Private Equities to Drive This Segment’s Revenue Growth in Q3

Investing and Lending segment

Goldman Sachs’s (GS) Investing and Lending segment has continuously reported significant YoY (year-over-year) revenue growth in the past few quarters. Analysts expect the segment to have performed well in the third quarter mainly due to rising rates, high lending, new assets, and private equity gains.

The segment’s revenue of $1.94 billion in the second quarter marked a 23% rise compared to the previous year’s quarter. Moreover, the bank registered a 67% rise in debt lending. The robust growth in its structured debt lending also led to a 40.0% rise in Goldman Sachs’s net interest income.

Private Equities to Drive This Segment’s Revenue Growth in Q3

Equities increased 9.0% YoY in the second quarter driven by a significant rise in net gains from private equities and partially offset by softness in investment in companies listed on stock exchanges. The company expects these listed entities to deliver weaker returns in the quarters ahead, but it projects continued gains from private equities.

The robust market scenario for private equities has been drawing investment bankers to focus on this space. Investment banks such as Morgan Stanley (MS) and alternative managers (XLF) such as Blackstone (BX) and Carlyle Group (CG) are also focusing on private market equities.

Goldman Sachs’s Investment and Lending segment is expected to see continued gains from private equities, decent growth in loans and debt securities, and a marginal increase in management fees in the quarters ahead. The segment is also expected to benefit from a higher interest rate spread and increased demand for structured debt due to growth in middle-market companies in the United States.

Asset management

Goldman Sachs has witnessed strong growth in its Investment Management segment’s revenues. In the last reported quarter, the company registered a 20.0% YoY rise in the segment’s revenue primarily driven by higher incentive fees and management fees.

In the second quarter, Goldman Sachs’s assets under management increased by $15.0 billion to $1.5 trillion. It also recorded an increase of $5.0 billion in long-term assets under supervision, primarily aided by net inflows of $8.0 billion. This increase was spread across all asset classes, partially offset by net market depreciation of $3.0 billion.