Shares of Goldman Sachs dropped Monday despite the Wall Street giant posting a blockbuster first-quarter profit, as investors zeroed in on weak spots beneath the headline numbers.
The stock dropped roughly 2% intraday after initially plunging more than 4% at the open — even as the bank reported earnings and revenue that topped expectations.
Investors also weighed the potential impact of the Iran conflict on dealmaking and market activity.
Goldman posted net income of $5.63 billion on revenue of $17.23 billion for the quarter, with earnings per share of $17.55 — topping analyst estimates of $16.49 per share on revenue of about $16.97 billion.
But the strong headline results were overshadowed by a sharp miss in a key business line: fixed-income trading.
Revenue from fixed income, currencies and commodities — known as FICC — came in at roughly $4 billion, falling short of expectations by as much as $900 million, according to estimates cited by analysts.
The shortfall in FICC, a core driver of institutional trading revenue, weighed heavily on investor sentiment and sparked concerns about whether trading conditions are beginning to soften.
Weakness wasn’t limited to trading. The firm’s asset and wealth management division generated $4.08 billion in revenue, falling roughly $140 million short of analyst expectations.
At the same time, Goldman reported a larger-than-expected provision for credit losses, booking about $315 million — more than double the roughly $150 million analysts had anticipated.
The higher provision raised questions about potential stress in the bank’s lending portfolio and exposure to private credit markets.
It was the bank’s largest increase in loan loss provisions since 2020, Wells Fargo analyst Mike Mayo said in a note cited by CNBC.
Nonetheless, the company offered to a positive take on the first-quarter results.
“Goldman Sachs delivered very strong performance for our shareholders this quarter, even as market conditions became more volatile,” CEO David Solomon said.
“Our clients continue to depend on us for high quality execution and insights amid the broader uncertainty, and we remain confident in how we’ve positioned our businesses.”
Speaking on a conference call later Monday, Solomon said dealmaking activity has remained resilient but warned he is closely tracking developments in Iran and the broader Middle East region.
“If the resolution of the conflict drags, that probably will be a headwind in some of these areas, particularly inflation trends as we get further into the second and the third quarter,” Solomon said. “So we’ll have to watch that.”
Solomon also struck an optimistic tone on dealmaking, saying executives he has spoken with “believe they have an opportunity to drive scale and consolidation” that wasn’t possible under the Biden administration.
Some analysts warned that the outlook for dealmaking remains uncertain.
“The absence of a material increase in [investment banking] activity over a sustained period and/or a cool-down in market performance could lead to disappointment and a sharp correction,” Saul Martinez, head of US financials research at HSBC, told the Wall Street Journal.
Investors appeared to look past the firm’s strong performance in other areas.
Equities trading revenue surged to a record level during the quarter, while investment banking fees rebounded sharply amid a pickup in dealmaking activity.
Shares of JPMorgan Chase rose about 0.8%, while Bank of America gained roughly 0.7%, reflecting a modestly positive tone across large-cap lenders.
The broader KBW Bank Index was little changed, pointing to a flat-to-slightly-positive session for the sector, while the Invesco KBW Bank ETF hovered in the mid-$80s range.
