Goldman Sachs ‘ dealmaking prowess may grab all the glory, but the biggest driver of growth last quarter came from the daily grind of equities trading. Sure, Goldman and the other top Wall Street banks were able to cash in on all the market volatility lately. Many are even on track for their best year ever in trading revenue. But Goldman, in particular, has put itself in a position to meet the moment through years of investment and a strategy shift within its Global Banking & Markets group, which includes investment banking, equities, fixed income, currency, and commodities (FICC). The firm has made a concerted effort to get big clients through the door for investment banking or wealth management to use its equities services, and vice versa. Just look at how the bank crushed last quarter’s earnings report. Revenue from Goldman’s equities business handily topped estimates, surging 72% to a record $7.42 billion in the second quarter. Investment banking revenue rose 55% to a much-better-than-expected $3.4 billion, which included fees from SpaceX ‘s IPO and $25 billion bond sale during the quarter. It also includes the money earned from co-leading Alphabet ‘s massive $85 billion equity raise, which was announced in June. FICC revenue also beat, rising 32% to $4.6 billion. Global Banking & Markets is Goldman’s largest division, garnering $15.5 billion in revenue last quarter, or over 75% of the bank’s total revenue. The other two reporting segments — Asset & Wealth Management and Platform Solutions — brought in $4.6 billion and $221 million in revenue, respectively. Speaking to Goldman’s Kevin Kelly, the global co-head of client coverage for Global Banking & Markets and global co-head of equities, I asked him what’s driving stocks, where markets are going next, and what makes the business tick. The interview, which took place on July 22, has been edited for clarity and length. Let’s start at the highest level and explain what, exactly, Goldman’s equities business is. It may be a little harder to understand than even, say, what an investment banker does. How would you explain it to somebody at a cocktail party who doesn’t know a lot about Wall Street? Kelly: We’ll just start with the investment banker that most people know about and then what we do. So obviously, investment banking’s end clients are the corporates. That’s the Apples of the world, the Broadcoms , etc. That’s their real main clients. You have people in investment banking who do both mergers and acquisitions, capital markets activities; then you have just sector coverage bankers. So you choose your industry, people cover that sector and the companies within that sector, and they help them with all kinds of corporate transactions on the private side. When you come to the public side, and I’ll speak about equities, we help institutional and wealth clients transact. So, think about cash sales, trading equities for our clients. We give them content, ideas, different structures,…
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