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Goldman Sachs Q3 earnings shatter Wall Street estimates on strength in trading, consumer banking

Julia La Roche
·3 mins read

Goldman Sachs (GS) posted third-quarter earnings on Wednesday that blew away Wall Street’s estimates, as strong trading and consumer banking revenue overwhelmed the impact of the COVID-19 pandemic.

Here were the key figures versus expectations for the third quarter, according to analysts.

  • EPS: $9.68 versus $5.57 expected

  • Net Revenues: $10.78 billion versus $9.45 billion expected

The firm’s earnings per share is a record for a quarter, while revenues rose 30% from a year ago.

Goldman’s stock jumped 3.96% in pre-market action to trade near $216.90 per share, up from Tuesday’s closing price of $210.81.

The Goldman Sachs logo is displayed on a post above the floor of the New York Stock Exchange, September 11, 2013. REUTERS/Lucas Jackson (UNITED STATES - Tags: BUSINESS)
The Goldman Sachs logo is displayed on a post above the floor of the New York Stock Exchange, September 11, 2013. REUTERS/Lucas Jackson (UNITED STATES - Tags: BUSINESS)

Like other bulge-bracket banks, the Wall Street giant has steadily carved out money for expected loan losses due to the coronavirus outbreak but has devoted less money to that segment as economic conditions improve. Goldman set aside $278 million for credit losses in the quarter, down from $291 million a year ago and the $1.59 billion set aside in the second quarter.

“Our ability to serve clients who are navigating a very uncertain environment drove strong performance across the franchise, building off a strong first half of the year,” CEO David Solomon said in a statement.

“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,” he added.

The firm noted that the decrease reflects “reserve reductions from pay downs on corporate lines of credit and consumer installment loans, partially offset by reserve increases from individual impairments related to wholesale loans and growth in credit card loans.” The firm’s total allowance for credit losses is $4.33 billion.

Elsewhere, Goldman set aside provisions for litigation and regulatory proceedings of $3.15 billion, which it said reduced its diluted EPS by $8.77.

For the quarter, trading revenues came in at $4.55 billion, up 29% from the same period a year ago. Goldman’s Fixed Income, Currency and Commodities (FICC) sales and trading revenue hit $2.5 billion, while equities trading generated $2.05 billion in revenues.

Collectively, those businesses accounted for 42% of Goldman’s quarterly revenues.

The firm’s core investment banking business delivered $1.97 billion, up 7% from the same period a year ago, driven by higher underwriting revenues.

The bank’s Consumer & Wealth Management business posted $1.49 billion in quarterly revenues, driven by record revenue in the consumer banking business.

Revenues for the consumer banking business rose 50% from a year ago to $236 million, reflecting higher credit card loan balances. What’s more, consumer deposits grew to $96 billion in the quarter, up from $92 billion in the prior quarter.

Revenues for asset management came in at $2.77 billion in the quarter, jumping 71% from the same period a year ago.

Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.

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