As more U.S. companies report their third-quarter financial results, investors got to see a pretty convincing snapshot of how the financial sector is doing. In general, banking is seen as one of the backbones of the modern economy, and the state of the financial sector is seen as a potential indicator of how the markets are operating. In that light, a number of major bank stocks reported better than expected Q3 results, with Goldman Sachs (NYSE: GS), in particular doing exceptionally well.
Goldman Sachs reported that its Q3 profits had more than doubled, growing to $3.6 billion. That’s actually better than what the bank reported a year ago before the coronavirus pandemic. It goes to show you that despite everything that’s going on, financial institutions are doing quite well for themselves. Both profits as well as the company’s quarterly revenues, which were around $10.8 billion, were significantly higher than what analysts were expecting.
One big reason bank stocks have done so much better than expected this quarter are the low-interest rates that the Federal Reserve has set in place for the next year or so. “The markets continue to benefit from the unprecedented monetary and fiscal support by central banks and governments globally,” said Goldman’s CEO, David Solomon.
Unlike the 2008 financial crisis, which left major U.S. banks on the cusp of going belly up, this particular recession hasn’t had the same effect on banks. Some economists say that the regulations put in place in the post-2008 years have proved effective, hence why banks are doing so well during this recession. Another reason, however, is that the crisis itself did not originate within the financial system. Instead, it was caused by an external factor, in this case, the coronavirus.
Other bank stocks also reported their Q3 results, most of which were better than expected. JPMorgan and Bank of America both reported their earnings on Wednesday, which were both pretty solid in comparison to analyst expectations, although there were still some hiccups. Bank of America reported that its profits fell by 16% in comparison to last year, while JPMorgan said that its profits rose slightly over the same time frame.
For banking stocks like Goldman, shares generally don’t move much in response to this type of news. The company’s stock stayed pretty much the same despite the positive financial results. Compared to the beginning of 2020, Goldman is still down around 20% or so. However, it has made a decent bounce back from its April lows, where the stock was down almost 45% in comparison to the start of this year. While the banking industry as a whole hasn’t been a major winner this year, you can’t say that it’s suffered all that much either.
Goldman Sachs Company Profile
Goldman Sachs is a global investment banking firm whose activities are organized into investment banking, institutional client services, investing and lending, and investment management segments. Approximately 60% of the company’s net revenue is generated in the Americas, 15% in Asia, and 25% in Europe, the Middle East, and Africa. In 2008, Goldman reorganized itself as a financial holding company regulated by the Federal Reserve System. – Warrior Trading News