By Saeed Azhar and Niket Nishant

(Reuters) -Goldman Sachs' first-quarter profit beat Wall Street estimates as a recovery in underwriting and dealmaking boosted its investment banking unit, helping it post the highest earnings per share since 2021.

As a leading advisor for mergers and acquisitions, Goldman has advised on some of last year's biggest deals, including (NYSE:)'s $60 billion purchase of (NYSE:).

"We continue to execute on our strategy, focusing on our core strengths to serve our clients and deliver for our shareholders," CEO David Solomon said.

The Federal Reserve has so far managed to steer the economy toward a so-called soft landing, in which it raises interest rates and tames inflation while avoiding a major downturn.

With corporations regaining some confidence to raise money in capital markets, equity and bond underwriting business rebounded and corporate boards clinched more deals.

Global volume of mergers and acquisitions climbed 30% in the first quarter to about $755.1 billion from a year ago, according to data from Dealogic.

Executives at rivals JPMorgan Chase (NYSE:) and Citigroup also cited improving conditions for dealmaking on Friday when the lenders reported profits that beat market expectations.

Higher fees from underwriting debt and stock offerings as well as advising on deals lifted Goldman's investment banking fees up 32% to $2.08 billion.

"A rebound in a variety of capital market sensitive revenue areas may finally be underway, while an exit from the ill-fated entry into consumer businesses has removed some headline risk," said Stephen Biggar, banking analyst at Argus Research.

Profit rose 28% from last year to $4.13 billion, or $11.58 per share, for the three months ended March 31, higher than the $8.56 per share that analysts expected.

The bank reported its best earnings per share since the third quarter of 2021, according to LSEG.

Its shares rose 3.6% before the bell. As of Friday, they have climbed about 1% so far this year compared with a nearly 8% drop for rival Morgan Stanley.

TRADING STRENGTH

Revenue from trading in fixed income, currencies and commodities (FICC) rose 10% to $4.32 billion, helped by record financing revenue thanks to mortgages and structured lending.

Revenues in commodities and interest rate products were slightly lower, while equities revenue jumped 10% to $3.31 billion.

The asset and wealth management division generated record quarterly management fees of $2.45 billion. Meanwhile, assets under supervision rose to a record $2.85 trillion with wealth client assets at $1.5 trillion.

The bank had joined its asset management and wealth management arms as part of its reorganization in 2022.

Platform solutions, the unit that houses some of Goldman's consumer operations, garnered 24% higher revenue.

Goldman is slimming down its ill-fated consumer banking operations after they lost billions of dollars. It has already taken big writedowns on GreenSky, a home improvement lender it bought and sold two years later.

CEO Solomon, who once championed the retail push, has drawn criticism for the strategy.

Top proxy adviser Institutional Shareholder Services (ISS) urged shareholders to vote for the bank to split its chairman and CEO roles, both of which are currently held by Solomon. ISS cited his "missteps and steep losses" in a report to investors.

Goldman has also scrapped its co-branded credit cards with General Motors (NYSE:), and a similar partnership it has with tech giant Apple (NASDAQ:) is facing an uncertain future.

The bank's provisions for credit losses jumped to $318 million compared to a net benefit of $171 million a year ago. The increase was tied to its credit cards and wholesale loan portfolio.

Goldman had a headcount of 44,400 at the end of March, 2% lower than the fourth quarter. It had laid off thousands of employees in 2023, including a January round of cuts that was its largest since the 2008 financial crisis.