Goldman's trading business returns to former glory amid Covid-19 crisis

Goldman Sachs Group on Wednesday posted its best quarterly performance in a decade by some measures, as trading has moved back into the limelight and lack of a big consumer business switched from a curse to a blessing.

The Wall Street bank posted a quarterly return on equity of 17.5 per cent — its highest since 2010. Investors closely track the figure because it shows how well a bank uses shareholder money to produce profits.

Goldman also posted record earnings per share, beating analyst expectations by a wide margin. Its performance was driven in large part by a 29 per cent jump in trading revenue, as clients responded to news about the coronavirus pandemic by shifting their portfolios.

While rivals have also benefited from the market boom this year, they are far more exposed to vulnerable consumers and businesses suffering from unemployment and lockdowns. 

“Simply stunning results,” said Credit Suisse analyst Susan Roth Katzke in a report.

In the years leading up to the pandemic, Goldman’s heavy exposure to trading and lack of exposure to traditional lending was viewed as a problem. 

The bank is in the middle of a business-model revamp orchestrated by CEO David Solomon, which includes building out its consumer bank ‘Marcus’ and adding services like retail wealth management.

Analysts say it is the right strategy for the long term, but for now, Goldman’s business mix is just right. Its $4.6 billion in quarterly trading revenue jumped 29 per cent compared to the year-ago period, a bigger increase than other Wall Street banks. The business accounted for 42 per cent of Goldman’s overall revenue, while consumer and wealth management represented 14 per cent.

Goldman’s i-banking business also benefited from several high-profile IPOs.

The bank’s overall profit nearly doubled $3.5 billion from $1.8 billion a year ago. Earnings per share were a record $9.68, up from $4.79 a year earlier.

Revenue rose at all four of its business units — up 30 per cent to $10.8 billion. That was above the $9.5 billion consensus estimate.