Goldman Sachs earns less
Bank of America exceeds expectations
October 17, 2023, 3:09 p.m
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The series of higher-than-expected banking figures in the USA continues. Bank of America earns more in the summer thanks to high interest income. However, the bank is already warning that the economy is slowing and consumers are likely to become more stingy.
Rising interest income also boosted business at Bank of America (BoA) in the summer. The profit increased by around ten percent to $7.8 billion within a year, as the second largest US bank announced. Meanwhile, the summer was completely different for the leading US investment bank Goldman Sachs. Earnings collapsed due to high write-downs. Profits shrank by around a third to just under $2.1 billion.
“We have gained customers and accounts in all business areas,” explained BoA CEO Brian Moynihan. “We did this in a healthy but slowing economy, where U.S. consumer spending is still above last year but continuing to weaken.” 90 cents were earned per share.
Like other institutions, the major bank benefited from the sharp rise in interest rates in the USA between June and the end of September. The broad financial group’s net interest income increased by four percent to $14.4 billion. Bank of America increased its total income to $25.2 billion. Higher risk provisions had a negative impact: the bank set aside $1.1 billion for loans at risk of default, compared to $0.9 billion in the same period last year.
Overall, however, the financial giant exceeded Wall Street’s expectations with higher income in investment banking and trading divisions, thus defying an industry-wide slump. Investment banking fee income rose two percent to $1.2 billion, while trading revenue climbed eight percent to $4.4 billion.
Goldman Sachs continues to rebuild
At Goldman Sachs, CEO Solomon focuses on the strategic direction of the business. “We continue to make significant progress in delivering on our strategic priorities and are confident that the work we are doing now will give us a much stronger platform for 2024,” he said. The bank earned $5.47 per share – more than expected.
After an unsuccessful and costly foray into the private customer business, which resulted in losses of around $3 billion over the past three years, Solomon is refocusing on its traditional investment banking and trading business. Goldman Sachs has identified asset management as a further growth area.
Write-downs on the GreenSky platform, which arranges consumer loans for home renovations, as well as write-downs on real estate investments totaled $864 million in the third quarter. GreenSky has since been sold to a consortium of investment firms.
Asset management revenue fell 20 percent to $3.23 billion in the summer quarter. Overall, net income fell by one percent to $11.8 billion. Things went somewhat better in investment banking in the summer. Fee income in the business was roughly at the same level as the previous year at $1.55 billion. The bond issuance business picked up slightly and things also went a little better in the IPO business. Goldman Sachs has recently been involved in high-profile IPOs such as chip developer Arm Holdings and grocery delivery service Instacart.
The US financial giants JP Morgan and Wells Fargo had already reported jumps in profits on Friday, also spurred on by flourishing income in the lending business. Citigroup also increased its quarterly profit slightly after recent rather lean quarters.