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Goldman Sachs’ quarterly profits jumped 45 per cent to $3bn in the third quarter, boosted by its equity trading business, even as the bank took another hit from its retreat from retail banking.
Goldman’s net income compared with $2.1bn in the third quarter of last year and outstripped analysts’ estimates of about $2.5bn.
Chief executive David Solomon said the backdrop of the US economy “continues to be resilient”. “While we’ve seen some softness in consumer behaviour, the tone of my recent conversations with clients has been quite constructive,” he said.
Solomon had warned just last month that trading revenues were likely to drop by close to 10 per cent, largely due to sluggish activity in fixed income.
But Goldman’s stock trading business had its best quarter since the start of 2021, helping lift overall trading revenues by 2 per cent from the third quarter of 2023.
Equity trading revenues reached $3.5bn: 18 per cent higher than a year ago and defying expectations they would fail to show any improvement. Fixed-income trading revenues fell 12 per cent to $3bn.
Trading across large US banks has been stronger than analysts were expecting this quarter.
JPMorgan Chase reported an 8 per cent rise in trading revenues to $7.2bn while Bank of America posted a 12 per cent increase to $4.9bn and Citigroup a 0.5 per cent upturn to $4.8bn.
Goldman benefited from a continuing revival of dealmaking activity in what Wall Street hopes is the start of a sustained recovery.
Fees rose 20 per cent to $1.9bn, slightly ahead of estimates; JPMorgan last week reported a 31 per cent increase in investment banking fees to $2.3bn. Fees at BofA rose 18 per cent to $1.4bn, while Citi’s were 44 per cent higher to $999mn.
Solomon said the firm’s backlog of potential deals grew this quarter and that activity levels in mergers and stocks sales were still below 10-year averages, adding to optimism that fees will increase further.
Goldman shares reversed early gains to end marginally lower on Tuesday, after reaching a record high on Monday.
The year-on-year increase in net profits was flattered by losses Goldman took a year ago tied to its pullback from consumer banking and writedowns on real estate investments.
In the latest quarter, Goldman took a roughly $415mn pre-tax hit from moving its credit card partnership with General Motors to Barclays, the cost of exiting from small business loans and further writedowns on the GreenSky business that it sold last year.
Goldman’s asset and wealth management division, which is central to Solomon’s efforts to make the bank less reliant on investment banking and trading, reported a 16 per cent increase in revenues to about $3.8bn.
Rival Morgan Stanley will report its results on Wednesday.
