Unlike many of its competitors, the US investment bank earned less in the first quarter.
(Photo: dpa)
Frankfurt The interpretation of the quarterly results from Goldman Sachs and Bank of America could be read clearly on the stock exchange price on Tuesday. Because Goldman was unable to benefit from the boom in the bond markets, and revenues in this important business fell by 17 percent in the first three months, the share price fell by almost four percent at the opening on Wall Street.
At Bank of America, on the other hand, the violent price fluctuations on the bond markets, like most other US banks, caused the trading floors to be very busy. At the second largest US money house, income from bond trading rose by 30 percent in the first quarter. The result: In early US trading, the stock climbed 0.7 percent.
Overall, Goldman’s earnings in the first quarter fell to $3.09 billion from $3.83 billion a year earlier. Group-wide revenues fell 5 percent to $12.2 billion. Experts had expected higher revenues.
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David Solomon, head of America’s leading investment bank, said: “The events of the first quarter felt like another real-life stress test and demonstrated the resilience of Goldman Sachs and the nation’s major financial institutions.”
Goldman was not only struggling with problems in the important business with bonds, foreign exchange, derivatives and commodities. As in the previous quarter, there was also a lull in asset management and in classic investment banking, which includes supporting companies with IPOs as well as takeovers and mergers. Also on the balance sheet was a $470 million loss from the sale of part of Goldman’s consumer loan portfolio. In return, the bank released provisions for possible loan defaults in almost the same amount.
At Bank of America, the situation looked much brighter in the first quarter. The money house benefited not only from bond trading, but also from the interest rate hikes by the US Federal Reserve (Fed). Net income attributable to shareholders increased by a billion to $7.66 billion from January to March year-on-year. That equates to earnings per share of 94 cents, while analysts had expected only 82 cents.
Total earnings of $26.3 billion also beat analysts’ expectations of $25.1 billion. “The rising earnings reflect a strong improvement in net interest income coupled with one of our best trading quarters,” said Chief Financial Officer Alastair Borthwick.
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Bank of America set aside $931 million for impending loan defaults. Other large US banks also fear a slowdown in the economy because the Fed intends to hold on to its rate hike course for a while longer. The US Federal Reserve has meanwhile hiked interest rates from near zero to a range of 4.75 to 5.00 percent in a bid to fight inflation and cool down the overheated labor market.
Overall, US banks have so far weathered the turbulence on the US banking market well and surprised investors with a strong increase in profits. JP Morgan, Citigroup and Wells Fargo, which presented their quarterly figures last Friday, benefited above all from the robust business with private customers and rising net interest income. In March, the collapse of three US regional banks shook the entire US financial market and fueled fears of a new banking crisis around the world.
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