Goldman Sachs' equities business grew faster than any other unit last quarter, posting record revenue even as the bank's dealmaking drew most of the attention. Kevin Kelly, the firm's global co-head of equities, says the gains rest on years of investment and closer coordination between trading and banking clients.
Goldman Sachs' equities division delivered the sharpest growth inside the bank's Global Banking & Markets group last quarter, even though the firm's dealmaking business grabbed most of the headlines. Equities revenue surged 72% to a record $7.42 billion in the second quarter, outpacing every other line on the bank's earnings report.
Equities and FICC both beat forecasts
The jump came alongside gains elsewhere in the division. Investment banking revenue rose 55% to $3.4 billion, a figure that included fees from SpaceX's IPO and a $25 billion bond sale during the quarter, plus proceeds from co-leading Alphabet's $85 billion equity raise, announced in June. Fixed income, currency and commodities trading also topped estimates, with FICC revenue rising 32% to $4.6 billion.
Together, Global Banking & Markets brought in $15.5 billion last quarter, more than 75% of the bank's total revenue. Goldman's other two reporting segments were smaller: Asset & Wealth Management posted $4.6 billion and Platform Solutions brought in $221 million.
Behind the growth: dispersion and hedging
Kevin Kelly, Goldman's global co-head of client coverage for Global Banking & Markets and global co-head of equities, said the past several weeks brought more dispersion in stock performance after a stretch when AI-related names moved almost as one block. According to Kelly: "the year has been quite good."
Clients have also trimmed some concentrated positions. Semiconductor and semi-cap equipment exposure in Goldman's net portfolio climbed from 10% at the start of the year to a high of 24%, before easing back to about 18%, Kelly said.
Hedging demand climbs with volatility
Kelly pointed to elevated hedging activity as another driver. Single-name volatility has hit all-time highs, with a wider gap against index volatility than during the tariff-driven market swings known as "Liberation Day," he said, pushing clients to shift positions more actively. He also noted that retail investors can account for 20% of trading volume on a given day.
Source: CNBC
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