Goldman Sachs bounces back in stock trading revenue

Goldman Sachs Group's blockbuster performance in stock trading last quarter has some Wall Street watchers wondering whether it knocked rival Morgan Stanley out of the top spot in equities.

Goldman was head-and-shoulders above Morgan Stanley for many years in stock trading, where the two banks compete aggressively to finance hedge funds' trading positions, win block trading mandates and gain bragging rights for the best technology.

But in recent years Morgan Stanley has gained ground: its 2014 stock-trading revenue surpassed Goldman's for the first time in at least a decade. It also placed No1 in a global industry ranking calculated by Coalition, a firm that compiles statistics on the banking industry.

Goldman Sachs and Morgan Stanley are perennial rivals in a range of Wall Street businesses ranging from merger advice to private banking. Goldman tends to excel in businesses like trading and principal investments, while Morgan Stanley has shifted its focus onto wealth management and other businesses that do not risk its own balance sheet.

Thus, Morgan Stanley's recent gains in equities trading has become a point of pride for the bank, which tends to lag Goldman in profit overall. However, the US$2.3 billion in stock-trading revenue Goldman reported in its first-quarter results on Thursday looks hard to beat, analysts said.

Goldman's 46 per cent year-over-year jump far surpassed the 9 per cent rise in comparable revenue at JPMorgan, the 4 per cent rise at Citigroup and 2 per cent decline at Bank of America Corp. Morgan Stanley, which reports earnings today, would have to report a 36 per cent gain to match Goldman's results.

Goldman chief financial officer Harvey Schwartz said there was particular strength in stock options and other equity derivatives, which perform well when markets move in surprising directions, as well as some large block trades performed for clients.