A broker dealers-related ETF strengthened Wednesday after Goldman Sachs Group (NYSE: GS) revealed a better-than-expected profit gain under David Solomon’s first quarter of leadership as higher equities trading revenue and a surge in merger and acquisition activity offset a dip in bond trading.
The iShares US Broker-Dealers & Securities Exchanges ETF (NYSEArca: IAI) rose 3.6% and broke above its short-term trend line at the 50-day simple moving average. IAI includes exposure to investment banks, brokerages and stock exchanges that may have more to gain from trading activities.
Goldman Sachs saw a 56% jump in M&A fees, along with higher trading activity on its equity desk over a volatile quarter, despite the dip in bond trading, Reuters reports.
“It was a really treacherous quarter, and they navigated it fairly well,” Charles Lemonides of ValueWork LLC told the Wall Street Journal. “To have as difficult an environment as we saw and have a 12% return on equity shows you’re doing something right on the cost side.”
GS shares climbed 9.8% on the report. GS is the largest component holding under IAI, making 9.5% of the ETF’s portfolio.
Goldman Sachs targets $5 billion in additional annual revenue
According to Solomon’s plan, Goldman Sachs is targeting $5 billion in additional annual revenue by growing its consumer operation as it tries to entice institutional customers and convince existing clients to do more business with the bank.
“We will not be complacent waiting for the market to return,” Solomon said on a conference call with analysts, referring to bond trading, a business whose structural issues have forced the bank to rethink its overall business model.
Related: Bank of America’s Record Earnings Report Helps Lift Bank Sector ETFs
Goldman reported profits of $2.3 billion in the fourth quarter, compared to a loss of $2.1 billion in the same quarter the year prior when the bank took on a one-time hit from the U.S. tax reforms. The profits of $6.04 per share in the fourth quarter vastly outstripped expectations for a $4.45 per share gain. Furthermore, total revenue was $8.1 billion, compared to average estimates of $7.6 billion.
The fourth quarter results were also a stark turnaround as Goldman was among the worst performing among Wall Street banks last year.
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