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Goldman Sachs: Investment Banking Division Getting Stronger

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4Q17 strong results based on underwriting

Goldman Sachs’s (GS) investment banking division produced revenues of $2.1 billion, a 19% rise over 3Q17. The increase was due to strong momentum in underwriting revenues, which offset a decline in M&A (mergers and acquisitions) activities.

Advisory revenues were $772 million, a decline of 15% from the previous quarter. The decline was due to a decrease in the number of completed M&A transactions. GS advised on 75 transactions that closed in 4Q17, which represents ~$120 billion of deal volume. Announced transactions totaled $450 billion.

GS participated in large transactions around the world, which led to improvement in equity issuance. Net revenues were $1.4 billion in 4Q17, a 55% rise sequentially. Equity underwriting’s net revenues of $460 million doubled compared to 3Q17. The increase was due to follow-on offerings.

The debt underwriting franchise has grown to a $3 billion business. Debt underwriting revenues increased 35% to $909 million and included contributions from leveraged finance activity.

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Records for the investment banking segment

In 2017, the investment banking segment generated the second-highest annual revenues since the bank’s IPO (initial public offering). It ranked first in both global announced and completed M&A and held the top position in global equity underwriting.

It also has a leading position in leveraged finance, where the company has picked up market share over the last few years by integrating its strategic capabilities with capital markets and market-making franchises.

The new tax legislation is expected to give a push to the economy in the long term and help banks (IYF) generate strong operating cash flows and revenue streams.

Goldman Sachs (GS) has a market capitalization of $96.4 billion. Below are the market capitalizations for its peers:

  • JPMorgan Chase (JPM): $390 billion
  • Wells Fargo (WFC): $285 billion
  • Citigroup (C): $198.8 billion
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