October 25, 2020

Goldman Sachs 3rd-quarter earnings trounce expectations as trading desks thrive through the pandemic

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  • Goldman Sachs on Wednesday announced third-quarter earnings that thrashed analyst expectations for revenue and profit.
  • The bank’s focus on trading helped earnings more than double from the third quarter of 2019.
  • “As our clients begin to emerge from the tough economy brought on by the pandemic, we are well positioned to help them recover and grow, particularly given market share gains we’ve achieved this year,” CEO David Solomon said in a statement.
  • Goldman shares rose as much as 3% in early Wednesday trading.
  • Watch Goldman Sachs trade live here.

Goldman Sachs announced third-quarter earnings on Wednesday that trounced Wall Street’s estimates and showed continued strength through the coronavirus pandemic.

A $278 million build-up in loan loss reserves over the period was offset by trading desks’ outperformance and marked a sharp decline from the prior quarter’s $1.6 billion sum. Profit more than doubled that from the year-ago period and handily beat expectations. Revenue also came in above analyst estimates.

Goldman shares gained as much as 3% in early Wednesday trading.

Here are the key numbers:

  • Revenue: $10.78 billion, versus the $9.4 billion estimate from analysts surveyed by Bloomberg
  • Earnings per share: $9.68 per share, versus the $5.53 estimate
  • Net income: $3.62 million, versus the $1.97 billion estimate

Read more: A fund manager beating 90% of his rivals told us why he actively avoids companies with giant profit margins – and shares 5 stocks he thinks will keep winning for years

“As our clients begin to emerge from the tough economy brought on by the pandemic, we are well positioned to help them recover and grow, particularly given market share gains we’ve achieved this year,” CEO David Solomon said in a statement.

Goldman sources more of its revenue from deal advising and trading arms than other major Wall Street banks. Accordingly, the focus on trading aided the bank through the quarter as stocks endured volatility. Equities revenue hit $2.1 billion, up 10% from the third quarter of 2019 and its second-highest quarterly revenue for equity underwriting.

Fixed-income sales and trading raked in $2.5 billion, up 49% from the year-ago period as the Federal Reserve maintained its credit-market backstop. Investment banking revenue reached $2 billion, up 7% from the year-ago period.

Goldman’s latest metrics come after a similarly rosy second-quarter report in July. The bank beat estimates for revenue and earnings, with the former reaching its second-highest quarterly reading ever. The report also revealed Goldman’s outperformance in the financial sector as the bank largely avoided the consumer banking slowdown seen at other firms.

Wednesday marks the second day of bank earnings after JPMorgan and Citigroup reported results Tuesday. Both banks beat revenue and profit estimates, with the former boasting a 32% leap in trading revenue. Both firms also shrank the size of their credit reserve builds from the previous quarter.

Bank of America reported third-quarter figures that missed analyst expectations for revenue earlier on Wednesday. Morgan Stanley is slated to release its earnings report on Thursday morning.

Goldman closed at $210.81 per share on Tuesday, down 8% year-t0-date. 

Now read more markets coverage from Markets Insider and Business Insider:

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Morgan Stanley lays out its 5 favorite trades for investors looking to dominate a looming V-shaped recovery, even if a stimulus deal takes until 2021

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