Goldman Sachs Group Inc. blew through profit expectations and said Thursday that it rang up its highest quarterly revenue in four years, another sign of the resurgence of Wall Street's profit-making power after the financial crisis.
Goldman's big first quarter echoed strong performances earlier this week by other mega-banks, particularly those of J.P. Morgan Chase & Co. and Wells Fargo & Co., both of which saw large increases in revenue from investment banking despite a stricter regulatory environment imposed by the 2010 Dodd-Frank financial reform law.
Goldman said its net income rose 40% to $2.8 billion, or $5.94 a share, compared with earnings of $2 billion, or $4.05 a share, for last year’s first quarter. Revenue rose 14% to $10.6 billion.
The New York financial giant’s profit far exceeded the $4.26 a share expected by Wall Street analysts.
Significantly, Goldman's investment banking division posted net revenue of $1.9 billion — its highest quarterly results since 2007. The division’s merger advisory business took the lead on Wall Street in a booming time for deals. Among others, Goldman was an advisor to pharmaceuticals maker Allergan Inc. in Irvine in fending off a hostile takeover attempt and agreeing to be bought by Irish counterpart Actavis.
Several economic trends boosted the investment banking business, analysts said. Accelerating growth in the U.S. economy fed a boom in mergers and in initial and secondary stock offerings. They also said volatility in bond, currency and commodities markets helped to push up trading revenue.
The value of deals globally this year already has topped $1 trillion through Thursday, according to financial software company Dealogic, a strong start to the year after a huge 2014 that saw total deals hit $3.6 trillion, up 28% over the previous year.
Michael Wong, an analyst for Chicago research firm Morningstar Inc., said firms such as Goldman remain far from the roaring profitability levels of the years before the Great Recession and the 2008 financial crisis — a time, he acknowledged, that was atypical.
“Yes, it's a fantastic quarter, a blowout quarter,” he said. “But it pales in comparison to the pre-crisis era.”
Goldman shares fell 74 cents, or nearly 0.4%, to $200.36 in midday trading. Investors had run up the shares after strong investment banking performances posted by competitors earlier in the week.
On Tuesday, JP Morgan said its corporate and investment bank, its fastest growing unit, posted revenue of $9.6 billion, up 8% from last year’s first quarter. Wells Fargo posted a 36% increase in investment banking fees from a year earlier, even as overall profitability fell slightly.
Stocks in the Standard & Poor's financial-sector index are up more than 12% in the last 12 months, according to FactSet Research Systems Inc.