Published On: Tue, Apr 17th, 2018

Goldman Sachs Earnings: Good Trading Quarter Complicates Future

Goldman Sachs Group Inc. is back, and that’s a problem.

The bank that is still led, at least for now, by CEO Lloyd Blankfein on Tuesday delivered better-than-expected first-quarter results that were driven by a part of the bank that many increasingly thought Goldman was on the path to de-emphasizing. But that wasn’t the case in the first three months of 2018. Instead, Goldman’s beleaguered fixed-income, currencies and commodities (FICC) unit produced its best quarter in more than three years. The unit’s revenue jumped 23 percent from a year ago to nearly $2.1 billion. Goldman’s rivals were able to capitalize on the volatility as well, but only in their equities divisions. Debt trading at rivals Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co, was either flat and down. In equities trading, Goldman’s 38 percent jump matched the high end of its rivals.

Trading Up

Market volatility helped Goldman Sachs to its best trading quarter in three years

Source: Bloomberg, Goldman Sachs

All told, revenue at its client services and execution unit was up 31 percent from a year ago and contributed 44 percent of Goldman’s overall revenue, up from 30 percent in the last three months of 2017.

But the revival of its trading arm comes at an awkward time for the firm. Goldman has been increasingly looking as if it wanted to pivot from its trading-dominated business model back to its investment-banking roots. The firm recently named David Solomon, an investment banker (and disc jockey), as its sole chief operating officer, all but solidifying his position as Blankfein’s successor. Solomon was chosen over Harvey Schwartz, who like Blankfein had spent much of his career in the firm’s trading division.

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