By Catherine Ngai
NEW YORK (Reuters) - Goldman Sachs Group Inc (NYSE:GS) on Tuesday reported a year-on-year jump in debt underwriting revenue after working on financing for big M&A deals that some peers missed out on.
Analysts have feared slower corporate issuance could weigh on Wall Street debt underwriting and also crimp credit trading as companies adjust for higher interest rates and the U.S. tax code overhaul.
Debt underwriting revenues slumped from a year earlier at other U.S. banks that reported first-quarter results.
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At Morgan Stanley (NYSE:MS), which reports on Wednesday, fixed-income underwriting revenue could fall 11 percent from the year-ago quarter, analysts at Keefe, Bruyette & Woods said in a report earlier this month.
Goldman's debt capital markets (DCM) business fell from a record fourth quarter but notched its second-best result with $797 million in revenue.
"It's really M&A as the driver for demand, for the issuance, and you've seen the results flow through into revenues," said Goldman finance chief R. Martin Chavez on a call with analysts.
He highlighted Goldman's role in CVS Health (NYSE:CVS) Corp's $40 billion bond issuance to help fund its acquisition of health insurer Aetna Inc (NYSE:AET).
The bank also said credit trading, which can be supported by issuance, was a factor behind its 23 percent rebound in fixed income, currency and commodities (FICC) revenue.
A rebound in commodities and currencies trading during an uptick in broad market volatility also helped the improvement from a weak year-ago period.
Structured trading in particular boosted the credit business year on year, Goldman said. Peers had called out credit as an area of weakness in first-quarter FICC trading.
Bank of America Corp (NYSE:BAC) Chief Financial Officer Paul Donofrio told reporters on Monday that FICC income for credit products in particular fell from a year earlier because the bank did not see as much DCM activity.
JPMorgan Chase & Co (NYSE:JPM) on Friday said lower client activity in credit and rates weighed on fixed-income trading.
On a call with analysts, JPMorgan CFO Marianne Lake said the bank missed out on some "larger fee events," and its pipeline for equities underwriting was likely stronger than for DCM given rising interest rates.
New issues for corporate investment-grade debt fell in the first quarter for the first time in four years to $343.23 billion, according to Thomson Reuters IFR data. That was the lowest outright value since 2014.
Shares in Goldman were trading lower Tuesday afternoon, with some analysts citing concerns about the volatile nature of its core businesses.