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Goldman's Earnings Reduced By Half But Still Exceeds Expectations As Fixed-Income Trading Shines

Goldman's Earnings Reduced By Half But Still Exceeds Expectations As Fixed-Income Trading Shines
Goldman Sachs Group Inc reported a smaller-than-expected 48 per cent drop in second-quarter earnings on Monday, buoyed by gains in fixed-income trading as investors realigned their bets despite volatile market conditions.
The global markets unit, which includes Goldman's trading desks, increased revenue by 32 per cent to $6.47 billion, with fixed income, commodities, and trading revenue increasing by 55 per cent and equities revenue increasing by 11 per cent.
This helped the bank compensate for a drop in investment banking revenue due to a drop in underwriting activity and deals as risk-aversion gripped global markets.
Its quarterly report rounds out major bank profits and mirrors those of peers JPMorgan Chase & Co and Morgan Stanley, both of which witnessed a drop in investment banking income.
In the third quarter, revenue from investment banking business decreased 41 per cent to $2.14 billion. Revenue from equity and debt underwriting declined, as did revenue from stock listing and mergers and acquisitions advice.
Net revenue decreased 23 per cent to $11.86 billion in the second quarter, while profit nearly half to $2.8 billion, or $7.73 per share.
Inflationary pressures and rising borrowing costs to combat it have roiled global financial markets, causing corporations to temper their desire for mergers while also limiting their efforts to raise capital through stock or debt issues.
According to Ernst & Young data, the global market for initial public offerings saw 305 deals raise $40.6 billion in proceeds in the second quarter, a 65 percent decrease from the previous year.
According to Dealogic data, the value of announced acquisitions fell 25.5 per cent year on year to $1 trillion in the quarter, with M&A activity in the United States down 40 per cent. JPMorgan Chase & Co's investment banking revenue was $1.4 billion, a 61 percent decrease from the previous quarter, mostly due to a 54 per cent decrease in fees, while Morgan Stanley reported a 55 per cent decrease in investment banking revenues.
Goldman's asset management division was another bad spot, with net revenue of $1.08 billion, 79 per cent lower than the second quarter of 2021.
The provision for credit losses was $667 million in the second quarter of 2022, compared to a net benefit of $92 million in the same period in the previous year.

Christopher J. Mitchell

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