Key points:

  • Earnings in the second quarter of 2024: More than double last year, beating analysts’ expectations.
  • Reorientation to traditional areas: investment banking, trading.
  • Successful implementation of the new strategy: stock growth by 24.4% in 2024.

In the second quarter of 2024, Goldman Sachs recorded earnings more than doubling year-over-year, beating analysts’ expectations.

It’s worth noting that compared to the record first quarter, when profits reached their highest level since 2021, there has been a slight decline. However, the strength of the US economy is instilling confidence in corporate management, which is fueling increased activity in acquisitions, debt sales and equity offerings.

Quarterly report results

Goldman Sachs shares rose 2.3% to a record high after reporting second-quarter 2024 results. However, growth slowed later in the trading day, ending at 0.3%.

The modest growth was partly due to Goldman Sachs’ investment banking earnings lagging behind rivals such as JPMorgan Chase and Citigroup. Argus Research analyst Stephen Biggar notes that the bank’s second-quarter profit was $3.04 billion, or $8.62 per share, which is 3% higher than analysts’ forecasts ($8.34 per share).

Despite the underperformance, CFRA Research director Kenneth Leon remains optimistic about Goldman Sachs’ prospects. He expects investment banking fee income to rise given the bank’s significant portfolio expansion.

It’s worth noting that Goldman Sachs’ results exceeded expectations by a smaller margin than the previous two quarters. In the first quarter, the bank’s profit exceeded forecasts by 35%, and in the second – by 56%.

However, Goldman Sachs’ second-quarter investment banking fees rose 21% to $1.73 billion. Revenue from mergers and acquisitions (M&A) advisory services jumped 7%, and debt and equity underwriting rose by 39% and 25% respectively.

By comparison, JPMorgan on Friday reported investment banking revenue growth of 46%, and Citigroup rose 60%.

Change of company guidelines

Goldman Sachs’ second-quarter 2024 earnings rose but were partially offset by GreenSky-related asset write-downs. Fintech company GreenSky was sold to Goldman Sachs last year.

Goldman’s unsuccessful attempt to penetrate the consumer banking market led to a refocusing of its activities on its traditional areas of investment banking and trading.

This year marks the 25th anniversary of Goldman’s initial public offering. That same year, David Solomon joined the company and is now CEO.

Investors are applauding Goldman’s new strategy to strengthen its position on Wall Street. The bank’s shares are up 24.4% this year. By comparison, Morgan Stanley shares rose 11.6% and JPMorgan shares rose 20.5%.

Goldman’s fixed income, foreign exchange and commodities (FICC) trading revenue rose 17%. This growth was facilitated by FICC’s business, which provides loans to private investors and other major market players.

Goldman Sachs plans to launch first Asia-focused private equity fund

Goldman Sachs is set to raise $2 billion for its first private equity fund focused on the Asia-Pacific region. This will allow the bank to strengthen its position in one of the most dynamically developing economic regions in the world.

Sources familiar with Goldman Sachs’ plans said the fundraising comes as private equity firms in Asia shift investment strategies and fund allocations. Geopolitical tensions, rising interest rates, market volatility and macroeconomic challenges are pushing investors to reconsider their approaches.

Goldman Sachs Asset Management, the bank’s investment arm, is offering the new fund to sovereign wealth funds, pension funds and private investors. The fund’s first closing is expected in the fourth quarter.

The target size of the fund, which was first announced, is $2 billion. The main focus will be on investment opportunities in Japan, where about half of the capital is expected to be directed.