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Goldman Sachs said its profit jumped 19% in the first quarter, powered by a resurgence in deal activity and volatile markets that drove a record performance for its core banking and markets division.

Profit rose to $5.63 billion, or $17.55 per share, higher than the expected $16.47 per share, according to FactSet.

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Revenue rose 14% to $17.23 billion, compared with $15.06 billion last year. The bank reported revenue of $12.74 billion in its banking and markets division, an all-time record. Investment-banking fees were up 48% to $2.84 billion, while revenue from its markets business rose 9% to $9.34 billion.

Banks have benefited from a growing economy and huge investments into artificial intelligence, which helped spur a rush of deals in the first quarter. At the same time, volatility in the financial markets is helping traders and salesmen collect fees from buying and selling stocks, bonds and derivatives from clients who want to reposition their portfolios.

It was Goldman’s second-best quarter ever for overall profit and revenue, falling behind only the first quarter of 2021, when a rebound from the Covid-19 pandemic helped turbocharge results.

Going forward, banks expect to earn more dealmaking fees as private-equity firms move to sell a record number of portfolio companies or take them public. Meanwhile, several big tech companies are looking to go public, including SpaceX and Anthropic. New regulations are freeing up more capital that banks can use to lend more or buy back shares, too.

But investors’ doubts about banks’ exposure to private credit and other macroeconomic risks have pushed down some of their stock prices since the beginning of the year. Many private-credit funds have seen large redemption requests from individual investors, prompting managers to limit withdrawals.

Goldman’s own private-credit fund didn’t have to impose those restrictions as 4.99% of investors requested to redeem their shares, just under the fund’s 5% limit. Overall, the bank reported raising an additional $10 billion for private-credit strategies in the first quarter.

Other fears lurking for banks include the risk that the war in Iran could drive inflation higher and curtail dealmaking. Goldman’s stock is down by nearly 7% since the beginning of the year, while JPMorgan Chase and Morgan Stanley are both down 15% and 4%, respectively.

Goldman shares fell in premarket trading Monday morning, along with a broader market retreat.

Write to Alexander Saeedy at alexander.saeedy@wsj.com

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