Diversified Goldman Sachs improves its revenues

Goldman’s still generates most of its money from investment banking work but has been diversifying its earnings streams. Picture: Getty Images

Goldman Sachs’s investment banking fees were $US1.73bn ($2.57bn) for the second quarter, up 21 per cent from the previous corresponding period.

The result, the Wall Street bank said, reflected slightly higher net revenues in debt underwriting, primarily driven by leveraged finance activity, higher net revenues in equity underwriting, largely from convertible and initial public offerings, and slightly higher net revenues in advisory.

For Asia, which encompasses Australia and New Zealand, net revenues increased 12 per cent for the first six months of the year.

While the investment bank continues to rank No.1 in completed mergers and acquisitions internationally, Goldman’s has noted that mergers and acquisitions activity was still running well below its 10-year average, the Wall Street Journal reported.

Global banking and markets generated $US8.2bn ($12.2bn), asset and wealth management, a key focus for the group, generated $US3.88bn ($5.75bn).

While Goldman’s still generates most of its money from investment banking work, like others in the industry, it’s been looking to diversify earnings streams amid slower conditions that may persist for some time.

Locally, a number of key bankers that have departed the firm have been replaced internally.

Goldman’s used to count Michael Ashforth as a regional resources banking adviser based in Perth, but he has since left the bank and is now a director of gold miner Northern Star.

Mario Argyrides – who left in around April as head of equities – has been replaced by Credit Suisse banker Mark Davis, while Mr Argyrides’ other team members are still to be replaced.

Goldman Sachs head of ANZ equity capital markets Ian Taylor also left last year to join APM Human Services.

Two vital parts of Goldman’s strategy under chief executive David Solomon are to do more lending to Wall Street clients and shift assets from the bank’s own balance sheet to funds managed for fee-paying outside investors, the Wall Street Journal reported.

It is all part of Goldman’s broader aim to transition its image from Wall Street’s swashbuckling, boom-and-bust investment bank to a more reliable, diversified institution.

Based on what is being seen locally, it’s not just the Wall Street heavyweight that is taking this approach. In Australia, more of its peers – including JPMorgan – have been cutting staff within its equities ranks.

Local advisory firms such as MA Financial, that was started by ex JPMorgan banker Andrew Pridham, has pivoted away from pure advisory work in recent years, now generating the bulk of income from asset management and a minority of its income from investment banking.