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Goldman Sachs profit rises 66% to $5.3 billion thanks to M&A

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Goldman Sachs has posted quarterly gains that shattered expectations, ending a strong earnings season for major banks, leading Wall Street’s major indices to enter their best week since July.

Goldman Friday reported a 66 percent increase in third-quarter profits to $5.28 billion in the quarter ended Sept. 30, up from $3.23 billion a year ago, thanks to a boom in mergers and acquisitions.

CEO David Solomon praised the company’s “strong operating performance” during the quarter, adding that the “opportunity set remains attractive.”

Goldman’s results follow a wave of strong gains earlier this week from JPMorgan Chase, Bank of America and other financial heavyweights with larger retail operations.

The sector’s strong gains signaled positive economic growth, and the Dow Jones Industrial Average rose 534 points on Thursday and another 280 points in Friday afternoon trading, reversing three consecutive days of losses.

Goldman Sachs posted quarterly profits that exceeded expectations, ending a strong earnings season for major banks. CEO David Solomon can be seen above

Goldman shares rose after the strong report.  Goldman reported a 66 percent increase in third-quarter profits on Friday, to $5.28 billion in the quarter ended Sept. 30.

Goldman shares rose after the strong report. Goldman reported a 66 percent increase in third-quarter profits on Friday, to $5.28 billion in the quarter ended Sept. 30.

With ultra-low interest rates enabling debt-backed acquisitions, global mergers and acquisitions have broken records as deals worth more than $1.5 trillion were signed by the world’s largest investment banks in the third quarter, according to data from Refinitiv.

Goldman comfortably maintained its top spot in the global M&A advisory rankings, according to Refinitiv. The tables rank financial services companies based on the amount of mergers and acquisitions they generate.

Goldman’s total revenue from financial advisory, including mergers and acquisitions, grew 225 percent to $1.65 billion, while insurance revenue grew 33 percent to $1.90 billion.

Net income from Goldman’s consumer banking business, which includes wealth management app Marcus, rose 17 percent to $382 million, due to 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.

Since acquiring Lloyd Blankfein in 2018, Solomon has sought to diversify the bank’s revenues, focusing more on consumer banking, mass-market asset management and cash management.

Traders work Friday on the floor of the New York Stock Exchange.  Dow Jones industrial average rose more than 250 points in morning trading as investors reacted to positive news

Traders work Friday on the floor of the New York Stock Exchange. Dow Jones industrial average rose more than 250 points in morning trading as investors reacted to positive news

The Dow made up for losses on Thursday and Friday and headed for a gain for the week

The Dow made up for losses on Thursday and Friday and headed for a gain for the week

The major retail banks all benefited from an improvement in economic conditions that allowed them to book billions of dollars in profits previously set aside in the pandemic in the event of bad loans.

But Goldman broke with this trend and imposed $175 million in new provisions, mainly for loans related to its growing credit card business.

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

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

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

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

However, there are fears that supply constraints could disrupt the holiday season and fuel inflation amid ongoing shortages of motor vehicles and other goods.

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

A report from the Commerce Department 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) Friday

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

“Everyone knows that these supply chain issues are going to take a little longer, but when you consider how strong the gains have been, there are good reasons to be optimistic that there will be continued momentum in the economy,” said Edward Moya, senior market analyst at OANDA.

The travel industry also surged after the White House announced it will lift entry restrictions on fully vaccinated aliens, at land borders and on air travel, effective Nov. 8.

The S&P 1500 Airlines index rose 1.5 percent, while cruise lines Carnival Corp, Royal Caribbean and Norwegian Cruise Line Holdings gained between 1.9 and 2.1 percent.

Shares of Moderna rose 1.2 percent after a US FDA panel voted to recommend booster shots of the COVID-19 vaccine for Americans 65 and older and those at high risk.

Western Digital fell 1.6 percent when Goldman Sachs lowered the storage hardware manufacturer’s inventory to “neutral” from “buy.”

Shares of cryptocurrency and blockchain-related companies also rose 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 and 7.8 percent.

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