Goldman Sachs profits jump as CEO eyes more merger activity

[NEW YORK] Goldman Sachs reported a jump in second-quarter profits on Wednesday behind significant increases in financial advisory revenues that chief executive David Solomon said could presage an uptick in dealmaking.

“Anecdotally, the level of dialogue is significantly increased,” Solomon told analysts on a conference call after the investment bank’s earnings surpassed analyst estimates.

There is a greater “confidence level on the part of CEOs, that significant scaled industry consolidation is possible,” said Solomon, who attributed the shift to the Trump administration’s more favourable posture towards mergers compared with regulators in the Biden administration.

Later in an interview with CNBC, Solomon also said he was sensing a “little bit of an acceleration” in the economy as sentiment has improved.

In April he warned of increased recession as President Donald Trump’s aggressive initial tariff launch roiled markets.

The comments came as the big US investment bank scored a 20 per cent increase in profits to US$3.5 billion compared with the year-ago period, easily topping analyst expectations.

Revenues rose 15 per cent to US$14.6 billion.

Goldman said increases in advisory fees reflected strength in the Americas, Europe, the Middle East and Africa.

Its investment banking fees backlog rose compared with the end of the first quarter, suggesting more mergers and acquisitions (M&A) and initial public offerings lie ahead.

In its markets division, Goldman’s gains were particularly pronounced in equities, where it enjoyed significantly higher revenues in financing and “intermediation,” where Goldman acts as a middleman between two parties in a transaction.

These increases helped to offset lower revenues in Goldman’s Asset and Wealth Management business.

Goldman’s strong results – which echo those at JPMorgan Chase, Citigroup and other large banks this week – add to the industry’s momentum at a time when the Trump administration has signaled regulatory relief expected to free up billions of dollars in capital that had been required after the 2008 financial crisis.

Tariff uncertainty

During the conference call, Solomon described the M&A market as “remarkably resilient.”

Year-to-date dealmaking volumes are running 30 per cent over the same period in 2024, even after sluggish activity in the first half of the quarter.

Solomon pointed to NRG’s US$12 billion acquisition of energy assets from LS Power Equity Advisors and Salesforce’s US$8 billion purchase of Informatica as reflective of deal acceleration.

Bankers had been bullish on dealmaking after Trump’s November election victory.

But in the first quarter, investment banks said such activity was placed on the backburner as the White House focused on fast-changing trade policy.

Executives at rival financial services companies expressed hope Tuesday for more deals, with clients opting to charge ahead despite tariff uncertainty. Trump has threatened steep tariff increases on countries that don’t reach trade deals with Washington.

Solomon expressed measured optimism about the economy.

“It’s hard to say that confidence is not higher on July 15 than it was on May 15,” Solomon told CNBC. “And if confidence is higher, you’re going to see that in behavior.”

Shares of Goldman Sachs rose 0.4 per cent in afternoon trading. AFP