Like his fellow CEO of a top Wall Street operation, noted local D.J. David Solomon isn’t much of a fan of the bank he runs, Goldman Sachs, which is why he’s working so hard to change (almost) everything about it: the dress code, the compliance department, the salaries, the secrecy, the font. Trading and investment banking were out, mortgages and Marcus and the credit cards you get when you buy a car were in. Welcome to the Goldman Sachs even your anti-Semitic great aunt in Nebraska can love. Or at least not fear.
So far, the returns on this evolution have been, uh, let’s say mixed. But the third quarter proved to be an absolute disaster for Solomon and his new-look bank. Sure: Goldman posted its best earnings in a decade, with profit nearly doubling on record earnings per share. One analyst called the results “simply stunning.” There’s just one problem if you’re David Solomon.
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% of Goldman’s overall revenue, while consumer and wealth management represented 14%.
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 billion-20 billion this year.
Goldman’s investment banking business also benefited from several high-profile IPOs including Snowflake, Rocket Companies and Dun & Bradstreet during the quarter.
That’s right: When Goldman really shines in the Solomon era, it’s the Olde Gods—the traders he has so assiduously worked to drive out and deemphasize—reliving their glory days, and not those bedraggled retail bankers Solomon prefers to spend his time with. And what of those other banks that already look like Solomon wants Goldman to look?
Revenue from trading rose 3.6% to $3.34 billion, falling short of the $3.5 billion that analysts had forecast…. Bank of America’s small increase wasn’t enough to boost overall revenue as the bank’s consumer unit saw a 17% slide…. Investment banking was a bright spot, delivering the second-best quarter in the company’s history, with a 15% jump in fees to $1.8 billion.
Wells Fargo & Co. said Wednesday that its third-quarter profit fell 56%, though the bank signaled it was prepared for a wave of soured loans…. “As we look forward, the trajectory of the economic recovery remains unclear as the negative impact of Covid continues and further fiscal stimulus is uncertain,” Chief Executive Charles Scharf said in a statement.
Goldman’s trading business returns to former glory during pandemic stress [Reuters]
BofA Traders Fall Short of Rivals as Revenue Forecast Missed [Bloomberg]
Wells Fargo Earnings Drop 56% Despite Pandemic Hit Subsiding [WSJ]