Goldman Sachs has seen its quarterly profit double, beating Wall Street estimates, and boosted by returns from investing the bank’s own money.
The investing and lending division, which tracks the group’s investments in debt and equity markets, produced nearly seven times as much revenue in the second quarter as it did a year earlier.
Investors question how much revenue growth the bank can generate in this sector under new regulations. The Volcker rule, part of the 2010 United States’ Dodd-Frank financial reform law, limits banks’ bets with their own money. But the industry has years to comply with the law, and Goldman believes most of its investing and lending activities already do.
Overall, Goldman’s net profit rose to $1.86 billion (£1.23bn) in the second quarter from $927 million in the same period last year. Net revenue rose 30 per cent to $8.61bn.
The biggest contributor to revenue was fixed-income, currency and commodities (FICC) trading, which reflects income from client business. Revenue there rose 12 per cent to $2.46bn.The biggest source of growth was the investing and lending division, where revenue surged to $1.42bn from $203m a year earlier.
Chief executive Lloyd Blankfein said: “Improving economic conditions in the US drove client activity.”
The results echo similar trends in the investment banking units of JPMorgan Chase & Co and Citigroup, whose fixed-income trading businesses also benefited from improvements in trading and underwriting revenue in the second quarter.