Goldman Sachs named its Asset and Wealth Management segment as a highlight in its second-quarter results, reporting total net income of $3.88 billion for that segment, up 27% from a year ago and up 2% continuously. The firm's wealth management and other fee income was $1.44 billion, up 8% from the year-ago quarter.
The firm posted a record $2.9 trillion in assets under supervision and an increase in wealth management client assets to about $1.5 trillion. It had $31 billion in net long-term inflows during the second quarter, including $18 billion in alternative investments, $7 billion in fixed income and $6 billion in equities. The wealth management business saw $9 billion in client inflows.
“This business has been a key contributor to our success in growing more sustainable revenue and provides us with a strong source of demand for our alternative product suite,” Goldman Sachs CFO Denis Coleman said on an analyst call Monday morning. . “A great example of the power of this unique platform. We expect continued momentum in this business as we also deepen our customer lending penetration and grow our advisor footprint. Our pre-tax margin for the first half was 23%, demonstrating significant improvement compared to last year and approaching our mid-20s target.”
The firm attributed the segment's results to net gains on equity investments, higher management and other fees and higher net income on debt investments. This was partially offset by lower net income in private banking and lending.
In a July 7 analyst note, Devin Ryan of JMP Securities said the positive momentum in this business has been underestimated by the market.
“We see Goldman Sachs' Wealth and Wealth Management business becoming an increasingly important contributor to the top and bottom lines,” the analyst note said. “The firm already operates a scalable platform with ~$3.5T in client assets, growing at a low double-digit CAGR over the past five years, but we see room for continued growth with better economics for the firm.”
Overall, Goldman reported second-quarter GAAP earnings per share of $8.62, up 180% year-over-year but down 26% sequentially. That beat analysts' expectations by 20 cents, according to SeekingAlpha.com. Revenue for the quarter was $12.73 billion, up 16.9% year over year, beating expectations by $360 million.
Last November, Goldman Sachs closed with the sale of its Personal Financial Management unit to Creative Planning. And at an event in May, the President and COO of Goldman Sachs John Waldron said the firm has no ambitions to launch own RIA business. Instead, the bank would like to become what Waldron called a “trusted advisor” to RIAs with services that complement those offered by other providers and fill gaps in the market by addressing the “pain points” of RIAs.
The firm continues to gains traction in its RIA custodial businessGoldman Sachs Advisor Solutions, which now has API integrations with 42 technology vendors.