Major Wall Street banks delivered another batch of eye-catching financial reports, and stock trading performance last quarter was very good
On October 15, the U.S. market welcomed the second wave of earnings reports from major banks, showcasing impressive performances across the board. Goldman Sachs reported a significant 45% year-over-year increase in profits, driven primarily by a substantial uptick in revenues from stock trading that far exceeded expectations, as well as a sharp rise in investment banking activity. Citigroup and Bank of America, while experiencing declines in net income compared to the same quarter last year, benefited from heightened market volatility that boosted trading revenues, allowing them to surpass market expectations overall. However, the three banks had varied stock performances on the New York Stock Exchange on the same day; Citigroup followed the downward trend of the broader market, Bank of America saw a rise, while Goldman Sachs initially opened high but saw its shares retreat towards the flat line.
Goldman Sachs’ third-quarter net income surged to $2.99 billion, translating to an earnings per share (EPS) of $8.40. Total revenue increased by 7%, reaching $12.7 billion. The revenue from the equities division hit $3.5 billion, marking its highest point in over three years. Fees from derivatives and cash products saw a significant increase, pointing towards a record-setting year ahead.
The investment banking division reported revenues of $1.87 billion, exceeding analysts’ expectations of $1.68 billion and outpacing other major operating divisions. Within this, advisory fees from mergers and acquisitions totaled $875 million. While Goldman Sachs lagged behind JPMorgan Chase in investment banking in the second quarter, it made a strong comeback in the third quarter.
Citigroup experienced a 32% surge in stock trading income, which contributed to a 1% increase in total revenue for its markets division, reaching $4.82 billion—its best third-quarter performance in at least a decade. Despite a significant jump in credit card delinquencies impacting overall profitability, Citigroup’s revenues across its other four main business lines—services, banking, wealth management, and U.S. personal banking—were all higher than the previous year.
This earnings report marks a major win for CEO Jane Fraser and her restructuring plan. She, along with CFO Mark Mason, has been actively reforming the bank’s structure, implementing a workforce reduction of 20,000 employees, and recruiting senior management from competing banks.
Overall, Citigroup’s quarterly revenue increased by 1% to $20.3 billion, while net income fell 9% to $3.2 billion, or $1.51 per share, including a $2.7 billion reserve largely due to rising losses in the credit card business.
Meanwhile, the nation’s second-largest bank, Bank of America, also announced an increase in trading revenue across equities, fixed income, currencies, and commodities by 12% to $4.93 billion. The investment banking sector also exceeded expectations, reflecting the long-awaited revival in trading activity, which helped Bank of America achieve EPS that outperformed analyst projections.
Bank of America reported a 2.9% decrease in net interest income (NII) to nearly $14 billion, a reduction less than the expected 3.4%. NII represents the difference between interest earned on loans and interest paid on deposits. The bank’s net income for the quarter stood at $6.9 billion, or $0.81 per share, indicating a nearly 12% year-over-year decrease but still better than the analyst estimates of a near 16% decline.
In tandem with the uptick in trading activity, the investment banking revenue rose by 15%, with income from equity and debt issuance increasing by 16% and 37%, respectively.
