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Goldman Sachs Just Reported a Monster Quarter — Will the Strong Results Continue?

For the second consecutive quarter, Goldman Sachs (NYSE: GS) has delivered revenue and earnings that shattered even the most optimistic expectations. In this Fool Live video clip, recorded on July 19, Fool contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss the numbers and what investors should know about them.

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Jason Moser: In regard to investment banking, investment banking, I think, has really had an interesting period of time here, particularly with all these IPOs, the SPAC movement, there's just been a lot of business to underwrite lately. How did that impact Goldman Sachs? Because that's the investment bank, this bank really should be shining in this investment banking environment.

Matthew Frankel: Yes. Their investment banking revenue was the second-highest it's ever been. The first quarter was the highest, so they almost beat their own record. The IPO market certainly helped, Goldman's a big IPO underwriter. There have been a $135 billion worth of IPO issuance so far this year. The average for a full-year over the past five years is $53 billion. We're well above what you would see in a typical full year in the IPO market, and that's not SPACs, that's traditional IPOs. Goldman, that really helped. Trading revenue was down but exceeded expectations. In a non-volatile environment, you're not going to stay that high forever. Earnings really smashed their expectations. Like I said, I don't know why they even put expectations for Goldman's earnings because they seem to beat them every quarter. They just increased their dividend by 60% after the stress tests were released. Their business is looking great, they're maintaining their No. 1 market share in most of their key categories. Revenue came in over $3 billion above expectations. We'll see how the IPO market continues for the rest of the year. But all these IPO alerts I'm getting from my TD Ameritrade account. There's a new one. I've gotten three today, so it doesn't look like it's slowing down anytime soon.

Moser: No, it's a good environment to get out there and raise some money. Do you get any feel for how Goldman is doing with its Marcus offering, how is Marcus in general? I know you've interviewed some thoughts from the team there in regard to Marcus, clearly they're making big investments. How is Marcus performing?

Frankel: Marcus is the personal loan and savings platform for those who don't know. They're one of the few that their deposits are up year over year which is nice. Right now their loan balance are up here every year.

Moser: Oh, that's good.

Frankel: But a lot is because they have some high-value loan products. Remember they're Apple's credit card partner, they recently took over GM's credit card business. I don't know if you saw the recent news, they're developing a buy now, pay later lending service for Apple.

Moser: Yes, I did see that.

Frankel: Specifically for Apple. Right now, with your Apple card, you could finance your MacBook over 24 months interest-free, things like that. Now they're developing something that will let you do that for any purchase in conjunction with Apple. We saw Affirm stock get hammered after that. They're the leading buy now, pay later. Goldman is really going all-in on consumer banking and it's still a really small percentage of the total. I don't have the number right in front of me, but it's less than 10% of their business. But I can see that becoming much bigger in the coming years.

Jason Moser owns shares of Apple. Matthew Frankel, CFP owns shares of Apple, General Motors, and Goldman Sachs and is short shares of Apple. The Motley Fool owns shares of and recommends Affirm Holdings, Inc. and Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.


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