First-quarter earnings season is now under way, and Goldman Sachs (NYSE:GS) has just issued its first-quarter results. Unlike most of the other big banks, which are seeing earnings crater because of massive increases in loss reserves, Goldman's business actually seems to be holding up fairly well.

With that in mind, here's a rundown of Goldman's first-quarter results and why the bank could be in a better position than its peers to make money during the tough times.

Two stock traders studying charts on a six-monitor display

Image source: Getty Images.

The headline numbers

On the surface, the top- and bottom-line numbers look like a mixed bag. Goldman's earnings of $3.11 per share for the quarter represent a drop of about 55% year over year and missed analyst expectations by a significant margin. It is worth noting, though, that the bank's profitability drop was rather mild compared to the drops at some of its peers -- Goldman's net income declined by 46% from the same quarter a year ago, while JPMorgan Chase and Wells Fargo saw net income declines of 69% and 89%, respectively. 

Revenue was another matter. Goldman's revenue was $8.74 billion for the first quarter, which was well ahead of what analysts had been looking for and was down by less than 1% compared with the first quarter of last year. We'll get into the reasons for the strong revenue in a bit, but for now, the key point is that Goldman Sachs' revenue hasn't suffered much.

First, the bad news

Of course, the headline earnings and revenue numbers don't ever tell the full story. And that's especially true in the current environment -- some aspects of the banking industry are suffering, while others are actually doing better than before the market downturn. We'll start with some of the negative pieces of Goldman's first quarter.  

The bank's asset management segment had negative revenue for the quarter, a major downswing compared to the $1.79 billion it generated in the first quarter of 2019. Losses in debt and equity investments were the main reasons for the poor performance.

Goldman's provision for credit losses increased by $713 million relative to the first quarter of 2019 in anticipation of loan losses, particularly corporate loans related to the energy sector and other businesses affected by COVID-19.

Much of Goldman's business is doing well

While the COVID-19 pandemic will certainly have a negative impact on parts of Goldman's business, it's important to know that several key areas of the business are performing quite well amid the health crisis.

Goldman's investment banking business generated $2.18 billion in revenue, its second highest quarterly total ever, and 25% higher than the same quarter a year ago. Plus, the bank kept its No. 1 market share position in worldwide M&A.

Trading revenue was a very strong part of the quarter and is the primary reason Goldman's revenue was so strong. Fixed income, currency, and commodity (FICC) trading revenue was the highest it has been in five years, and equity trading revenue was strong as well. The two aspects of the trading business generated $2.97 billion and $2.19 billion, respectively, which combines for roughly $1.2 billion more than analysts had expected.

The short explanation is that when markets get volatile, it leads to higher trading activity, which is a positive catalyst for trading revenue. Since trading is the largest component of Goldman's revenue, this could help the bank maintain profitability better than its peers during the turbulent times.

Finally, Goldman's consumer banking revenue, perhaps the most promising long-term growth driver in the bank's business, increased by 39% year over year. Deposits through its Marcus platform and increased credit card balances (Goldman launched the Apple Card last year) helped fuel the growth. However, it's important to point out that consumer banking makes up just over 3% of Goldman's revenue.

Expect a roller-coaster ride

As a final point, remember that the entire first quarter wasn't affected by the coronavirus outbreak. For the most part, January and February were relatively "normal" months in the U.S. economy. The second quarter's numbers are likely to be more reflective of the effects of the pandemic, especially in terms of actual loan losses and the full effects of volatility on trading revenue.

In any case, until there's more clarity regarding when the economy can start getting back to normal, the volatility in the stock market (and bank stocks in particular) is unlikely to go away, no matter what first-quarter results are telling us.