Goldman Sachs profits surge despite pandemic

Cornelia Mascio
Ottobre 16, 2020

Companywide revenue of $10.78 billion beat the estimate by more than $1 billion, driven by the trading and asset management divisions.

The remarkable performance was attributed largely to a 29 percent jump in trading revenue.

Net earnings for the third quarter was $3.62 billion, or $9.68 per share, compared to net earnings of $1.87 billion, or $4.79 per share in the third quarter of 2019. The bank is in the middle of a business-model revamp orchestrated by Chief Executive David Solomon that includes building out its consumer bank, called Marcus, and adding services like retail wealth management.

One other think about Goldman's blowout quarter was the comparatively tiny measurement of its shopper banking group, which left the financial institution with much less publicity because the pandemic has upended the mortgage books of Goldman's bigger rivals like JPMorgan Chase, Citigroup and Financial institution of America.

Key strengths to the money machine at Wall Street's iconic investment bank included a "significant" increase in initial public offerings and a surge in revenues from its markets division.

The lender set aside $1.4 billion to cover loan losses, nearly twice the previous year's figure but below the $2 billion it booked in the preceding quarter.

Bank of America reported a 16 percent drop in quarterly profits to $4.9 billion on a 10.8 percent decline in revenues to $20.3 billion.

The bank's shares rose almost 3 per cent in premarket trading as it reported a 49 per cent surge in bond trading revenue to US$2.5 billion.

Goldman's investment banking business also benefited from several high-profile IPOs including Snowflake, Rocket Companies and Dun & Bradstreet during the quarter. "Its loan portfolio is small and of very high quality compared to those of other large bank holding companies". That was similarly down from $7.2 billion in the second quarter, but up from $3.5 billion in the year-ago quarter. It has minimal exposure to credit cards and small business, which we see as the biggest COVID-19 risks.

Analysts had expected a profit of US$5.57 per share, on average, according to the IBES estimate from Refinitiv. "But it has upside leverage to more active capital markets".

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