Goldman Sachs Group Inc on Wednesday posted its best quarterly performance in a decade by some measures, as trading moved back into the limelight and its lack of a big consumer business switched from a curse to a blessing.
The Wall Street bank posted a quarterly return-on-equity of 17.5 percent, its highest since 2010. Investors closely track that figure because it shows how well a bank uses shareholder money to produce profits.
Goldman also boasted record earnings per share, beating analyst expectations by a wide margin. Its performance was driven in large part by a 29 percent jump in trading revenue, as clients responded to news about the coronavirus pandemic by shifting their portfolios.
While rivals including JPMorgan Chase Co have also benefited from the markets boom this year, they are far more exposed to vulnerable consumers and businesses suffering from unemployment and pandemic lockdowns. Goldman's consumer bank is relatively tiny.
Goldman's $4.6 billion in quarterly trading revenue included gains across fixed income and equity markets, and a bigger increase than other Wall Street banks. The business accounted for 42 percent of Goldman's overall revenue, while consumer and wealth management represented 14 percent.
The bank set aside $278 million to cover loans that go bad, bringing its year-to-date total credit provisions to $2.8 billion. By comparison, traditional rivals JPMorgan, Bank of America Corp and Citigroup Inc have set aside anywhere from $10-20 billion this year.
Goldman's overall profit nearly doubled $3.5 billion from $1.8 billion a year ago. Earnings per share were a record $9.68, up from $4.79 a year earlier.
In reporting third-quarter results, Bank executives have warned that the U.S. recovery could falter if Washington fails to enact additional stimulus following the expiration of key programs to support unemployed workers and embattled industries.
Bank of America, Citigroup Inc, JPMorgan Chase Co and Wells Fargo Co executives warned that losses on various types of loans might not really take shape until next year. For instance, credit-card write-offs usually happen after 180 days of delinquency, and those borrowers are still largely current.
"The economy has materially improved," said Wells Fargo CEO Charles Scharf, pointing to all the factors that have helped buoy the economy for now. "However, there's still a long way to go, and there remains significant risk to the recovery."
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