Goldman Sachs Profit Jumped 26% in First Quarter

Goldman Sachs still relies heavily on its traders, who make money selling everything from stocks to interest-rate swaps.
Photo:

Michael Nagle/Bloomberg News

Goldman Sachs Group Inc.
GS 0.77%

reported sharply higher profit and revenue from a year ago, catching the wave of lower taxes and newly active markets that boosted other big banks’ quarterly earnings.

First-quarter revenue at the Wall Street firm rose 25% from a year ago to $10.04 billion. Profits of $2.83 billion, or $6.95 a share, were up 26%. Both figures beat analyst expectations.

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The headline increase benefited from soft comparisons with the year-ago period, when Goldman’s traders made bad bets on the dollar, interest rates and energy.

Gains were spread broadly across the firm in the latest quarter. Each of Goldman’s four business lines reported higher revenues. Its return on equity, a measure of profitability, stood at 15.4% for the quarter, its highest in six years.

The firm showed progress on areas Chief Executive

Lloyd Blankfein

has targeted as growth priorities. Debt underwriting revenues rose 25%, and asset management revenues hit a record $1.77 billion.

Net interest income of $918 million also was a new high for the firm, a decade after its conversion to a Main Street bank. Goldman expects lending—including in its new consumer bank, Marcus—to account for nearly half of the $5 billion in annual revenue it aims to add by 2020.

Shares, which are up 1.2% in 2018 through Monday, rose 0.9% to $260.19 in premarket trading.

For all its emphasis on new businesses, Goldman still relies heavily on its traders, who make money buying and selling everything from stocks to interest-rate swaps. Recent troubles in that area have spurred criticism that Mr. Blankfein, who once ran Goldman’s trading arm, hadn’t acted quickly enough to reposition the firm for the postcrisis market calm and rise of passive investing.

But the business roared back in the first quarter as volatility returned to the markets. The dollar fell, interest rates rose, and stocks swung around amid fears of a trade war and as the tumult at

Facebook Inc.

weighed on shares of technology companies.

Goldman reported a 38% increase in stock-trading revenue with gains spread across both plain-vanilla cash sales and more-complex derivative products.

Goldman said fixed-income trading rose 23%. That was well ahead of rivals who have reported in recent days but reflected that Goldman stumbled badly in the first quarter of 2017. In the most recent quarter, Goldman cited a rebound in areas including currencies and commodities and lower revenues in interest-rate products and mortgages.

JPMorgan Chase

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& Co.,

Citigroup Inc.

and

Bank of America Corp.

have reported mixed trading results, doing better in equities but disappointing in areas like bond and credit trading.

In investment banking, the business of arranging mergers and helping companies raise money, Goldman reported a 5% increase in revenue from a year ago, with a rise in underwriting compensating for a decline in merger fees.

The surprise factor in Goldman’s earnings is often its opaque investing-and-lending segment, which comprises everything from simple mortgages to illiquid investments in private startups. Revenue in that division rose 43% to $2 billion.

During the quarter, Goldman sold its last shares of credit bureau TransUnion, sealing in a roughly $3.3 billion profit on the six-year-old deal. Kensho Technologies Inc., an artificial-intelligence firm that Goldman was an early investor in, was sold to S&P Global.

Goldman also got a boost from the recent tax overhaul. It said its tax rate in the quarter was 17.2%, compared with an average over the past few years of about 30%.

Write to Liz Hoffman at liz.hoffman@wsj.com

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