A trader works at the Goldman Sachs stall at the New York Stock Exchange. Picture: REUTERS
A trader works at the Goldman Sachs stall at the New York Stock Exchange. Picture: REUTERS

New York —  Goldman Sachs Group  joined other big US banks in cashing in on continuing pandemic-induced volatility, as the firm’s bond traders posted the biggest jump on Wall Street so far.

Third-quarter revenue from buying and selling stocks and bonds increased 29%, driven by a 49% surge in fixed-income trading and mirroring similar gains reported Tuesday by JPMorgan and Citigroup. Revenue at each of Goldman’s four divisions rose from a year earlier, pushing earnings per share to a record that was almost twice as high as analysts predicted.

Many investors were expecting Goldman to beat estimates, “but nowhere close to this order of magnitude, with strength coming from both high- and low-quality sources”, Steven Chubak, an analyst at Wolfe Research, wrote in a note. “Whatever your whisper number was, they crushed that too.”

Trading gains since the start of the pandemic have helped offset weakness in consumer businesses at the nation’s biggest banks, where loan-loss provisions piled up in the first half of the year.

For Goldman, which is still a minnow in the world of retail banking, deal making and trading divisions have helped cushion its stock price from the kinds of steep declines some of its competitors have experienced.

Shares of the company are down 7.3% in 2020, compared with an 19% decline for the S&P 500 Financials Index. They climbed 1% to $212.90 in New York.

The firm also posted a surprise drop from a year earlier in its loan-loss provisions, echoing its bigger rivals in locking away a much smaller amount for credit losses. The stockpile amounted to just $278m in the third quarter, down from $1.6bn for the previous three months. The decline was mostly tied to corporate and consumer borrowers paying down loans, Goldman said.

Citigroup’s bond-trading revenue jumped 18% from a year earlier and its stock traders saw a 15% increase. At JPMorgan, fixed-income trading revenue increased 29% and equities advanced 32%. Bank of America missed out on the surge, posting a 3.6% climb that fell short of estimates.

Goldman’s fees from helping put together deals for companies dropped 27% to $507m. Underwriting revenue of $1.43bn topped analysts’ average estimate of $1.3bn. Goldman’s consumer operation cracked $1bn in trailing 12-month revenue for the first time since it started operations four years ago.

The firm’s equity investments delivered $1.4bn of gains, more than double that of a year earlier, as it benefited from rallying markets, according to a statement from the New York-based firm on Wednesday. That generated a bigger increase for the $3bn  public-equities portfolio than for the firm’s $16bn in private holdings.

The bank’s lending portfolio also stayed on the mend after a big writedown at the start of the year. Goldman has been working to manage more client money to generate steady recurring fees, even though the strategy limits big wins that could come from wagering more of its own money. It is closing in on raising about $14bn for a new credit fund — the biggest pool of investment cash it has raised in more than a decade.

Goldman’s consumer deposits climbed at a slower pace than in the second quarter. Its money-management arm posted a 3% drop in assets under management, mostly driven by a decline in liquidity products.

Net income almost doubled from a year earlier to $3.62bn. Earnings per share were a record $9.68, far surpassing analysts’ estimates for $5.53.

Bloomberg

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