Goldman Sachs’ traders’ winning streak drives surge of profits

Goldman Sachs profit increased by 45 percent to $3 billion, the best quarter in equities since 2021. This is a sign of optimism for the strength and stability of the American economy.

The US investment bank was able to beat analysts’ expectations thanks to a resurgence of investment banking activity in the third quarter and an unexpected rise in revenue from stock trading.

David Solomon, Goldman Sachs’ chief executive, stated that the American economy continues to be “resilient”.

He said that despite the fact that we have seen some softness among consumers, my conversations with clients in recent months were constructive. The beginning of the rate-cut cycle has renewed hope for a softer landing. This should lead to increased economic activity.

Federal Reserve’s decision to lower the benchmark policy rate to 4.75 to 5.0%, or 50 basis points, is expected to encourage more companies to make deals and issue initial public offerings.

Goldman’s third-quarter investment banking fees rose by 20 percent to $1.87billion, while revenues from equity trading increased 18 per cent to reach $3.5billion.

The revenue from trading in fixed income, currencies and commodities fell by 12 percent to $2.96 Billion.

After abandoning an misguided push into consumer finance, the company has now refocused its efforts on investment banking and trading. The earnings were impacted by a $415 million one-time charge, which included a writedown relating to the transfer of General Motors Co’s credit card partnership to Barclays.

Stephen Biggar of Argus Research’s banking analysts said that Goldman has achieved “a powerful beat in revenue across all segments”. This shows the capital markets are on their way to recovery and is durable, according to Biggar.

Citigroup and Bank of America also exceeded analysts’ expectations on Tuesday thanks to stronger trading and investment banking.

The confidence of corporate clients has increased, leading them to issue additional debt and equity.

JP Morgan Chase, Wells Fargo and other rival American banks beat analysts’ profit expectations in their Friday reports. This has fueled hopes for a softer landing of the US economy. Wall Street lenders said that consumers and borrower remain resilient, despite depleting their pandemic saving and dealing with higher interest rates. The banks have stated that the US consumer finance sector is supported by a strong jobs market.

Goldman shares reversed gains made in the morning to close slightly lower. It fell 20 cents or 0.04 percent to $522.55. This valued the bank at $165 Billion.

Goldman Sachs, which employs around 6,000 people and has offices in London Birmingham and Milton Keynes in the UK, will be among the first to benefit from a relaxation of ring-fencing regulations, introduced following the banking crisis in order to protect British taxpayers.

Treasury announced that it would raise the deposit threshold from £25 billion to £35 billion.

Retail divisions of large banks that have both retail and investment banking activities must be ring-fenced with capital and liquidity. Depositors are protected from bad investment banking bets and the state is not required to rescue failing banks.

Goldman’s Marcus Savings division in the UK, with £23 billion in deposits, is one bank that is close to the trigger.

The government plans to exempt retail banking from the rules as well if investment banking activities account for less that 10% of their capital.

Tulip Siddiq announced the change on Monday in a statement, as the government laid out a welcome mat for investors from abroad, including Solomon who was an invited guest at the Guildhall event. She said that the reforms will be implemented as soon as possible, depending on how much time is available in parliament.