Goldman Sachs Group Inc (NYSE: GS) reported a 43% decline in profits but beat Wall Street expectations Friday as strong performances by its wealth management and trading business partly offset a slumping in equity underwriting as stock markets listings dried up.
Wall Street banks are under pressure due to a global slump in dealmaking. However, volatility caused by worries about interest rate hikes as well as the economic fallout from the Ukraine war has helped Goldman’s trading desks surpass expectations.
The global markets segment of the bank reported net revenue of $7.87billion, an increase of 4% over last year when trading activity was at its peak. The bank’s strong performance was due to a 21% increase in fixed-income revenue.
Under Chief Executive David Solomon, the Wall Street bank is also taking steps to diversify its revenue stream. It has been able to earn more from predictable sources such as consumer banking, wealth management and asset management.
The net revenue of wealth management and consumer management jumped 21% to $2.10 Billion, thanks to higher management fees and credit cards balances.
However, investment banking revenue fell 36% to $2.41 trillion, due to a decline in fees for advising on stock exchange listings and underwriting, and the backdrop of increased tensions between Russia, Ukraine, and other countries.
Solomon stated, “It was an unstable quarter dominated by a devastating invasion of Ukraine.” Goldman was the first major U.S. Bank to withdraw from Russia.
Solomon said that the rapidly changing market environment had an impact on client activity. As risk intermediation became more important and equity issuance was stopped, Solomon also added.
The revenue of Goldman from advising on deals remained relatively unchanged at $1.13billion, which is in stark contrast to Morgan Stanley’s revenues from the business.
Dealmaking was slowing in quarter as the U.S. Federal Reserve began to remove pandemic-era support from the economy. This put a damper on some of Goldman’s most profitable businesses.
Goldman saw an 18% decrease in operating expenses during the quarter. This was mainly due to lower compensation and benefits spending.
In the first quarter, the bank reported a profit of $3.83 trillion, or $10.76 per share. According to Refinitiv data, analysts had predicted $8.89 per share.