Wall Street is coming back to life as big banks led by Goldman Sachs benefit from a rebound in trading.
The financial giant, led by CEO David Solomon, reported a 45% increase in quarterly profit on Tuesday, as rivals Bank of America and Citigroup also reported better-than-expected results. He led the pack in the sector.
IPOs and mergers are still a fraction of the post-pandemic boom in 2021, when blank-check companies fueled deal-making success across the industry. Still, bank executives said the Federal Reserve's 0.5 percentage point cut in interest rates last month bodes well for businesses in the coming months.
“We are seeing significant pent-up demand from our customers,” Solomon said on a conference call. “The start of the rate cutting cycle has renewed optimism for a soft landing.”
Goldman noted that investment banking fees rose 20% year-over-year to $1.87 billion, and third-quarter profit was $2.99 billion, or $8.40 per share, compared with a year earlier. That's up from $2.06 billion, or $5.47 per share, in the same period.
Revenue rose 7% to $12.7 billion, the bank said.
The results far exceeded expectations compiled by London Stock Exchange Group for earnings of $6.89 per share and sales of $11.8 billion.
Goldman is refocusing on its core business of investment banking and trading after a failed foray into consumer banking, and executives said Tuesday that the unit's $415 million pre-tax increase in the third quarter Revealed the blow.
Bank of America's net income fell 12% to $6.9 billion, or 81 cents per share, due to losses from bad debt disposals and higher expenses. Still, CEO Brian Moynihan said earnings were “strong”, citing 18% growth in investment banking, strong asset management fees and sales and trading revenue.
“We continue to benefit from our investment in this business,” Moynihan said in a statement.
Meanwhile, Citigroup, the third-largest U.S. lender, posted a smaller-than-expected decline in profits in the third quarter. Investment banking revenue rose 31% to $934 million, the second consecutive quarter of positive news.
The bank, led by Chief Executive Officer Jane Fraser, said net income fell to $3.2 billion, or $1.51 per share, from $3.5 billion, or $1.63 per share, a year earlier. Announced.
That beat the average Wall Street analyst estimate of $1.31 per share, according to estimates compiled by LSEG.
The better-than-expected results follow surprisingly strong results reported by crosstown rival JPMorgan on Thursday.
The results also suggest that investor and customer confidence in the outlook for the U.S. economy is improving ahead of the Nov. 5 presidential election.
The surge in investment banking comes after two years of rising interest rates that have increased borrowing costs and slowed major mergers and acquisitions on Wall Street.
Just last month, the Federal Reserve cut its key lending rate by half a percentage point to 4.75% to 5%.
Goldman is exiting its credit card business with automaker General Motors, which signed a deal with Barclays.
JP Morgan is also in talks to become the global tech giant Apple's credit card partner on behalf of the company.
Local officials say increased M&A activity should mean higher salaries for Wall Streeters.
Last week, a report from New York State Comptroller Thomas DiNapoli predicted that Wall Street bonuses could expand by more than 7% due to the surge in trading.
High salaries drive economic growth for New York City and the state, with the financial industry contributing $5.1 billion in tax revenue in fiscal year 2024.
