Kcapital market business hui, credit business ugh. This conclusion can be drawn after three other American banks – Goldman Sachs, Bank of America and Wells Fargo – presented their business figures for the third quarter on Wednesday. The day before, JP Morgan and Citigroup had unanimously exceeded the earnings expectations of the equity analysts thanks to the surprisingly low need for risk provisions in the lending business and the booming capital market business. On the second day of the reporting season, however, the wheat was separated from the chaff: the investment bank Goldman Sachs, which specializes in capital markets business, shone, while the universal banks Bank of America and above all Wells Fargo disappointed. But one after the other.
Goldman Sachs did well in the third quarter. The bank, which is strongly focused on the capital market business, which analysts had expected a profit increase between 5 and 10 percent, was able to double its net profit between the beginning of July and the end of September compared to the same quarter of the previous year to 3.5 billion dollars (3.0 billion euros). The Goldman share then rose significantly in early business on Wednesday.
Goldman’s trading results stand out
It is known that the banks’ capital market business is currently booming because customers need your help in the Corona crisis: corporate customers get money by selling bonds and stocks. And securities are traded more strongly when prices fluctuate. But with revenue increases of 30 percent in the third quarter, Goldman stands out among the banks that have reported on their business in the third quarter so far. In trading bonds, foreign exchange and commodities, which Deutsche Bank also counts to its strengths, Goldman’s revenues even climbed 49 percent compared to the same quarter of the previous year.
Bank of America (Bofa), on the other hand, had to accept that its revenue in the third quarter of 2020 fell by 11 percent to 20.3 billion euros compared to the same quarter of the previous year. The major bank, which is not only active in the capital market business, but also in the lending business, suffered more from the lower interest rates, which were cut by the US Federal Reserve to support the economy during the Corona crisis. A further complicating factor for lenders is that, compared to Europe, more companies in America become insolvent and more consumers are unemployed during the Corona crisis.
Bofa has to double risk provision
Bank of America therefore had to double its risk provisioning in the third quarter compared to the same quarter of the previous year to 1.4 billion dollars. However, the bank had set aside $ 5.1 billion for bad loans in the second quarter. In this respect, the impression of the previous day that the risk provisioning of the American banks could have peaked this year was consolidated. The bottom line was that Bank of America earned $ 4.44 billion, 16 percent less than in the same quarter of the previous year and roughly met expectations.
Wells Fargo came off weaker. The San Francisco bank apparently continues to suffer from a phantom accounts scandal. She had to set aside $ 769 million as provision for bad loans, up from $ 74 million from the year-ago quarter, but still a significant decrease of $ 2.4 billion from the second quarter. However, costs increased and revenues decreased. Wells Fargo’s quarterly profit collapsed slightly more than expected: by 57 percent to $ 1.7 billion.