Goldman Sells $5.5 Billion of Bonds in Echo of April Bank Sales

Goldman Sachs Group Inc. raised $5.5 billion in new bonds after reporting earnings Tuesday, reminiscent of an issuance onslaught from the biggest U.S. banks after they posted results three months ago.

The lender sold the debt in two parts, according to a person with knowledge of the matter. The longest portion of the offering, a 21-year security, yields 1 percentage point above Treasuries, after initial discussions of around 1.25 percentage points, said the person, who asked not to be identified as the details are private.

Goldman differs from other big banks in that the company is finding opportunities in prime brokerage, a potential driver of increased borrowing, according to Bloomberg Intelligence analyst Arnold Kakuda. The lender said on Tuesday that it plans to continue growing its prime brokerage even if other banks are shrinking from the business of selling bundled financial services to clients with more complex needs, such as hedge funds.

“For Goldman, they see an opening in prime brokerage to gain share with their financing,” said Kakuda in a phone interview Wednesday, referring to the bank’s active debt issuance.

The bank has raised about $38 billion in bond sales in the first half of the year, the analyst wrote in a note Wednesday.

Big domestic banks borrowed heavily after reporting earnings in the first-quarter to ensure they have enough money to back up their assets, which grew rapidly during the pandemic. Goldman borrowed $6 billion in April while Bank of America Corp. brought the biggest bank bond sale ever, pricing a $15 billion deal. JPMorgan Chase & Co., meanwhile, borrowed $13 billion.

While JPMorgan, BofA and Citi are likely to follow Goldman in selling new debt, the banks may borrow in smaller amounts than in April because their balance sheet growth probably is smaller than in the first quarter.

“The pressure to issue is not as large as it was before, so I don’t see the need for the banks to issue massively like they did in April,” said Kakuda.

JPMorgan bank analyst Kabir Caprihan, meanwhile, raised his overall supply estimate for U.S. banks to $181 billion from $151 billion, with the increase “reflecting higher expected senior holdco unsecured debt issuance from the GSIBs.” Caprihan also revised his estimate for non-U.S. dollar GSIB issuance to $48 billion from $34 billion.

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