What's going on?
Goldman Sachs posted seriously tasty third-quarter earnings on Friday, making its rivals’ previously strong results look like an amuse-bouche to the main course.
What does this mean?
Goldman Sachs has a knack for helping other companies with fundraising and dealmaking, and it was certainly on top form last quarter: its investment banking segment saw revenue rise an expectation- and rival-beating 88% compared to the same time last year. Better still, the investment bank’s stock trading business brought in $3 billion, which both topped that of its competitors and helped its overall sales and trading results beat forecasts too. Put those all together, and Goldman grew its total revenue and profit by 26% and 63% versus the same time last year. That might be why investors initially sent its stock up 3% on Friday.
Why should I care?
The bigger picture: Banks are steeling themselves.
Goldman and other banks are expecting the big bucks to keep coming in the next few months. Mergers and acquisitions (M&A) have had a record year so far, after all, and that momentum isn’t likely to slow down anytime soon – not while private equity firms have a record $3.3 trillion to spend. And since investment banks make tidy fees for every deal they advise on, they’re making sure their teams are ready: Citigroup, for one, is beefing up its ranks, while JPMorgan’s planning to up its staff’s pay packets.
For markets: Retail investors might be losing interest.
Hargreaves Lansdown isn’t quite as lucky as Goldman, which primarily makes its money from companies and governments: the UK investment firm – which relies much more heavily on retail investors – revealed on Friday that revenue was down last quarter. That makes sense, with customers spending less time looking at screens now that lockdowns have loosened up. And since that’s the new normal (here’s hoping), investors were quick to send its stock down 2%.