Goldman Sachs Group on Wednesday posted its best quarterly performance in a decade by some measures, as its trading business moved back into the limelight and its lack of a big consumer business switched from a curse to a blessing.
The Wall Street trading powerhouse easily outperformed rivals JPMorgan Chase & Co and Citigroup Inc with a 29 percent jump in overall trading revenue, as clients bought and sold more stocks and bonds to adjust their portfolios in response to the coronavirus pandemic.
The bank's shares rose nearly 3 percent in premarket trading as it reported a 49 percent surge in bond trading revenue to US$2.5 billion. Equities trading revenue rose 10 percent to US$2.05 billion.
Unlike rivals such as JPMorgan and Bank of America, Goldman has a relatively small consumer business, even though it has been one of the top strategic priorities for Chief Executive David Solomon who wants Goldman to look more like a Main Street bank.
However, the lack of a large consumer bank has proved to be a blessing for Goldman, protecting it from loan defaults during the pandemic and the impact of low interest rates.
In the third quarter, Goldman set aside US$278 million to cover loans that go bad, compared with US$1.59 billion in the second quarter.
Goldman's return on equity (ROE) climbed to 17.5 percent, its best since 2010. Metrics like RoE help measure how well a bank uses shareholder money to produce profit.
The bank also generated handsome underwriting fees from a number of high-profile IPOs such as Snowflake, Rocket Companies and Dun & Bradstreet during the quarter.
Total net revenue jumped 30 percent to US$10.78 billion and beat estimates of US$9.5 billion. Revenue at all four of its main reporting lines jumped, with asset management revenue up 71 percent to US$2.8 billion. (Reuters)