NEW YORK: Goldman Sachs reported a jump in first-quarter earnings on Tuesday (Apr 17) following an uptick in its trading business and said merger and acquisition dialogue was picking up.
Net income for the quarter ending Mar 31 was US$2.7 billion, up 26.6 per cent from the year-ago period. Revenues were up 25.0 per cent to US$10.0 billion.
Goldman scored an increase in revenues in its closely-watched fixed income, currency and commodities, a division that has been slumping in recent quarter.
Revenues surged even more in equity trading, boosted by the same wave of stock market volatility that lifted Goldman's competitors.
Goldman last experienced such strength in both areas of trading in 2015, but the combination of strong global growth, US tax reform and other macro dynamics makes the current dynamic "more durable" than three years ago, when central bank moves played a key role, said Chief Financial Officer Martin Chavez.
Goldman offset a drop in revenues for advising companies on mergers and acquisitions with higher revenues from underwriting.
But Chavez said dialogue had picked up in merger and acquisition advising, suggesting that business could soon see gains as well.
"Yes there are concerns about tariffs and trade wars, but the dialogue and activity are strong," he said.
The bank reported higher employee expenses as well as non-compensation expenses, due in part to investments in the bank's growing online lending business, Marcus, which aims to grow business connected to everyday consumers.
Chavez said the buildout of Marcus was proceeding as expected and that it included a fraction of "subprime" clients that the firm was comfortable with. Marcus' loans grew US$500 million in the quarter, he said.
The big investment bank announced on Sunday that it acquired Clarity Money to supplement Marcus. Clarity Money is a personal finance application "offering personalised products to save and borrow, that are simple, transparent and always on the side of the customer," Goldman said.
Goldman is exploring other potential growth opportunities for Marcus, including possibly in credit cards, but "we're not in any hurry" to grow, Chavez said, adding that Goldman was cautious on dynamics in the broader credit universe.
"There will be no announcement of the turn of the credit cycle," he added. "We're going to proceed with this methodical growth."
Shares of Goldman fell 1.4 per cent to US$254.35 in late-morning trading.