Goldman’s trading business returns to former glory during pandemic stress

Goldman Sachs’ net income jumps close to 100% in the fiscal third quarter

While rivals including JPMorgan Chase & Co have also benefited from the markets boom this year, they are far more exposed to vulnerable consumers and businesses suffering from unemployment and pandemic lockdowns.

While Goldman Sachs hasn't been walloped by expected loan losses tied to the coronavirus like other big bank rivals, the firm has yet to convince investors its new businesses will drive earnings growth and share appreciation.

Oppenheimer analyst Chris Kotowski said Goldman remains one of the favorite stocks due to its small but very high-quality loan portfolio, compared to those of other large bank holding companies.

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 business accounted for 42% of Goldman's overall revenue, while consumer and wealth management represented 14%.

That was down from $1.1 billion in the second quarter of this year, but it was more than double the same figure last year, when Goldman earned $366 million from its equity underwriting business.

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.

Revenue from trading rose 3.6 per cent to US$3.34 billion, falling short of the US$3.5 billion that analysts had forecast. It has minimal exposure to credit cards and small business, which we see as the biggest COVID-19 risks.


Goldman's investment banking business also benefited from several high-profile IPOs including Snowflake, Rocket Companies and Dun & Bradstreet during the quarter.

There's no telling how long Goldman will have the wind at its back, but it is making the most of these unusual market dynamics.

The bank's overall profit almost doubled US$3.5 billion from US$1.8 billion a year ago.

The company earned $3.6 billion, or $9.68 per share, in the three months ended September 30.

Analysts had expected a profit of US$5.57 per share, on average, the IBES estimate from Refinitiv showed.

Quarterly revenue jumped 29.5% to $ 10.78 billion in the third quarter, which surpassed expectations for revenue of $ 9.38 billion.

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