Goldman Sachs shares fall as bond trading miss outweighs equity record

Goldman Sachs Group Inc.’s surprise drop in bond- and rates-trading revenue cast a shadow over another record quarter from the bank’s equities team, prompting Chief Executive Officer David Solomon to point the finger at analysts for setting the bar so high.

“A lot of this has to do with expectations that are set in the research community,” Solomon said Monday on a conference call with analysts. “It was the 10th-best FICC quarter ever.”

Goldman’s results offer one of the first glimpses into how Wall Street fared in a volatile period. Its equities traders rode the wave to a banner quarter, beating their own previous all-time quarterly high by more than $1 billion. But its fixed-income, currency and commodities business posted revenue of $4.01 billion, down 10% from a year earlier and more than $800 million below the consensus of analyst estimates, according to a statement.

Denis Coleman, the bank’s chief financial officer, said the fixed-income unit’s performance in rates and mortgages was relatively lower than last year. Meanwhile, it improved in currencies and commodities.

The bank also warned that its backlog of fees decreased slightly compared to the previous quarter.

Shares of the company slumped 2.4% to $886.24 at 2:10 p.m. in New York, by far the biggest decline in the 24-company KBW Bank Index.

Goldman has one of the largest markets divisions on Wall Street. Such businesses benefit from a surge in volatility, which this year has been driven by the war in Iran, as well as concerns around artificial intelligence and private credit.

The investment bank’s stocks division reported revenue of $5.33 billion for the first three months of the year, passing the $4.31 billion record set in the fourth quarter of last year. The latest three-month haul was the highest set by any bank in history.

Its equities boom was driven by a surge in equities financing, which includes lending to large hedge fund clients and other speculative investors. It also came despite the shock departure of one of its co-heads, Erdit Hoxha, to hedge fund Millennium Management.

Investment bankers’ advisory fees were 89% higher than the same period last year, beating expectations across the board and reflecting a rebound in merger activity. Total fees for the unit hit $2.84 billion in the quarter.

“The backlog really did not move very significantly at all,” Solomon said on the analyst call, downplaying the firm’s lower guidance on its deals pipeline. “We continue to see significant activity on the M&A front.”

In the asset-management division, the company said assets under supervision rose to $3.7 trillion and net revenue increased compared to the same period last year. Earlier in April, Goldman said one of its private credit funds narrowly escaped a broader exodus of investors.

The bank’s own former chief executive officer, Lloyd Blankfein, warned earlier this year that private markets — on which Goldman has staked much of its future growth strategy — face a “fire” risk from possible excessive valuations.

Solomon said there would likely continue to be noise about retail private-credit funds going forward, but said the bank still saw private credit as an attractive space.

In the first quarter, Goldman also promoted seven more partners to its top management committee and hiked pay for its most senior executives, while also announcing the departure of its top lawyer.