Goldman Bond Trading Miss Outweighs Equity Record

Bloomberg Intelligence Financials Analyst, Neil Sipes discusses Goldman Sachs' earnings out before the bell Monday.

Goldman Sachs Group Inc. shares fell after the bank reported a surprise drop in bond-trading revenue, casting a shadow over what was another record quarter from the firm’s equities team.

Fixed-income, currency and commodities revenue was $4.01 billion for the first quarter, according to a statement Monday. That was more than $800 million below the consensus of analyst estimates compiled by Bloomberg and 10% less than the same period last year.

The bank also warned investors that its backlog of fees decreased slightly compared to the previous quarter.

Shares of the company slumped 4.2% to $869.88 at 9:33 a.m. in New York, by far the biggest decline in the 24-company KBW Bank Index. The drop left the stock down 0.8% for the year.

Those sour notes contrasted with results from equities traders, who beat their own previous all-time quarterly high by more than $1 billion as the war in Iran fueled market volatility.

Goldman, which was first of the top investment banks to report results this week, has one of the largest markets divisions on Wall Street. Such businesses benefit from a surge in volatility, which this year has been driven by the war in Iran, as well as concerns around artificial intelligence and private credit.

The investment bank’s stocks division reported revenue of $5.33 billion for the first three months of the year, passing the $4.31 billion record set in the fourth quarter of last year. The latest three-month haul was the highest set by any bank in history. Its equities boom was driven by a surge in equities financing, which includes lending to large hedge fund clients and other speculative investors. It also came despite the shock departure of one of its co-heads, Erdit Hoxha, to hedge fund Millennium Management.

Investment bankers’ advisory fees were 89% higher than the same period last year, beating expectations across the board and reflecting a rebound in merger activity. Total fees for the unit hit $2.84 billion in the quarter.

Read More: Wall Street Poised for Record $18 Billion Equities Trading Haul

In the asset-management division, the company said assets under supervision rose to $3.7 trillion and net revenue increased compared to the same period last year. Earlier in April, Goldman said one of its private credit funds narrowly escaped a broader exodus of investors.

The bank’s own former chief executive officer, Lloyd Blankfein, warned earlier this year that private markets — on which Goldman has staked much of its future growth strategy — face a “fire” risk from possible excessive valuations.

In the first quarter, Goldman also promoted seven more partners to its top management committee and hiked pay for its most senior executives, while also announcing the departure of its top lawyer.

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