Goldman Sachs share ultimately rises: expectations exceeded despite slump in earnings

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In the three months to the end of June, the financial group earned a bottom line of 2.9 billion dollars, 47 percent less than a year ago.

Goldman Sachs felt the slump in traditional investment banking, which includes assisting companies with IPOs, takeovers and mergers. Banks earn a lot here through fees. But after the boom during the pandemic, companies were very reluctant to deal with deals in the first half of the year.

In view of the bleak economic outlook, Goldman Sachs also significantly increased risk provisions for bad loans. The US Federal Reserve is tightening monetary policy because of high inflation, but rising interest rates harbor the risk of stalling the economy. Experts fear a recession that could lead to payment defaults.

However, the great nervousness on the financial markets also plays into the hands of banks such as Goldman Sachs. As many investors adjusted their portfolios, securities trading boomed in the past quarter. Goldman CEO David Solomon spoke of “solid results” in the annual report. But overall, the money house’s income fell by 23 percent to $ 11.9 billion.

Analysts had expected significantly weaker numbers on average. Goldman Sachs also announced an increase in its quarterly dividend from $2.0 to $2.5 per share.

At Bank of America, higher reserves for bad loans and legal costs caused profits to fall 33 percent year-on-year to $6.2 billion, the US lender said on Monday. Revenues rose 6 percent to $22.7 billion. However, strong growth in some business areas such as securities trading could not offset higher costs.

Goldman Sachs puts banking accounting season in a more positive light

After a poor start from JPMorgan last Thursday and then better news from Citigroup, encouraging signals came from major US banks on Monday. The trend in the sector is thus becoming more positive, according to the market. The investment bank Goldman Sachs in particular was convincing at the beginning of the week. There were also results from the industry giant Bank of America.

Goldman Sachs shares were up 2.54 percent in NYSE trading to close at $301.32.

The figures presented were particularly well received by Goldman Sachs investors, as the investment bank performed better than expected despite a profit break. According to Barclays analyst Jason Goldberg, earnings from all four business areas, including the investment banking arm, contributed to this. Compared to its peers, Goldman delivered the strongest earnings year-over-year and reported the smallest quarter-over-quarter decline in investment banking fees.

In the recently strengthened industry environment, investors at Bank of America overlooked the fact that the financial institution’s trading revenue and earnings were just below expectations. They focused more on solid net interest income, which explained the 0.7 percent gain. According to UBS expert Erika Najarian, the quarter was therefore better than it appears at first glance.

NEW YORK (dpa-AFX)

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