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How Goldman Sachs Is Benefiting from Volatile Markets


Aug. 2 2018, Updated 3:26 p.m. ET

Alternatives and uncertainty to drive growth

With tech stocks registering the steepest decline since the dot-com bubble, broad markets are facing renewed selling pressure. The broad markets recovered in the second quarter after declines in February 2018 on hawkish monetary policy and trade conflicts. Goldman Sachs (GS) benefited from volatility resulting in higher trading revenues, structured debt financing, investing, and lending in equity securities. The investment bank has beaten estimates in the last five quarters.

In the second quarter, Goldman Sachs posted EPS of $5.98 compared to estimates of $4.66. The growth came from financial advisory, equity underwriting, investing, lending in equities, debt securities, and higher incentive fees in asset management.

Goldman Sachs’s investments through private markets and its focus on currencies, alternatives, and commodities have allowed it to garner higher fees and revenues in volatile markets. The bank has demonstrated an ability to generate returns through customized offerings.

Among other bankers (XLF), Morgan Stanley (MS) also beat estimates by 20% in the second quarter due to its investing and lending business. However, the growth also came from financial advisory fees with an uptick in M&A and equity placements.

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Trading income

Bank of America (BAC) has invested heavily in technology to widen and improve trading solutions. The bank has outperformed its commercial banking peers in terms of growth in trading income. Goldman Sachs (GS) has regained its top spot with stellar growth in fixed income, currencies, commodities, and a stable performance in equities and securities.

Amid expectations of currency wars, global rate hikes, and trade conflicts, Goldman Sachs is expected to continue garnering higher income from this segment.

In investment banking, JPMorgan Chase (JPM) continues to rank number one in its share of total wallet fees.


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