Goldman Sachs profits jump 45% in best quarter for trading since 2021

Goldman Sachs’ profit jumped 45 per cent to $3 billion in the best quarter for equities trading since 2021, fuelling optimism about the strength of the American economy.
A resurgence in investment banking activity and an unexpected increase in stock trading revenue in the third quarter helped the US investment bank beat analyst expectations.
David Solomon, chief executive of Goldman Sachs, said the American economy “continues to be resilient”.
“While we’ve seen some softness in consumer behaviour, the tone of my recent conversations with clients has been quite constructive,” he said. “The beginning of the rate cut cycle has renewed optimism for a soft landing, which should spur increased economic activity.”
The decision by the Federal Reserve last month to cut the benchmark policy rate by 50 basis points to a range of 4.75 per cent to 5 per cent is expected to encourage companies to pursue more deals and initial public offerings.
Goldman’s investment banking fees in the third quarter rose 20 per cent to $1.87 billion, while revenue from equities trading rose 18 per cent to $3.5 billion.
Revenue from fixed income, currency and commodities trading fell 12 per cent to $2.96 billion.
The company has shifted its focus back to investment banking and trading after pulling back from an ill-fated push into consumer banking. The earnings included a one-time hit of $415 million that included a writedown related to the transfer of its credit card partnership with General Motors Co to Barclays.
Stephen Biggar, banking analyst at Argus Research, said that Goldman achieved “a powerful revenue beat across all segments, showcasing the rebound in capital markets is under way and we believe has durability”.
On Tuesday, Citigroup and Bank of America’s profits also exceeded analyst forecasts on the back of stronger investment banking and trading.
Confidence among corporate clients has improved, spurring them to issue more debt and equity.
The rival American banks JP Morgan Chase and Wells Fargo both beat analyst profit expectations when they reported on Friday, fuelling hopes of a soft landing for the US economy. Wall Street lenders have said that consumers and borrowers remain resilient despite running down their pandemic savings and contending with higher interest rates. Banks have said that US consumer finances have been supported by a solid jobs market.
Goldman’s shares climbed more than 3 per cent in early trading but had fallen back to be ahead by $0.78, or 0.2 per cent, at $521.97 by late morning.
Goldman, which employs about 6,000 people in the UK and has offices in London, Birmingham and Milton Keynes, is set to be one of the first potential beneficiaries of a relaxation of ring-fencing rules introduced after the banking crisis to protect British taxpayers.
The Treasury said it was raising the threshold for compliance with the regime from £25 billion of deposits to £35 billion.
Large banks with retail and investment banking operations have to ring-fence their retail divisions with dedicated capital and liquidity. The aim is to insulate depositors from investment banking bets that go badly wrong and so obviate the need for state rescues of banks that fail.
One bank close to the trigger point is Goldman, whose Marcus savings division in the UK has £23 billion of deposits.
The government also plans to exempt retail banks from the rules if their investment banking operations account for less than 10 per cent of their capital.
Tulip Siddiq, the City minister, announced the change in a written statement on Monday as the government set out the welcome mat for foreign investors — including Solomon, who was a guest at the Guildhall gathering. The reforms would be introduced as parliamentary time allowed, she said.