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Goldman Sachs Beats Q2 Estimates, Expects Deals To Drive Annual Profits


Goldman Sachs Beats Q2 Estimates, Expects Deals To Drive Annual Profits
Following estimate beating performance for the second quarter, Goldman Sachs Group Inc expects to make large profits for the whole year because of a record backlog of deals which will happen during the rest of the current year.
According to Refinitiv data, despite slowing activity among blank-check firms, in the three months to June 30, deals worth $1.5 trillion were announced which was more than any other second quarter ever and was 13 per cent higher than the first quarter – which was also a record.
With businesses seeking to re-position their business for the post-pandemic world, the surge in deal making is expected to continue through the year, said Goldman's Chief Executive Officer David Solomon, during a conference call with analysts.
"Strategic discussions with our corporate client base remain high, reflective of elevated CEO confidence and the prospect of continued economic recovery," he said. "We're seeing really broad engagement across our franchise."
The banker however sounded a note of caution on eth possible impact of the executive order signed last week by United States president Joe Biden which orders various US agencies to clamp down on anti-competitive practices of American companies which could make deal completion more difficult.
"It's something we'll have to watch very, very closely," Solomon said. He added that there would potentially be "a lot of discussion" over whether it would be feasible to allow merger of large tech companies.
During its latest completed quarter, a surge of 36 per cent in its revenues from investment banking, at $3.61 billion, was reported by Goldman.
According to Refinitiv, the bank easily retained its position at the top ranking banker in the league table for worldwide M&A advisory. The league tables ranks financial services firms on the amount of M&A fees they generate.
There was a 16 per cent rise in total net revenue to $15.39 billion, while the bank reported diluted earnings per common share of $15.02 which comfortably beat analysts’ estimates of $10.24, according to the IBES estimate from Refinitiv.
The bank however did not perform to expectations in trading as the base for the second quarter last year was very high when the Covid-19 pandemic first hit and sent markets into a frenzy with large trading in equity and other market products, .
Goldman reported a 32 per cent drop in revenue from its global markets business, which includes its trading business, for the quarter.
The company reported a 45 per cent year on year drop in its net revenue from fixed income, commodities and currencies (FICC) trading and a 12 per cent year on year drop in net revenues from equities trading for the same period.
A slowdown in trading activities in the financial market compared to the record-breaking trading results of the company last year was also reported by the largest US bank JPMorgan Chase & Co.
"We picked up 160 basis points of market share through the first quarter, and that's allowing us to take greater share of whatever the broader trading market provides us," Solomon said.