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Goldman Sachs quarterly profit nearly doubles on trading surge

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NEW YORK: Goldman Sachs Group Inc reported a 94% rise in quarterly profit today that swept past estimates, driven by strength in its bond trading business and lower provisions for credit losses.

With a 29% jump in trading revenue, Goldman easily outperformed rivals JPMorgan Chase & Co and Citigroup Inc as financial market volumes broke records in a recovery from a coronavirus-led selloff.

Bond trading revenue surged 49% to US$2.5 billion, while equities trading rose 10% to US$2.05 billion.

The bank’s net earnings applicable to common shareholders surged to US$3.5 billion in the quarter ended Sept. 30 from US$1.8 billion a year ago. Earnings per share doubled to US$9.68 from US$4.79 a year earlier.

Analysts had expected a profit of US$5.57 per share, on average, according to the IBES estimate from Refinitiv.

Total net revenue jumped 30% to US$10.78 billion and beat estimates of US$9.5 billion.

Unlike rivals such as JPMorgan and Bank of America Corp, Goldman has a relatively small consumer business. Although Goldman is trying to build out its consumer bank, the lack of exposure has protected it from loan defaults during the pandemic.

This quarter, Goldman set aside US$278 million to cover loans that go bad, compared with US$1.59 billion in the same period last year.

Meanwhile, Wells Fargo & Co reported a 57% drop in third-quarter profit as the bank’s loan book shrank and near-zero interest rates and higher costs hurt its bottom line.

Net-interest income at the fourth-largest US bank was US$9.4 billion, down US$512 million from the second quarter, as its loan book shrank 2%. Total revenue fell 14%.

Because Wells does not have a large capital markets business like JPMorgan Chase or Bank of America Corp, it has fewer ways to cushion declines in revenue from lower interest rates.

“Strong mortgage banking fees, higher equity markets, and declining sequential charge-offs positively impacted our results, while historically low interest rates reduced our net interest income and our expenses continued to remain elevated,” chief executive officer Charlie Scharf said.

Wells Fargo said allowance for credit losses for loans was US$20.5 billion, flat compared with the previous quarter.

The bank reported net income applicable to common stock of US$1.72 billion, or 42 cents per share, for the quarter ended Sept 30, compared with US$4.04 billion, or 92 cents per share a year earlier.

Analysts had expected a profit of 45 cents per share, according to Refinitiv data, but it was not immediately clear if the numbers were comparable. – Reuters