For the second consecutive quarter, Goldman Sachs (NYSE: GS) generated revenues and profits that shattered even the most optimistic expectations. In this fool live Video clip, recorded July 19, Fool contributor Matt Frankel, CFP, and Focus on industry Host Jason Moser discusses the numbers and what investors should know about them.
Jason Moser: As far as investment banking, investment banking, I think, has had a really interesting time here, especially with all these IPOs, the SPAC movement, there has been a lot of business to take on. lately. How did this impact Goldman Sachs? Because it is the investment bank, this bank should really shine in this investment banking environment.
Matthieu Frankel: Yes. Their investment banking income was the second highest on record. The first quarter was the highest, so they almost broke their own record. The IPO market has certainly helped, Goldman is a large IPO underwriter. There have been $ 135 billion in IPO issues so far this year. The average for a full year over the past five years is $ 53 billion. We’re way above what you would see in a typical full year in the IPO market, and it’s not PSPCs, it’s traditional IPOs. Goldman, that really helped me. Trading revenues fell but exceeded expectations. In a non-volatile environment, you aren’t going to stay that high forever. The profits really exceeded their expectations. Like I said, I’m not sure why they even set expectations for Goldman’s earnings because they seem to beat them quarterly. They just increased their dividend by 60% after the stress tests were published. Their business is doing well, maintaining their # 1 market share in most of their key categories. Revenue exceeded expectations by over $ 3 billion. We’ll see how the IPO market continues for the rest of the year. But all these IPO alerts I get from my TD Ameritrade account. There is a new one. I have three today, so it doesn’t seem to be slowing down any time soon.
Moser: No, it’s a good environment to go out and raise money. Do you have any idea what Goldman is doing with its Marcus offering, how is Marcus in general? I know you’ve interviewed some of the team’s thoughts there regarding Marcus, clearly they’re making big investments. How does Marcus behave?
Frankel: Marcus is the personal loan and savings platform for those who don’t know. They are one of the few who see their deposits increase year over year, which is good. Right now, their loan balance is increasing here every year.
Moser: Oh it’s good.
Frankel: But that’s largely because they have such great loan products. Remember they are Applecredit card partner of, they recently took over DGcredit card business. I’m not sure if you’ve seen the latest news they’re developing a buy now, pay later loan service for Apple.
Moser: Yes I saw that.
Frankel: Specifically for Apple. Right now, with your Apple Card, you can fund your MacBook for 24 months without interest, things like that. Now they are developing something that will allow you to do this for any purchase in conjunction with Apple. We saw To affirm the stock is hammered after that. They are the first buy now, pay later. Goldman is really into personal banking and that’s still a very small percentage of the total. I don’t have the figure in front of me, but it’s less than 10% of their turnover. But I can see that it will become much more important in the years to come.
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