In an encouraging sign for the robustness of the U.S. economy, Goldman Sachs today (July 15) reported that its profit skyrocketed 150 percent to just over $3 billion during the April-June quarter from a year prior, driven by strong growths in its investment banking and wealth management divisions. On a call with analysts, CEO David Solomon said that while inflation has remained “stickier than many had anticipated,” the nation’s economic environment “remains relatively constructive.”
The bank’s quarterly revenue came at $12.7 billion, up 17 percent from a year ago. About 44 percent of the revenue came from investment banking fees and asset and wealth management revenue, which saw year-over-year increases of 21 percent and 27 percent, respectively. Goldman shares rose 2 percent today on the results.
On July 12, the Dow Jones Industrial Average topped 40,000 for the second time this year. Solomon told analysts that “markets continue to forecast a strong landing as the expected economic growth trajectory improves and equity markets remain near all-time highs.”
Goldman Sachs joins a chorus of major banks reporting strong second-quarter earnings and positive yet wary outlooks for the economy. JPMorgan Chase (JPM), the largest bank in the U.S., last week reported a 20 percent jump in revenue ($51 billion) and 25 percent profit growth ($18.2 billion) in the June quarter. In a press release, JPMorgan CEO Jamie Dimon noted that, despite cooling inflation, inflationary forces like large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization mean that “inflation and interest rates may stay higher than the market expects.”
Wells Fargo CEO Charles Scharf pictured a similar outlook on interest rates but is more optimistic about the economy. “Looking ahead, overall, the U.S. remains strong, driven by a healthy labor market and solid growth,” Scharf told analysts on an earnings call on July 12. “However, the economy is slowing, and there are continued headwinds from still-elevated inflation and elevated interest rates.” The fourth largest bank in the nation last week reported a quarterly revenue of $20.7 billion and a profit of $4.9 billion, barely changing from the year prior.
And at Citigroup (C), where quarterly revenue rose 4 percent to $20.1 billion, the bank’s CEO Jane Fraser (the only female leader of a major Wall Street bank) said on a conference call that “after a break in progress, inflation now appears back on a downward trajectory.”
Amid cooling inflation, the Federal Reserve has indicated plans to begin lowering interest rates this year. In May, Solomon predicted no cuts in 2024 amid sticky inflation and a resilient economy in May. “I still don’t see the data that’s compelling to see we’re going to cut rates here,” he said while speaking at an event at Boston College.
Goldman Sachs today also noted that compensation, which includes bonuses, for its more than 45,000 employees rose by 17 percent to a total of $4.2 billion in the second quarter. The rise reflects “improved operating performance,” noted the bank, which additionally signaled its eagerness to embrace emerging technologies like A.I. to aid its productivity in coding and communicating information to clients.
Goldman Sachs’ board of directors recently spent a week in Silicon Valley speaking to leading A.I. CEOs, Goldman told analysts, adding that “we all left with a sense of optimism about the application of A.I. tools and the accelerating innovation in technology more broadly.”
