Goldman Sachs smashes Q3 expectations

Bank’s strong figures were driven by trading and investment banking performance.

Goldman Sachs’ third-quarter earnings comfortably beat analyst expectations on Friday, helped in large part by strong trading and investment banking performance. 

The bank’s profit jumped by 63% year-on-year to $5.28bn (£3.8bn), or $14.93 per share, down 1% from the previous quarter. Analysts polled by Refinitiv had forecast earnings of $10.18 per share. 

Earnings per share for the first nine months of 2021 stood four times higher than in 2020, rising by $12.65 to $48.59. 

Instead of the $11.68bn consensus forecast, Goldman’s third quarter revenue came in at $13.61bn, a 26% year-on-year rise, but still 12% lower than the second quarter of 2021.

Investment banking net revenues hit their second-highest level on record, beating estimates by $700m to top $3.55bn. 

Trading

Fixed Income, Currency and Commodities (FICC) sales and trading revenue stood 10% lower year-on-year, but at $2.51bn were still $560m higher than analyst estimates.

The bank stated this reflected “significantly lower net revenues in interest rate products, credit products and mortgages, partially offset by significantly higher net revenues in commodities and higher net revenues in currencies”. 

Equities sales and trading enjoyed a 30% year-on-year rise, beating estimates by almost $900m to $3.1bn. Goldman Sachs said that the growth in Equities financing reflected “increased client activity (including higher average client balances)” while Equities intermediation performance was a result of “significantly higher net revenues in both derivatives and cash products”.

Overall trading revenue amounted to $5.61bn instead of the $4.14bn predicted by analysts. 

David Solomon

CEO David Solomon hailed the quarter’s “strong operating performance”. He added: “We announced two strategic acquisitions in our Asset Management and Consumer businesses which will enhance our scale and ability to drive higher, more durable returns. Looking forward, the opportunity set continues to be attractive across all of our businesses and our focus remains on serving our clients and executing our strategy.”

Goldman Sachs is the last of the six largest banks in the US to report its earnings this week. While all six beat expectations, some were aided by substantial reserve releases. The firm’s provision for credit losses amounted to $175m for the quarter, $97m less than the third quarter of 2020. 

Further reading: US PPI rises to 30-year high

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