-on-year revenue growth in the second quarter, in each case surging by 20%.
Debt underwriting revenues reached $ 724 million after Goldman Sachs posted the biggest percentage revenue rise of any Wall Street bank so far to achieve its second-best quarter from the business, behind the $ 730 million earned in the second quarter of 2014.
In the institutional client services division, which houses Goldman Sachs’s sales and trading and securities services activities, FICC revenues surged to $ 1.9 billion in revenues, marking the bank’s best quarter since the third quarter of 2014.
The bank said the FICC performance was helped by “significantly higher net revenues in currencies and credit products, as well as higher net revenues in interest rate products and commodities”.
However, it added: “Although market-making conditions generally improved compared with the first quarter of 2016, fixed income, currency and commodities client execution continued to operate in a challenging environment characterised by low interest rates, political uncertainty and concerns about global growth.”
As with some of its Wall Street rivals, the picture was somewhat different in the equities business.
Revenues from equity underwriting plunged by 55% to $ 269 million – the worst year-on-year percentage fall on Wall Street in the second quarter – due to what the bank called “a significant decline in industry-wide activity”.
Goldman Sachs’s equities trading revenues also fell. Client execution revenues, commissions and fees stood at $ 1.3 billion, down 14% from a year earlier and marking the sharpest drop yet seen on the Street. Among the big US investment banks, only JP Morgan has yet delivered a rise in equities revenues for the second quarter, at just 2%.
The underwriting performances, along with financial advisory revenues that nudged up at $ 794 million, left Goldman Sachs’s investment banking revenues down 11% at $ 1.8 billion. In institutional client services, revenues rose 2% to $ 3.7 billion.
Meanwhile, at the bank’s funds business, assets under management grew by $ 23 billion over the quarter to a record $ 1.31 trillion. This growth was mainly due to market appreciation, with Goldman Sachs Asset Management seeing net inflows of just $ 1 billion over the second quarter of the year.
Net revenues were down 18% year-on-year to $ 1.35 billion, but unchanged from the first quarter of 2016. This was due to “significantly lower incentive fees”, the bank said.
Goldman Sachs continued: “In addition, management and other fees were slightly lower, reflecting shifts in the mix of client assets and strategies, partially offset by the impact of higher average assets under supervision.”