Investor uncertainty over President Trump's policies has sparked a surge in trading activity, benefiting major banks like Goldman Sachs (GS, Financial). Alongside JPMorgan Chase and Morgan Stanley, Goldman reported higher first-quarter profits, driven by a significant rise in trading revenues. As investors anticipate potential market disruptions from Trump's trade and economic policies, they are adjusting portfolios, and banks are profiting from related fees.
Despite robust profits, bank executives remain uneasy about future business conditions and the potential impact on corporate clients. Goldman's first-quarter profit rose 15% to $4.74 billion, or $14.12 per share, surpassing analyst expectations. Revenue increased 6% to $15.06 billion, also exceeding forecasts. The growth in trading income was largely due to a 27% rise in equities business revenue, including trading and lending to clients.
Executives noted that at the year's start, many investors had portfolios aligned with the "American exceptionalism" trade. Now, clients are reducing investments in U.S. stocks and dollars, shifting towards international assets in Europe and South America. Goldman highlighted particularly high net income from equity derivatives as investors prepared for market volatility.
However, the bank's deal-making performance was less impressive. Market downturns and global economic uncertainty led many companies to delay mergers and IPOs. In Q1, Goldman's investment banking revenue fell 8%, with advisory fees dropping 22% as the main drag. Executives emphasized the need for reduced headline risks reshaping global trade to ease market tensions.
