Goldman Sachs in whopping 47% increase in earnings
GOLDMAN Sachs Group, once the most profitable firm on Wall Street, reported a 47 percent increase in third-quarter earnings as revenue from bond trading surpassed analysts’ predictions.
Net income rose to $2.09 billion (R29.76bn), or $4.88 a share, from $1.43bn, or $2.90, a year earlier, the New York-based company said yesterday.
Chief executive Lloyd Blankfein, 62, has cut jobs, given responsibility to more junior employees and lowered compensation to reduce expenses and preserve flexibility to ramp up trading when activity returned.
This quarter benefit of the strategy, which attracted some scepticism among analysts as competitors such as Morgan Stanley decided to retreat instead. “We saw solid performance across the franchise that helped counter typical seasonal weakness,” Blankfein said.
Fixed-income trading revenue rose to $1.96bn, beating the $1.7bn estimate of five analysts surveyed. Equities-trading revenue of $1.78bn surpassed the $1.69bn estimate.
The bank is battling sluggish revenue prospects and trying to show investors it can generate a return on equity above its cost of capital after years of returns often in excess of 20 percent.
Goldman Sachs enacted at least four rounds of job reduc- tions in New York this year that accounted for more than 400 dismissals. It also extended cuts in its fixed-income division to roughly 10 percent of staff, double what it normally The bank is trying to show investors it can generate a return on equity above its cost of capital. culls each year, and eliminated dozens of managing directors, executive directors and vice presidents across the mergers and debt and equity capital-markets teams.
In recent weeks, Goldman Sachs has reduced its projection for job cuts in Asia. The firm now intends to trim about 15 percent of its investment-banking jobs in Asia outside Japan, fewer than the 25 percent, or 75 positions, initially considered. New businesses The company has also sought to develop new businesses to help generate revenue and boost returns. The bank this month began offering loans through its online-lending platform Marcus by Goldman Sachs, which offers unsecured consumer loans to creditworthy borrowers.
It also has an online deposit-taking franchise that it purchased from General Electric this year. Consumers can open a savings account there with as little as $1.
Goldman Sachs’s stock slumped 6.2 percent this year to Monday, lagging behind the 0.2 percent drop for the S&P 500. Goldman Sachs is the fifth of the six biggest US banks to report results, with Morgan Stanley set to announce earnings today.
JPMorgan Chase kicked off the US financial industry’s earnings season on Friday, topping analysts’ profit estimates on a 48 percent surge in fixed-income trading.
Citigroup and Bank of America surpassed predictions, too, as fixed-income revenue jumped 35 percent and 39 percent, respectively.