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Goldman Sachs posts best results in a decade

Its lack of a large consumer bank has proved to be a blessing, protecting it from loan defaults during the pandemic and the impact of low interest rates

New York

GOLDMAN Sachs Group Inc on Wednesday posted its best quarterly performance in a decade by some measures, as its trading business moved back into the limelight and its lack of a big consumer business switched from a curse to a blessing.

The Wall Street trading powerhouse easily outperformed rivals JPMorgan Chase & Co and Citigroup Inc with a 29 per cent jump in overall trading revenue, as clients bought and sold more stocks and bonds to adjust their portfolios in response to the coronavirus pandemic.

The bank's shares rose nearly 3 per cent in premarket trading as it reported a 49 per cent surge in bond trading revenue to US$2.5 billion.

Equities trading revenue rose 10 per cent to US$2.05 billion.

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Unlike rivals such as JPMorgan and Bank of America Corp, Goldman has a relatively small consumer business, even though it has been one of the top strategic priorities for chief executive David Solomon, who wants Goldman to look more like a Main Street bank.

However, the lack of a large consumer bank has proved to be a blessing for Goldman, protecting it from loan defaults during the pandemic and the impact of low interest rates.

In the third quarter, Goldman set aside US$278 million to cover loans that go bad, compared with US$1.59 billion in the second quarter.

Goldman's return on equity (ROE) climbed to 17.5 per cent, its best since 2010. Metrics like ROE help measure how well a bank uses shareholder money to produce profit.

The bank also generated handsome underwriting fees from a number of high-profile initial public offerings such as Snowflake, Rocket Companies and Dun & Bradstreet during the quarter.

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 a record US$9.68 from US$4.79 a year earlier.

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

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

Revenue at all four of its main reporting lines jumped, with asset management revenue up 71 per cent to US$2.8 billion. REUTERS

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