Listen, Goldman isn't going out of business, ok?
I mean yes, they somehow ended up mismanaging the commodities business into its worst performance ever in 2017 (a far cry from the halcyon days). And no, navigating stumbles in trading and the difficulties inherent in trying to help the bank shed the whole “muppet” meme (fuckin' Greg Smith, man), hasn't always been as easy as Lloyd at times made it look on the way to (basically) doubling the stock during his tenure as Master of the Financial Universe.
But don't you forget that Goldman is still Goldman and they proved as much on Tuesday morning by turning in a quarter that obliterated estimates. The top line beat ($10 billion against consensus of $8.75 billion) was notably "bigly", and guess what helped? Equities trading, where, like JPMorgan and Citi, Goldman benefited from market turmoil.
Revenues in the equities business jumped 38% y/y thanks to people actually trading and shit hitting the fan. Here's how you say that in a way that's appropriate for a press release:
During the quarter, Equities operated in an environment characterized by periods of high volatility and an increase in client activity compared with the fourth quarter of 2017.
Right. Overall, trading revenue was up 31% - that looks like the largest gain of any bank that's reported so far.
And here's the other thing: FICC results, while not a huge beat, jumped 23% from Q1 2017, on what the bank says were "significantly" better performances from FX, commodities and credit. The $2.1 billion in revenue was the best quarter in three years. Rates products and mortgages were apparently a drag, but that 23% growth was markedly better than the showing put up by the rest of the Street so far. Here too, Goldman cited "higher client activity" compared to Q4 - so again, people actually doing shit in light of market conditions.
Revenue in the super-fun investing and lending division jumped 43%.
Investment banking revenue was down from Q4 and only up marginally from Q1 2017, but debt-underwriting was solid (the second best quarter in history there). This seems like it's notable:
Net revenues in Financial Advisory were $586 million, 22% lower than the first quarter of 2017, reflectinga decrease in industry-wide completed mergers and acquisitions transactions.
I guess the question here might be what path Goldman will end up setting for the future in the event trading makes a triumphant comeback. I mean, ideally they may want to diversify into a more stable model that's less dependent on swashbuckling, but hell, money is money and a couple more quarters like this one for trading could well prompt them to "Make Yesteryear Great Again".
The stock faded its premarket knee-jerk and is lower after the cash open. It looks like "sell the news" is going to be a theme this earnings season - or at least for the banks.
Meanwhile, Netflix was sharply higher right out of the gate on Tuesday morning after posting results which suggested the company is still really great at setting cash on fire in order to provide you with only the finest in original Adam Sandler programming.