Premarket trading saw Goldman Sachs’ shares rise more than 3% as its third-quarter profit increased by 45% due to a recovery in bond sales, stock offerings, and mergers.
It joined JPMorgan Chase, which benefited from a resurgence in investment banking as corporate clients’ increased confidence in the state of the economy prompted debt and equity offers.
“Our performance demonstrates the strength of our world-class franchise in an improving operating environment,” CEO David Solomon said in a statement released on Tuesday.
The economy’s resilience has been highlighted by strong U.S. job and pay growth, and businesses have been encouraged to pursue agreements by the Federal Reserve’s interest rate drop.
Investment banking fees reached $1.87 billion, a 20% increase. Leveraged finance drove a surge in debt underwriting. This includes loans provided for riskier endeavors, such as financing buyouts, as well as investment-grade activity.
Additionally, equity underwriting generated more money because of numerous secondary share transactions. While trading in stocks increased 18%, trading in fixed income, currencies, and commodities saw a 12% decline in revenue.
The bank also profited from simpler comparisons to the previous year, when it had to make significant writedowns on its real estate and consumer business investments.
PROVISIONS WEIGH
However, due to increased charge-offs in its credit card business, Goldman posted $397 million in provisions for credit losses, up from $7 million a year earlier.
Two years after withdrawing from its disastrous consumer business, the investment bank is still suffering. Since then, Goldman has returned its attention to the conventional pillars of trading and investment banking.
Due to an agreement with Barclays, the bank is ending its credit card partnership with General Motors.
A writedown associated with the sale of GM’s credit card business to Barclays was part of Goldman’s $415 million one-time impact.
The future of its card business with Apple is also questionable, as JPMorgan is reportedly in talks to take Goldman’s place as the tech giant’s credit-card partner.
For the three months ending September 30, the total profit was $2.99 billion, or $8.40 per share, as opposed to $2.06 billion, or $5.47 per share, in the same period last year.
The division that serves institutions and wealthy individuals, asset and wealth management, saw a 16% increase in sales over the previous year.
In the third quarter, the bank oversaw a record $3.1 trillion in assets. It had 46,400 employees, down from 45,900 a year earlier and 44,300 at the end of June.
Click here for more news on Banking.