Remember when everyone was worried about Goldman Sachs?
The Death Star of Wall Street was bleeding from the trading floor, old habits were dying hard and costing money, there was the small matter of Malaysia alleging that Goldman Sachs had - like - conned Malaysia into a financial crisis. Suffice it to say, things at 200 West Street looked so bleak as to be almost unrecognizable, especially since Goldman staff looked around for their familiar daddy figures only to realize that they were all gone, replaced by a smaller team of new daddies who felt more like distant uncles. But the thing about these new guys was that they felt different because they are; the age of traders died with Lloyd and Gary. David Solomon and John Waldron are investment bankers, dealmakers, a reality that made traders seem even more uneasy when they weren't distracted by losing so much money.
But it turns out that the new daddies might have had a plan all along:
Goldman Sachs Group Inc., owner of one of Wall Street’s top deal-making franchises, leaned on that business last quarter to overcome an industrywide downturn in fixed-income trading.
Merger-advisory fees jumped 56 percent to the highest in more than a decade, lifting the investment-banking division above analysts’ estimates even as companies tempered their stock and bond issuance. The gains helped offset a dismal quarter for the bank’s fixed-income traders, who turned in the worst performance since before the financial crisis.
Like any self-respecting EDM DJ, David Solomon likes a little cosplay. Be it a tank top or a hat or a mouse head helmet, putting a little costume stank on your performative hang low is a prove trick of the trade. So you've got to hand it to DJ D-Sol, after Ned Stark-ing Harvey Schwartz and elevating loyal i-bankers into roles held by traders loyal to Lloyd, Solomon essentially dressed Goldman Sachs up as a 90's investment bank. And it's working: Goldman stock surged 5% after the bell today.
But the best part of this illusion is that Goldman didn't even see stronger results in i-banking. It was simply just not as shitty as the street anticipated.
Fourth-quarter investment-banking revenue fell 5 percent to $2.04 billion, beating the average estimate of $1.93 billion, the New York-based company said Wednesday in a statement. Goldman earned $1.2 billion from its advisory unit. Wall Street analysts were split over how that business would perform, with estimates ranging from about $700 million to $1.3 billion.
Merger strength helped mask the slowdown in fundraising activity for companies as choppy markets weighed on capital markets. Revenue from Goldman’s underwriting business plunged 38 percent to $843 million, a decline the firm blamed on lower leveraged-finance activity and a drop in secondary equity offerings.
DJ D-Sol and "Johnny Fresh" Waldron used another shitty quarter for trading revenue to get back to basics, subtly lower guidance without lowering guidance and remind the street that Goldman Sachs is still Goldman Sachs: an overtly powerful dealmaking machine that just needed some oiling and dusting to kick back into gear. What we're seeing in early response to this quarter is not a recognition that everything is fixed at Goldman Sachs, it's an acknowledgment that the i-bankers are back in charge at 200 West Street, and everyone remembering what that can look like if these guys can get it even half-right going forward into their new regime.
As the old finance adage goes: They always rebuild the Death Star, bro.