Goldman Sachs Group Inc reported a 43 per cent reduction in earnings on Friday, but topped Wall Street estimates, thanks to strong results in its wealth management and trading operations, which partially offset a drop in equity underwriting as stock market listings dried up.

Wall Street banks have been under pressure due to a global slowdown in dealmaking, but Goldman’s trading desks outperformed expectations because to volatility fuelled by concerns about interest rate hikes and the economic consequences from the Ukraine war.

The bank’s global markets sector posted net income of $7.87 billion, up 4% from last year, when the US Federal Reserve’s accommodating monetary policy prompted a surge in trading activity. According to the bank, the strong performance was fueled by a 21 per cent increase in fixed income revenue.

Under the leadership of Chief Executive David Solomon, the Wall Street bank has been taking steps to diversify its revenue stream and earn more from stable sources such as consumer banking, wealth management, and asset management. 

Higher management fees and credit card balances helped Consumer and Wealth Management increase net sales by 21 percent to $2.10 billion.

Investment banking revenue, on the other hand, fell 36 per cent to $2.41 billion, as fees from stock market listing advice and debt underwriting fell in the face of rising tensions between Russia and Ukraine.

“It was a turbulent quarter dominated by the devastating invasion of Ukraine,” Solomon said. Goldman was the first major U.S. bank to retreat from Russia.

“The rapidly evolving market environment had a significant effect on client activity as risk intermediation came to the fore and equity issuance came to a near standstill,” Solomon added.

In stark contrast to rival Morgan Stanley, whose revenue from the division increased, Goldman’s revenue from deal advice stayed relatively steady at $1.13 billion.

Dealmaking slowed in the quarter as the US Federal Reserve began to wean the economy off pandemic-era support, casting a pall over some of Goldman’s most lucrative operations.

In the quarter, Goldman decreased operational expenses by 18 per cent, owing primarily to lower salary and benefits spending.

In the first quarter, the bank made $3.83 billion in profit applicable to common shareholders, or $10.76 per share. According to Refinitiv statistics, analysts projected $8.89 per share.

In the third quarter, total net revenue was $12.93 billion, down about 27 per cent from the previous year.

(Adapted from Reuters.com)