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Goldman Sachs profits surge 66% to $5.3B thanks to M&A boom

Goldman Sachs has posted quarterly profits that shattered expectations, capping off a strong earnings season for big banks that is sending the major indexes on Wall Street headed toward their best week since July.

Goldman on Friday reported a 66 percent surge in third-quarter profit, to $5.28 billion in the quarter ended September 30, up from $3.23 billion a year ago, thanks to a boom in M&A.

CEO David Solomon touted the company’s ‘strong operating performance’ during the quarter, adding that its ‘opportunity set continues to be attractive.’ 

Goldman’s results follow a wave of strong earnings earlier in the week from JPMorgan Chase, Bank of America and other financial heavyweights with bigger retail operations. 

The sector’s strong profits were a positive signal for economic growth, and the Dow Jones Industrial Average surged 534 points on Thursday and another 280 points in mid-day trading Friday, reversing three straight days of losses.

Goldman Sachs has posted quarterly profits that shattered expectations, capping off a strong earnings season for big banks. CEO David Solomon is seen above

Goldman shares rose following the strong report. Goldman on Friday reported a 66 percent surge in third-quarter profit, to $5.28 billion in the quarter ended September 30

Goldman shares rose following the strong report. Goldman on Friday reported a 66 percent surge in third-quarter profit, to $5.28 billion in the quarter ended September 30

With ultra-low interest rates facilitating debt-backed acquisitions, global M&A volumes have shattered all-time records, as deals worth over $1.5 trillion were signed by the world’s biggest investment banks in the third quarter, according to Refinitiv data. 

Goldman comfortably held its top ranking on the league tables for worldwide M&A advisory, according to Refinitiv. The tables rank financial services firms on the amount of M&A fees they generate. 

Goldman’s overall financial advisory revenue, which includes M&A fees, jumped 225 percent to $1.65 billion, while underwriting revenue surged 33 percent to $1.90 billion. 

Net revenue in Goldman’s consumer banking unit, which includes its wealth management app Marcus, rose 17 percent to $382 million, reflecting higher credit card and deposit balances. 

As part of Solomon’s strategy to build alternative revenue streams, Goldman is now doubling down on Marcus, its consumer bank.

Marcus offers clients high-yield savings accounts and fee-based wealth management services, including portfolios managed by Goldman experts.

Since taking over from Lloyd Blankfein in 2018, Solomon has looked to diversify the bank’s revenue, with more focus on consumer banking, mass-market wealth management and cash management. 

Traders work on the floor of the New York Stock Exchange on Friday. The Dow Jones industrial average was up over 250 points in morning trading as investors reacted to positive news

Traders work on the floor of the New York Stock Exchange on Friday. The Dow Jones industrial average was up over 250 points in morning trading as investors reacted to positive news

The Dow reversed losses on Thursday and Friday and headed toward a gain for the week

The Dow reversed losses on Thursday and Friday and headed toward a gain for the week

The big retail banks all benefited from an improvement in economic conditions that allowed them to book as profits billions of dollars that had been set aside earlier in the pandemic in case of bad loans.

But Goldman broke with this trend, establishing $175 million in new provisions primarily for loans tied to its growing credit card business.

This week’s strong results from big financial institutions have taken investor focus away from concerns about surging commodity prices and supply chain disruptions, which had fueled market volatility earlier this month. 

Ten of the 11 major S&P sectors advanced in early trading on Friday, with economy-sensitive energy, financials and industrials rising the most. 

At noon, the S&P 500 was up 0.53 percent, the Dow rose 0.77 percent, and the NASDAQ showed a 0.25 percent boost.

Meanwhile, a Commerce Department report also boosted sentiment, showing retail sales rose unexpectedly in September.

However, there are fears that supply constraints could disrupt the holiday shopping season and spur further inflation amid continued shortages of motor vehicles and other goods.

A Commerce Department report also boosted sentiment, showing retail sales rose unexpectedly in September. Shoppers are seen outside Macy's in Manhattan in a file photo

A Commerce Department report also boosted sentiment, showing retail sales rose unexpectedly in September. Shoppers are seen outside Macy’s in Manhattan in a file photo

Traders work on the floor of the New York Stock Exchange (NYSE) on Friday

Traders work on the floor of the New York Stock Exchange (NYSE) on Friday

‘Everyone knows that these supply chain issues will last a little bit longer, but when you consider just how strong the earnings have been, there’s good reasons to be optimistic that there’s going to be continued momentum in the economy,’ said Edward Moya, senior market analyst at OANDA.

The travel sector also rose after the White House announced it will lift entry restrictions for fully vaccinated foreign nationals effective November 8, at land borders and for air travel.

The S&P 1500 Airlines index jumped 1.5 percent, while cruise operators Carnival Corp, Royal Carribean and Norwegian Cruise Line Holdings added between 1.9 percent and 2.1 percent.

Moderna shares rose 1.2 percent after a U.S. FDA panel voted to recommend booster shots of its COVID-19 vaccine for Americans aged 65 and older and high-risk people.

Western Digital slipped 1.6 percent as Goldman Sachs downgraded the storage hardware maker’s stock to ‘neutral’ from ‘buy’.

Shares of cryptocurrency and blockchain-related firms also jumped as Bitcoin hit $60,000 for the first time since April.

 Coinbase Global, China-based SOS, MicroStrategy Inc, Marathon Digital and Riot Blockchain added between 3.7 percent and 7.8 percent.  


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