Goldman Sachs third-quarter profit source


Goldman Sachs Group Inc GS -1.55%

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Third quarter profit almost doubled, which is the latest confirmation that even in an epidemic and recession, Wall Street can still make money.

Goldman reported a quarterly profit of $ 3.62 billion, or $ 9.68 per share, on revenue of $ 10.78 billion. Both measures were better than the expectations of stock analysts, which estimate $ 1.94 billion on revenue of $ 9.38 billion, or $ 5.54 per share. Goldman posted a profit of $ 1.88 billion, or $ 4.79 per share, in the third quarter of 2019.

There is concern that the coronovirus, which has become a threat to the US financial system, has stopped for 2008. Trading fees of banks have increased. The hunger of bond investors has allowed companies that borrow billions of rupees from banks this spring to pay them off. Large corporates have gone bankrupt.

The pain may lie still further, especially if unemployment remains high and resurgence in the virus sparks new or harder lockdowns. But unlike the crisis of 2008, when banks posted multibillion-dollar losses, today’s lenders are still in the black. And they are not facing the same investor panic that drove the deadly bank last time.

Profit at JPMorgan Chase & Co. doubled from the second quarter and was up 4% from a year earlier, when the US economy was booming. After paying $ 19 billion as a cushion for some loan defaults earlier this year, the bank added only marginally to that quarter. Bank of america Corp.

And citigroup Inc.

Were profitable, however, less than a year ago.

Goldman has had a relatively easy crisis so far. Efforts by the Federal Reserve to support markets have allowed the firm to transfer debt from its books and recover fees from buying and selling securities. And JP Morgan’s nearly $ 1 trillion in the form of a 112 billion dollar sept 30, along with a small borrowing book – it is less exposed to defaults.

Trading revenue increased 29% to $ 4.55 billion from a year earlier. The firm’s investment bankers brought in $ 1.43 billion in underwriting fees, up 60% from a year earlier, due to an uptick in companies that went public, which offset the decline in merger fees. And Goldman’s own portfolio of equity investments made the stock market cry.

Goldman set aside $ 278 million for debt losses in its new credit-card business due to high anticipated charges. But it was less than a quarter of what it set for the second quarter.

The bank’s return on equity, a measure of beneficial use of shareholders’ money, was the highest since 2010. And this month raised some breathing room with regulators by raising their capital levels above a new minimum level.

Results from large commercial banks were boosted as they set aside less money for potential loan losses, as they had done earlier in the year, reflecting either a Russian approach or an abundance of caution back in the spring.

Still, without new incentive measures, including the expansion of unemployment benefits, officials warned that losses could mount. James Dimon of JP Morgan said on Tuesday that the country still faces a two-fold recession risk, which could cost his bank an additional $ 20 billion in loan losses.

The coronovirus meltdown was already going to be a high-wire act for Goldman, setting a backdrop for this. The Wall Street firm is in the early shift of a year-long axis that chief executive David Solomon hopes will boost revenue, make it less susceptible to market swings, and its stock price to drift sideways for a year. Will exclude

Some of those moves are unlikely to slow down – and may also be aided by, such as a plan to raise $ 100 billion in new private equity funds by 2025. Investment deals will emerge from the economic fronts. And with interest rates likely to remain near zero for years, investors fall for complex and opaque investments that offer high returns.

However, others appear to be at risk with the economy. Goldman’s new consumer bank specializes in unsecured loans and credit cards, bills of which often go unpaid in times of financial difficulty and are not backed by collateral. This business, for now, is fine: Revenue grew 50% to $ 326 million from a year earlier.

A cloud still hanging over the firm is the resolution of a lengthy investigation into its dealings with a Malaysian investment fund. Earlier this year it agreed to pay $ 3.9 billion to the government of Malaysia, and negotiations with the US Department of Justice are continuing on the penalty that The Wall Street Journal reported to top $ 2 billion.

The firm has $ 3.15 billion set to cover all its expected litigation and regulatory matters, a number that it did not meaningfully add to the third quarter.

Write Liz Hoffman at [email protected]

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