The bank’s profits plummeted.
(Photo: Reuters)
new York The slump in the business with takeovers and mergers has depressed profits at US bank Goldman Sachs. The fifth-largest lender in the United States, with its core business in investment banking, announced third-quarter net income of $2.96 billion on Tuesday. In the same period last year, the profit was still at 5.28 billion dollars.
Goldman Sachs stocks rose 5 percent Tuesday after Wall Street opened. The reason: the slump in profits was weaker than expected.
Bank boss David Solomon announced a restructuring in which the money house wants to realign its commission business due to the weak investment banking business. “Today, we are entering our next phase of growth with a realignment of our businesses that will allow us to leverage our dominant business model,” said Solomon.
The institute is to be focused on three business areas: wealth management, global banking and market and platform solutions.
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Goldman Sachs earned $8.25 per share in the third quarter. A year earlier, earnings were $14.93 per share. Analysts were expecting a weaker reading of $7.69.
The bank’s revenues were twelve percent below the previous year’s level at 11.98 billion dollars. However, the interest rate hike in the US boosted business in commodities, foreign exchange and bond trading.
>> Read here: Wall Street prepares for difficult times – big banks with significant profit slumps
The strongest signs of the slowdown were seen at Goldman Sachs in investment banking, where earnings of $1.6 billion were 57 percent lower than in the same period last year. In addition, Goldman put more money aside for impending loan defaults. At $515 million, loan loss provisions were almost three times higher than a year earlier, although not as high as in the second quarter.
Rivals JP Morgan, Morgan Stanley and Wells Fargo had also reported significant profit declines for the third quarter.
More: Goldman Sachs wants to merge investment banking and trading