Goldman Sachs sees M&A business weathering market slump

Wed Jan 20, 2016 3:05pm EST
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By Olivia Oran

(Reuters) - Goldman Sachs Group Inc (GS.N: Quote), the 2015 M&A champion, is putting a brave face on the prospects for its dealmaking business this year even with markets plunging.

The Wall Street firm, which last year topped the global dealmaking charts, is not yet concerned about the impact declining oil prices and China's slowing economy will have on dealmaking.

"We'll have to see, obviously, if markets stay under stress ... but we wouldn't say that two weeks of volatile markets would stop a pretty powerful M&A trend," Goldman CFO Harvey Schwartz said on the bank's fourth-quarter analyst call on Wednesday.

The need for Goldman to maintain a strong business advising companies on deals is crucial. The bank is increasingly generating a larger chunk of its revenue from investment banking as its bond trading arm, once a profit center for the bank, comes under pressure.

During the fourth quarter, investment banking, which includes advisory, equity and debt underwriting, comprised 21 percent of the bank's overall revenue, up from 15 percent in 2012.

Other Wall Street executives struck a more cautious tone over the last week about the deal environment.

"In the first couple of weeks, it's not been particularly strong and we do need to see some of the stability to come back for us to really see that conversation start to pick up," JPMorgan Chase & Co (JPM.N: Quote) CFO Marianne Lake said Thursday on the bank's fourth quarter earnings call, noting that M&A dialogue still remained active.

Goldman, which ranked No. 1 in advising on both announced and completed mergers and acquisitions globally in 2015, saw revenue from the business rise 27 percent during the fourth quarter to $879 million.   Continued...

A view of the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2013. REUTERS/Brendan McDermid