Goldman Sachs profits surge despite pandemic

NEW YORK • Goldman Sachs Group Inc reported strong third-quarter (3Q) results on Wednesday, nearly doubling profits and reflecting little of the vulnerability that has plagued other corners of the economy during the pandemic.

Key strengths to the money machine at Wall Street’s iconic investment bank included a “significant” increase in IPOs and a surge in revenues from its markets division.

The strong Goldman numbers easily eclipsed mixed results from Bank of America Corp (BofA) and Wells Fargo & Co, which are much more heavily focused on consumer lending.

Both BofA and Wells Fargo saw a profit hit following Federal Reserve (Fed) interest-rate cuts to support the economy, offset somewhat by much lower reserves set aside for bad loans compared to the prior two quarters.

Bank executives have warned that the US recovery could falter if Washington fails to enact additional stimulus following the expiration of key programmes to support unemployed workers and embattled industries.

At Goldman, net income came in at US$3.5 billion (RM14.53 billion), up 94% from the year-ago period and topping analyst estimates by a wide margin. Revenues rose 30% to US$10.8 billion.

Goldman set aside US$278 million for credit losses, well below the US$1.6 billion it allotted for bad loans in the prior quarter, when the most severe Covid-19 restrictions were in effect.

Trading has generally been a strength for large banks during the pandemic, boosting commission fees as markets have swerved. Volatility “declined modestly” in the 3Q, Goldman said.

Goldman’s revenue rose in all four divisions compared to the year-ago period. Revenues from equity investments soared 139% from the year-ago period, reflecting an ascendant stock market during the period.

CEO David Solomon lauded the company’s performance amid the downturn, adding that he would maintain “vigilance” given “potential weakness in the broader economy”.

BofA reported a 16% drop in quarterly profits to US$4.9 billion on a 10.8% decline in revenues to US$20.3 billion. The drop in profits reflected much lower net interest income following Fed rate cuts.

Wells Fargo reported profits of US$2 billion, less than half the US$4.6 billion in the year-ago period, but an improvement on the US$2.4 billion loss in 2Q. Revenues fell 14.3% to US$18.9 billion.

As with BofA, Wells Fargo was hit by a big drop in net interest income. However, provisions for credit losses were flat compared to the prior quarter.

Shares of Goldman rose 0.2% to US$211.23 by the close of markets, while BofA fell 5.3% to US$23.62 and Wells Fargo dropped 6% to US$23.25. — AFP